L'Oreal Co Eur Ord

wins, but could you also consider some pricing actions in the back half of the year should these higher prices persist? Thank you very much. All right. So, Guillaume, beauty market growth, and again, apologies for the glitch in the beginning. We estimate the markets in the first quarter to be shy of 4% growth, so it's likely to be 0.38 or something like that, but as you know, we don't have all the sellout data, but it's So more or less on the same pace than the second half of last year. So it remains dynamic. And as I said earlier, we have been paying a lot of attention on the recent weeks to see whether there was any impact on consumer behaviors of the increase in gas prices or for people where they have have to fuel their car tanks with. And we have seen absolutely no change in beauty consumption patterns. So that's the answer to your first question. As far as the US market of North America is concerned, first of all, what is important, as you know, our growth is Once adjusted of the IT transformation is a plus seven point six. So it's indeed one of our best growth In a while and with a little bit of discrepancy between selling and sell-out because our sell-out is actually higher than our sell-in We clearly outperform the market Big time I must say CPD in sell-out is really really doing great because it's low double digits in sell-outs, which is great, with hair care on fire. And the reason why we're a bit behind in sell-in, which is one of the explanations why our consumer product decision is a bit below some of the expectations, is the fact that we had kind of the perfect storm in the U.S. without play on words because we had, on the one hand, a sell-out that's really going really, really strong, particularly in hair care, but overall across all categories. We are building the inventory to prepare for our IT switch, which is going to be early June in the US. And at the same time, we had a snowstorm on our big distribution center in Arkansas, so we lost some sales there. But overall, CPT is doing great. Professional is a bit like everywhere. I would say the good The good sign is that salon-centric, which had been a bit lackluster last year, is back to positive growth. So it's helped by the launch of ColorWow, but overall we see a little better situation in the salon world. Luxury is doing good thanks to fragrance and the recent launches in fragrances and La Roche-Posay and LDB in general. are also doing pretty well because you have both the recovery of CeraVe in skin care and good performance in hair care, and La Roche-Posay continues to thrive. So overall, I think we are in a very good sellout situation in the U.S., and we are managing this big, it's our biggest country, so this move to our new SAP in the U.S. is something that we work very hard on, and that has had minor but real logistic implications in the first quarter. But overall, it's one of the countries where our performance is really very good right now. And Christophe, on the impact of... Yes, on the impact.

First, let me give you also a flavor on the structure of the growth because I think it's important. So we have both growth in volume and value. Basically, volume accounts for around 40% of this growth. And therefore, the value is there also to protect, of course, our growth margin. And as you can imagine, first part of the half, we have a negative impact linked to the tariffs. So this... will have a negative impact on the gross margin for the first half, but we are trying, of course, to mitigate the impact with different aspects. On the other side, we have been computing the potential cost linked to the oil. So as you can imagine, we have on one side the negative cost, additional cost on the logistics, and also indirect additional cost potentially on the sourcing of some materials, mainly on plastics. And when we add both of them, if the oil stays at around 90 to 100 US dollars a barrel, then the additional impact could be in the range of 90 to 100 million euros. Of course, all this is being calculated based on the evolution of the prices. And we'll see, because the biggest risk at the end will be the inflation that may come from this whole increase. And if inflation, of course, goes up On the long term, of course, we may have to take some action on the pricing later this year.

Yeah, we'll see if it lasts, whether we need to do it. But we also will have potentially some good guys on the tariffs in the US in the second half of this year to change in percentage that we now have. So we'll see. We're monitoring. But as you know, we have this capacity to take... prices up, and we have a lot of, I would say, opportunities in what we call revenue growth management, where the articulation of formats, product mixes, etc., and promotions is also another way to protect our gross margin without necessarily taking prices up too much for consumers. That's how we did it post-COVID, and that's one of the tools we used to to keep on recruiting consumers while protecting LPNL.

Very clear. Thank you.

The next question comes from Sarah Simon of Morgan Stanley. Please go ahead.

