VALUATION HIGHLIGHTS
- Skin Care constitutes 38% of the Trefis price estimate for L'Oreal's stock.
- Hair Care constitutes 21% of the Trefis price estimate for L'Oreal's stock.
- Fragrance constitutes 19% of the Trefis price estimate for L'Oreal's stock.
WHAT HAS CHANGED?
L'Oréal's ADR vs. S&P500 Performance
The performance of LRLCY stock with respect to the index has been quite volatile. Returns for the stock were 27% in 2021, -24% in 2022, 41% in 2023, and -28% in 2024.
In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 — indicating that LRLCY underperformed the S&P in 2022 and 2024.
Fiscal 2024 Earnings
L'Oréal demonstrated positive financial performance in 2024, as indicated by its results reported earlier this year. The company's sales grew to €43.5 billion, up from €41.2 billion in 2023. Furthermore, L'Oréal's profitability improved, with operating profit margins increasing to 20% in 2024 from 19.8% in 2023. This positive trend continued to the bottom line, which rose from €11.52 in 2023 to €11.95 in 2024.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
L'Oréal's Skin Care Revenue: Skin Care is L'Oréal's top-performing segment, with sales growing significantly from $10.6 billion in 2019 to $17.8 billion in 2024. Our current forecast projects this growth to continue, reaching $29 billion by the end of our review period. However, if Skin Care revenue growth were to slow to approximately $20 billion, it could result in a downside of over 10% to the Trefis price estimate for L'Oréal.
L'Oréal's Hair Care Revenues: L'Oréal's Hair Care division is its second-largest segment, with sales growing from $9.1 billion in 2019 to $11.1 billion in 2024. Looking ahead to our forecast period, we anticipate a steady mid-single-digit growth rate, projecting sales to exceed $15 billion. However, if Hair Care revenues were to stagnate at their current level, our Trefis price estimate for L'Oréal could see a downside of more than 5%.
BUSINESS SUMMARY
L'Oréal holds the position of the world's largest cosmetics manufacturer, offering a comprehensive range of makeup, fragrances, skin care, and hair care products through its portfolio of over 30 global brands. Headquartered globally, L'Oréal reaches a diverse consumer base across all income levels through an extensive network of distribution channels, including mass market retailers, drugstores, upscale perfumeries, pharmacies, department stores, its own retail outlets, and online platforms. For reporting purposes, L'Oréal categorizes its products into four main segments: Makeup, Skin Care, Hair Care, and Fragrances.
SOURCES OF VALUE
Leading market share in Skin Care, Fragrances, and Makeup
L'Oréal commands the largest market share in the Skin Care segment, which is both the largest and fastest-growing category within the Beauty Care industry (due to demand for anti-aging and men's skincare). The company also holds the top market share position in both the Fragrances and Makeup segments.
Highest R&D as percentage of net sales and marketing expenses in the beauty care industry which ensures market leadership
In the competitive beauty care industry, the continuous introduction of new and innovative products is essential for growth and even for sustaining market share. L'Oréal has distinguishes itself by investing a larger proportion of its revenue in Research and Development (R&D) compared to its competitors.
This commitment to innovation has been a key factor in L'Oréal's continued leadership in the cosmetics market. Furthermore, with revenues significantly higher at approximately $45 billion compared to Estée Lauder ($16 billion), L'Oréal possesses a substantial financial advantage, enabling greater investment in marketing, a critical element for success in the cosmetics sector.
KEY TRENDS
Booming Skin Care due to anti-aging creams
Here are a few ways to rephrase the statement about the demand for anti-aging skincare and L'Oréal's involvement, considering the current date (March 25, 2025) and location (Pune, Maharashtra, India):
Option 1 (Direct and concise):
Driven by aging populations in developed nations like Japan, the U.S., and Western Europe, there's a strong demand for anti-aging creams and anti-cellulite skincare products. A significant portion of L'Oréal's thriving skincare business is attributed to these anti-aging offerings. This anti-aging market, which includes products designed to address multiple signs of skin aging at once, is a rapidly expanding segment within the broader category of anti-aging beauty products.
Growth of natural products categories and "Masstige" segment as well as male product lines
There's a growing global demand for natural and organic products, particularly strong in developed markets like the U.S. and Western Europe. This is accompanied by a rising consumer preference for less synthetic, eco-friendly products and sustainable packaging.
Additionally, the "Masstige" trend, involving premium brands offered at more accessible prices through mass distribution, is gaining traction. Finally, the men's beauty care segment is emerging as a significant global niche, with the introduction and expansion of product lines for men being a major driver of growth in developed markets, especially in the U.S. and Western Europe.
