L'Oréal Lays Out 2009 Game Plan

Higher ad spending, job cuts part of strategy.

Agon said L’Oréal is keen to improve gross profits in 2009. As part of the effort to streamline and simplify its organizational structure, the firm has frozen hiring in some developed countries and will maintain its head count in rapidly growing emerging markets. In the U.S., it will reduce that subsidiary’s workforce by 500.

There is also a focus on offering highly innovative products, such as Lancôme’s new Oscillation mascara, said Agon, adding another way the firm is adapting to the current crisis is by introducing more accessibly priced products to brands such as Garnier, L’Oréal Paris and Vichy, in order to reach a wider audience. The firm will also concentrate on categories including styling, body care and men’s products, plus enter new markets. Over the next few months, for instance, L’Oréal is to open subsidiaries in Egypt, Pakistan and Kazakhstan.

“We have launched a plan to reduce the number of references across all divisions and brands,” continued Agon.

He had no news regarding a possible change in Nestlé’s holding in L’Oréal come April 29, when it is free to sell its almost 30 percent stake in the French beauty firm. Under terms of the current shareholder agreement, Nestlé is free to sell its holding in L’Oréal from that date but cannot take a majority share in the firm unless Liliane Bettencourt, who owns 30 percent of the firm, passes away earlier, and, in that case, not until six months after her death. After April 29, Nestlé does not have the right to acquire L’Oréal unless Bettencourt gives her approval. Agon said Bettencourt, whom he saw Monday at a board meeting, didn’t mention any intentions regarding her L’Oréal stake. However, Agon said she has been committed to the company.

L’Oréal’s 2008 results brought mixed reactions. Jean-Christophe Liard, analyst for consumer goods, retail and luxury at KBL Richelieu, said the company’s fourth quarter was disappointing.

“I think all long-term investors know that the 2008 and 2009 trend for health and personal care is very mediocre; therefore, there was no big surprise in what was published,” he said, adding the good news from L’Oréal included the hiring freezes and continuation of ad and promotion spending.

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