Meanwhile, Gucci owner Kering is seeing signs of a recovery led by online sales.

(Bloomberg)—L’Oréal SA suffered as locked-down populations worldwide spent less on pricey perfumes and makeup.
Sales in the three months through June dropped 19% on a comparable basis, the French cosmetics company said in a statement Thursday. Analysts had expected a 14% decline.

Users of makeup and perfume were less inclined to spend money on brands such as Maybelline New York since there were fewer occasions for social interaction during lockdowns. L’Oréal’s professional division also took a hit from the shutdown of hairdressers.

“We approach this second half with lucidity, confidence and resolve – lucidity because the global health crisis is unfortunately not over,” CEO Jean-Paul Agon said in the statement, predicting that “ecommerce will continue to get stronger.”

Separately, Agon told Le Figaro in an interview that he expects the second half of the year to be “much better” than the first, predicting “slight growth” in sales.

L’Oréal’s skincare products continued to perform well in the second quarter, with a 4.3% growth rate in its active cosmetics division. This unit, which sells dermatological brands such as La Roche-Posay, benefited from the fact that pharmacies and drugstores, considered essential during the pandemic, remained open to shoppers.

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Online sales for the cosmetic giant’s products grew 65% in the first half, in a further sign the pandemic is accelerating a digital shift among retailers worldwide.

L’Oréal is No. 52 in the Digital Commerce 360 Europe 500.

Gucci owner sees online leading recovery after sales plunge

Kering (No. 48) is seeing signs of a recovery led by online sales after pandemic-induced lockdowns hit the previously runaway demand for the Gucci owner’s fashions. Luxury brands are trying to make up for lost time after COVID-19 exposed their reliance on in-store business. During the second quarter, ecommerce sales soared 72%, Kering said in a statement Tuesday.
The shares rose as much as 6% early Wednesday in Paris, though they’re down 13% so far this year.
Overall, revenue fell 44% on an organic basis in the three months through June. The decline is greater than the sales fall that rival LVMH reported Monday, though less than the 47% drop analysts expected.

Kering follows the Louis Vuitton owner as well as Moncler SpA, Richemont and Burberry Group Plc in reporting what analysts expect will be their worst quarter ever. Prada SpA and Hermes International will provide updates Wednesday and Thursday, respectively.

“We have weathered what we hope was the worst of the crisis,” Jean-Francois Palus, deputy CEO, said during a call with analysts. “The appetite of millennials and Generation Z isn’t diminishing.”
While there were “encouraging” demand trends overall for Kering’s premium products in late June, which were confirmed at the start of this month, the company remains vigilant, Chief Financial Officer Jean-Marc Duplaix said during the call.
He cited the current lack of tourists in Europe this summer, normally a strong period when visitors typically splash out on luxury goods. Duplaix said this lack of international travel flows could last until the first half of next year.
The lack of visibility on the luxury market makes it impossible to forecast second-half sales, Kering said, adding that the loss in revenue in the first half will not be overcome in the latter six months of the year.
Duplaix said Kering still aims to spend up to 7% of its revenue in investment to improve operations. This goal will stand even after it trimmed this spending by around 5% in the first half.
“We remain attentive not to cut initiatives that will bring growth,” he said. “We have strategic initiatives that are for the long term, and we don’t change strategies because there’s a temporary element or because of a rival’s move,” he added, citing Kering’s push to improve its e-commerce and delivery capabilities.
There were some positive surprises during the quarter, notably performance at the Bottega Veneta brand, which was “outstanding,” according to Luca Solca, an analyst at Bernstein. Sales fell 24% on a comparable basis in the second quarter, showing more resilience than Gucci or Saint Laurent. The brand, known for its signature woven-leather shoes and handbags, has been enjoying a renaissance under Creative Director Daniel Lee.
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