L’Oreal may continue to raise prices in a targeted manner, CEO says
L’Oreal (OREP.PA) may continue to raise prices in the second half of the year to offset rising production costs, but would do so in a very targeted manner, the cosmetics group’s Chief Executive Officer Nicolas Hieronimus told Reuters on Thursday.
The maker of Maybelline mascara and Lancome perfumes beat expectations with 13.4% sales growth in the second quarter, tapping into a strong rebound in makeup sales as socialising resumes. It also bucked a declining trend in the luxury and fashion industry in China with higher sales despite the country’s lockdowns.
Despite an uncertain outlook for the second half of the year, the company is “overall pretty confident, even bullish”, about business prospects, according to the executive, who became CEO of the world’s biggest beauty company just over a year ago.
Rising input costs have most affected the group’s consumer products division, which has focused efforts on targeted price increases as well as introducing new products at higher price points.
“Instead of saying we’re going to increase everything by the same percentage, we’ve really fine-tuned it,” Hieronimus said, noting that the company has seen no reduction in volumes of goods sold, rather “we have so far continued to see upgrading of consumers in every category”.
Speaking from his 10th floor office with sweeping views of Paris, Hieronimus said while negotiations with retailers over price increases are “never easy” there hadn’t been any blockages or “really hard fights”.
L’Oreal slightly decreased the proportion of advertising and promotion spending over the first half to 31.5% of sales, easing up after a strong post pandemic push last year when it rolled out product launches that had been held back during lockdowns, including a makeup line under the Valentino label.
Hieronimus said the company could maintain a similar proportion of investments in the second half of the year.
“It’s possible we will apply the same recipe,” he said.