Research archive for LRLCY

I was asked by a client why we didn't buy him Advanced Micro Devices (AMD). My answer was, because you already own Nvidia.

L'Oreal has reportedly snagged Australian skincare label Aesop for a chunky $2.53 billion. It's a good deal for the Paris-based buyer, to grow its presence in high-end cosmetics, especially in the Far East.

Quite a few clients in New York own L'Oreal shares, and their most recent quarterly results were a bit mixed. For the first half of the year sales of 13.1 billion Euros were recorded, which is a decline of 11.7% on this same period in 2019.

L'Oreal is a French cosmetics group that we own for some investors in New York. It is the world's largest beauty company. In a recent interview, CEO Jean-Paul Agon said that the two trends driving the business were pollution and selfies.

L'Oreal has targeted Millennials and Chinese consumers as their next big growth area. More specifically they are targeting these consumers at travel hubs like airports. We know that people are travelling more because experiences are becoming very desirable.

The way people look has always been extremely important in human history. It is engraved in our psyche. With the likes of social media, people take the way they look even more seriously. I know there are negative connotations to an image oriented world but I am afraid that is the way the world is.

L'Oreal, the giant cosmetics and beauty care firm delivered a sales update a number of weeks back - Q1 2017 sales. Sales grew 7.5 percent for Q1 (relative to this time last year), to top 7 billion Euros. This is a beast, a big machine that operates across the globe. Makeup and beauty care is both a luxury and a necessity. It is an industry that fascinates me, beauty and the application of the associated products has been around for thousands of years. The application of cosmetics is quite simply to change or alter the appearance of the body, most noticeably the face. Way back, fragrances were used to mask the fact that people bathed less often.

L'Oreal reported numbers for their full year last evening, after the market had closed in Paris. The company continues to attract market share across all territories, sales grew 4.7 percent like for like to 25.84 billion Euros, earnings per share increased by 4.6 percent to 6.46 Euros per share. For the purposes of this exercise, when talking about valuations, we will reference the Paris price, which is 174 Euros a share. The stock trades at a pretty lofty 26x earnings, which is not cheap at all, the company has delivered in what has been a pretty tough operating environment. The company has four major operating divisions, you can see the breakdown via a previous message on the business - L'Oreal 3Q numbers - steady growth. The dividend has been jacked up by 6.45 percent to 3.30 Euros, maintaining the nearly just under 2 times dividend cover.

L'Oreal has acquired three skincare businesses from Valeant. You may recall that from last year Valeant was not just a fallen angel, it was sent to Hades, tossed to Tartaros, booted to the underworld of investing. OK, not that bad, close though. The French cosmetics giant has paid 1.3 billion Dollars in cash, in what represents around that same amount (1.3) in percent of their market cap. For a group of skincare products that produce sales of 168 million Dollars.

L'Oreal is a really great business, one of my favourite models. The Dollar share price might not have done that well, i.e. this is a case where the company has delivered and there have been certain currency issues that have weighed (and shareholder issues too), we think that the long term thesis remains intact. The group is certainly very focused on developed markets, namely Europe (around 1/3 of sales) and North America (just over one-quarter) and then the various other emerging markets, Asia Pacific accounting for 22.5 percent of sales.

Cosmetics and the application thereof is thousands of years old. The ancient Greeks, the ancient Egyptians all applied make-up in different forms, as did the Chinese and the Japanese. It is not a new phenomenon. In the recent era, in Europe and the Americas, the rise of make-up can be directly linked to a rise in urbanisation, more urban related activities (eating out, visiting hotels, seeing plays and the opera and the like) gave rise to the fashion industry being more accessible and more sought after for "ordinary people".

L'Oreal released a 9 month sales update towards the end of last week, this was for the sales period to end at September 30th, 2015. Emerging markets seem to be the biggest issue, a slowdown in China with specifically L'Oreal Luxe and what they term a "difficult Brazilian market", plus general Asia market turbulence. At face value the sales update looks decent, herewith a breakdown of the product and geographic mix:

Last week our favourite beauty company, L'Oreal reported their half year numbers. Given that they are based in Europe and not the US, their earnings got a big boost from the stronger dollar which is a nice change.

L'Oreal released a trading update for their first quarter a couple of days ago, and by couple I mean it in the classic sense, i.e. two. Talking of two's, today is the 22nd and the AGM of the company is today. Remember that the company has a pretty interesting set of shareholders, there is the history between the Bettencourt family and Nestle, which came about as a result of the French government wanting to nationalise everything in the 70's. The founder's (Eugene Schueller) daughter, Liliane Bettencourt was active in the business for years. According to Wiki, Liliane worked in the business from the age of 15, as an apprentice she would label shampoo bottles and mix cosmetics.

L'Oreal reported results last evening: 2014 ANNUAL RESULTS. Remembering that these are in Euro's, the ADR price is one fifth in Dollars, i.e. the ADR price that you see (closing at 37.35 Dollars last evening) is one-fifth of the Paris price. In simplest English, for each five ADR's (American depositary receipt) that you hold, that is the equivalent of one share of L'Oreal in Pairs. Got that? First things first, this company is controlled by Lilliane Bettecourt's historic shareholding and Nestle, the Swiss giant who have the shares historically too. Recently Nestle have been a seller, they sold a stake back to the company. In fact, there are 23 million shares less in issue, shares in issue have fallen from 608 million to 585 million, average over the period, there are NOW 561 million shares. Fewer shares always equals higher earnings.