Oh, yes. Thanks for taking my questions. I have two. First one is, Just can you remind us, like for like, is that assuming that what you own now you owned last year, or is it excluding the contribution of everything that's been acquired until you get to a year afterwards? I'm just thinking because obviously you've got some bigger M&A coming in.

And then the second question... It includes what we acquired during the year.

So if Medicaid is growing at 100%, you would benefit from that in your like-for-like?

If they are growing at 100%, yes. But we still have the sales. In the base, we have the sales that Medicaid did without us last year. They're doing great, by the way.

Well, I can see it's everywhere in the shops over here now. Second question was on Mixer and the rollout. Can you talk about where that's been rolled out from a geographic perspective and how much further there is to go? Thanks.

Well, Mixta today is mostly a European rollout. It's launched in DACH and we are, of course, studying a few other European countries. But as always at L'Oréal, when things start flying, you have a few... a few countries that are beginning to raise their hand and are becoming interested. So right now it's mostly Europe, but we may have other candidates later. But this year it's mostly a European place.

Great, thank you.

The next question comes from Olivier Nicolai of Goldman Sachs. Please go ahead.

Hi, good afternoon, Nicolai, Christophe, Eva. I might have missed this at the beginning on your remarks at the beginning, but submeda was up 15.4%. Have you made any comments on the impact from the issue in the Middle East and if, like some of your peers in luxury, expect any impact in Q2? And then just one question, going back to derma and the growth of CRV, which continues a nice turnaround there. You mentioned the growth of hair care in North America for CRV. Have you reached the full distribution for your hair care range compared to your skin care offer? And how much of CRV in the U.S. is hair care today?

Thank you. I'm not sure I have all the details to the latter. It has decreased. It hasn't reached full distribution, but more importantly, it hasn't reached full potential because it's very, very recent. It's growing month after month. And what's interesting is that in this line, you've got both anti-dandruff and I would say normal shampoo, and both are working very well. So it's totally additional for both for CeraVe and for us. It's still a minor part of the business in the U.S., but growing. And for us, what's really interesting is that CeraVe's turnaround is also and mostly driven by the turnaround of skin care. We've launched an intensive lotion on the back end of last year, which is doing really great. So it's really, and it's true everywhere, and we are just launching on survey, which is not a U.S. story today, but we're launching, we're just launching sun care in Europe, which is a good complement to the price positioning and overall strategy to La Roche-Posay. So it is promising, but the brand is back to growth, and that's for us a very good news because it's at some point started plateauing, and now it's growing again, and I think there's a lot of potential. On the Middle East, so first of all, a reminder for everyone, it's less than 3% of our sales, and it had, I would say, a manageable impact. on the month of March. It will have an impact on Q3, but I would say it's not as big as some of the other players you're mentioning, first of all, because it's smaller in our business. Second is that what we see today is that Saudi Arabia is back to normal in terms of consumption, that e-commerce, which is, as you know, one of the areas we bet on, is also pretty resilient. And even the neighborhood malls in the Emirates are doing okay. So it's really more both the tourists visiting the big malls, Dubai Mall, and the travel retail. So it's going to impact more our Lorraine Lux business than any other division. So I would say it will have an impact, but it will really depend on how long the conflict lasts and whether... particularly tourists and travelers are confident to go back to this region. But as far as local consumption, it is, I would say, globally okay. And by the way, most importantly, all our teams are safe and working. And I think if you look mid-term or long-term, it remains a very strong area of growth for us because of the size of the population, the economy, the women that are more and more empowered. I was last fall in Saudi, and it was pretty exciting. So today the impact exists. It will impact more Q2 than Q1, but it is, I think, overall manageable.

Thank you very much.

The next question comes from Charlotte Louise Cotty of Capelaire Chauvreux. Please go ahead.

