Ongoing Struggle At LOreal – US-FOREX.US
Billionaire Liliane Bettencourt, L’Oreal’s largest shareholder, does not have much to look forward to this year. Not only will her private life be scrutinized in a much-publicized legal battle between her daughter Francoise and photographer Francois-Marie Banier-who stands accused of wheedling nearly 1.4 billion out of the 86-year-old Liliane-but the woeful performance of L’Oreal is also not expected to improve. It is no secret that the company has suffered from its strong exposure to mature markets like the United States, where consumers are no longer quite so ready to shell out for Maybelline cosmetics or Kerastase hair care, but even the “green shoots” of economic recovery later this year are unlikely to change things. L’Oreal’s profitability is falling as it spends more on advertising and promotion to try to offset sluggish sales, and analysts think demand might not fully recover until 2010.”Any revenue growth we expect to be anemic at best [in the second half of 2009],” said Alex Molloy, an analyst at Credit Suisse. “Margins we now expect to show little or no recovery.”Although L’Oreal
did report slightly better sales growth in the second quarter, up 2.6%, than in the first quarter, up 0.3%, the cost to its bottom line from increased advertising will only become clear when it reports a full breakdown of six-month results on August 28. Molloy expects profits to be down 16.5%, to 1 billion euros , and for the whole of 2009 sees L’Oreal earnings down 9% over the year, to 1.9 billion euros . Shares of L’Oreal were down 0.6%, or 38 euro cents , to 58.91 euros , during morning trading in Paris on Wednesday. The stock is trading at a price-to-earnings multiple of 18, higher than rival Beiersdorf
, which owns the Nivea cosmetics brand, and Henkel
, owner of the Fa and Theramed brands. Sanford C. Bernstein Andrew Wood ranks L’Oreal as the worst of the European consumer goods sector, rating it “underperform.” “It is still expensive,” he told clients on Thursday, “and we see further downside from here.”
