Bottom Lines Squeezed At Key Beauty Firms

Revlon, Avon and Shiseido continue uphill battle.

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In Paris, L’Oréal reported a 2.6 percent increase in second-quarter sales to 4.4 billion euros, or $5.86 billion at average exchange for the period, helped by the Consumer Products Division and an uptick in new markets. Revenues in the three months ended June 30 dipped 2.1 percent on a like-for-like basis.

The French beauty giant’s first-half sales gained 1.4 percent to 8.77 billion euros, or $11.69 billion. On a constant basis, they fell 3.2 percent.

Structural changes — such as the acquisition of YSL Beauté and the consolidation of Club des Créateurs de Beauté’s entirety — added 3.6 percent in the half.

Currency fluctuations positively affected L’Oréal’s half-yearly results by 1 percent.

Jean-Paul Agon, L’Oréal’s ceo, commented that inventory and sales appear to be coming into balance in some markets. In Western Europe, for instance, “the destocking process was very important in the first quarter, especially in luxury. Apparently, now the numbers for sell-in are quite close to the numbers for sell-out,” he said.

During a financial analyst conference call Thursday night, Caroline Millot, head of L’Oréal’s investor relations, said the end of March was a “low point” almost everywhere.

L’Oréal’s Consumer Products Division registered revenue gains of 1.6 percent to 2.21 billion euros, or $2.94 billion, in the second quarter. During that period, the “rest of world” zone posted growth of 6.1 percent to 1.33 billion euros, or $1.77 billion.

L’Oréal’s outlook is upbeat. “We expect improvement to be gradual through the end of this year,” said Millot.

Shares closed at 58.25 euros, or $82.26 at current exchange, up 0.97 euros, or $1.37, or 1 percent.

Sally Beauty Holdings’ third-quarter net income came in at $31.5 million, or 17 cents a diluted share, from $29.4 million, or 16 cents a share, in the year-ago period. The company, which operates the Sally Beauty Supply and Beauty Systems Group store chains, registered sales of $673.3 million, 0.5 percent below the $676.8 million reported for the year-ago period.

Revenues included a negative impact from foreign currency exchange of $21.9 million, or 3.2 percent of sales.

Same-store sales were up by 2.6 percent and, at the end of the third quarter, total store count was 3,821, an increase of 105 stores over the same period last year. Sales of the firm’s Sally Beauty Supply division were up by 1.6 percent to $434.7 million from $428 million in the third quarter of 2008. Same-store sales in the division rose 3.2 percent.

Meanwhile, sales at BSG dipped 4.1 percent to $238.6 million from $248.9 million a year ago, although they rose 0.6 percent on a same-store basis.

Year-to-date profits jumped 28.6 percent to $72.1 million, or 39 cents a share, while sales slid 0.8 percent to $1.96 billion.

Shares fell 19 cents, or 2.7 percent, to $6.84 on Thursday.

Reporting on Wednesday, direct marketer Nu Skin Enterprises reported second-quarter net income was up 7.3 percent to $22.1 million, or 35 cents a diluted share. Excluding a restructuring charge, EPS was 36 cents, above the analyst consensus estimate of 30 cents.

Sales rose 0.3 percent to $322.6 million versus $321.7 million a year ago. Excluding the effects of currency exchange, sales were up 4 percent.

“Our growth is a result of continued strength in the skin care category, with sales up 14 percent,” Truman Hunt, president and ceo of Nu Skin, said during a conference call Wednesday. “Additionally, our business transformation efforts (dating back to 2006), most recently in Japan, have helped us track ahead of our operating margin targets.”

Gross margin fell 40 basis points to 81.2 percent of sales, primarily because of “foreign currency fluctuations and shifting product mix.”

Year-to-date net income fell 0.4 percent to $34 million, or 53 cents a share, while revenues fell 0.2 percent to $618.8 million compared with $619.8 million in the first half a year ago.

“I’m very encouraged by the direction of the business,” said Hunt. “And we remain on track to exceed our goals for the year and post another record year.”


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