L’Oreal profit margins miss estimate

Paris: L’Oreal SA, the world’s largest cosmetics maker, slid the most in more than 11 months in Paris trading after the company reported first-half profit margins that missed analysts’ estimates.

The shares dropped as much as 5.2 per cent to 95.80 euros, the steepest intraday decline since September 22, 2011, and were down 3.7 per cent as of 9:23am.

Gross profit as a percentage of sales narrowed to 71 per cent in the six months ended June 30 from 71.5 per cent a year earlier, the Paris-based company said on Tuesday after markets closed, less than the 71.9 per cent average estimate of four analysts compiled by Bloomberg. L’Oreal attributed the decline to the weakening of the euro, the consolidation of Clarisonic, a maker of sonic skincare devices that it agreed to buy at the end of 2011, and an increase in promotional offers.

“L’Oreal’s results came in below our expectations with generally poor quality,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a note. “Especially noteworthy was the miss on our and consensus estimates on margins.”

A 0.1 percentage point increase in the operating margin to 16.9 per cent was also below estimates, Wood said. The profit measure would have declined were it not for a reduction in advertising and promotional expenditure, he said.