Yes, good evening. Thank you for taking my questions. I have two. The first one on North Asia, the market is finally rebounding in China and you are outperforming it. I'm just curious to hear your outlook for the year and to what extent you believe this rebound is sustainable. And does the fact that the luxury beauty segment is driving the recovery confirm that Chinese consumers are more inclined to engage in discretionary spending and trade-up in your view? And second question on the fragrance category. There are some of your competitors in beauty in general and fragrances that are facing difficulties and it seems to be feeling a new wave of consolidation. or at least rumors of potential mergers for some. Are you still on the lookout to acquire some additional fragrance licenses, or do you consider your portfolio sufficiently broad after the Caring Beauty deal? Thank you.

So first, on the North Asian market, it's true that it has recovered. For North Asia, the biggest part, of course, is China. For us, it's China. 70% of the total, so it's really what is the absolute barometer of the market, and indeed China has gone back to positive territory. It's not a massive rebound, as we said, it's somewhere between plus one and two, but it is positive, and indeed it's more driven by by selective premium products. It's true for luxury brands, but it's also true for who are both very positive. And I would, you know, I would attribute it to probably two factors. One is that indeed there is, thanks to the rebound of the stock market in China, there is a bit more discretionary spending. And there's also, as travel retail remains negative, especially in domestic, there is also probably some transfer of consumption from what used to be a travel retail to the domestic Chinese market. So overall, we are confident on the fact that China will grow. We are conquering new consumers. That's interesting because We've been for a while stuck to 100 million consumers in China and we've increased it to 105 and growing 108 latest assumption thanks to the penetration in tier 3, 4, 5 cities which are driving the growth and that's the combination of a couple of door openings but a penetration allowed by e-commerce and Douyin in particular. Overall, we don't want to get carried away, and it remains a market which has not its old growth rhythm, but it's positive, and our brands are really good, doing good. We are launching, expanding our couture brands like Prada, and there's good response. EaseUp is doing good in China. It's a brand that... So I would say that it is positive news for us. It's a very competitive market, of course, and that forces us to be ever more innovative, but confident on that. On fragrance, first of all, it's true that the market, as some of the players said, has slowed down a bit. It remains positive. It's a meeting your budget, but we are really growing much faster than the market. Very happy that Libre has become, at the end of last year, from Saint Laurent, number one feminine fragrance in the world. We have had a lot of initiatives earlier in the year, which, whether it's the extensions of where you said Libre Berry Crush, or the new female fragrance from Armani, and for Armani Power & View. and female fragrances on our menu were always a bit of a challenge, and this one is off to a great start. So we are really firing on all cylinders on fragrances. And frankly, to your question, we are just, if I may use that term, got the keys of caring beauty a couple of weeks ago, and we have to, of course, integrate the teams, the brands, which have potential. So we are not... of the lookout for more brands in the fragrance world. We have a lot to do with, and we are very happy with the way we're doing it.

Thank you.

The next question comes from Jeff Stand of BNP Paribas Exxon. Please go ahead.

Good evening, everyone. Just one question. We, in the earlier questioner, referenced that potentially we're going to see meaningful consolidation in the industry. And my questions are, A, what do you think that says about the industry, if anything? And secondly, would you expect this to be the sort of first move and potentially a chain of consolidation? Or is it your expectation this is a sort of one-off event? Thank you.

Well, you know, I obviously not comment on or make predictions on the consolidation of the industry. What is true is that There has been a lot of either movements or announcements of movements recently. What is, you know, for me what it says, whether it's the decisions from Unilever or the discussion between Putsch and Stellater, it says a few things. It says that, first of all, the confirmation that duty is a very attractive category because, you know, some groups want to, be more involved in that category. Once again, it's proving right now it's one of the best-growing categories around the world. The second is that scale and a good portfolio of brands is one of the winning factors. But they are not the only ones. You have to have the innovation firepower, you have to have the agility because being big is not always compatible with being agile and that's what really we are very focused on keeping at L'Oreal. And then there's the company culture, and that's where whatever happens with the moves that people are talking about, having a company culture where people are aligned behind a mission, a way of doing things, is also a quintessential success factor. So I don't know whether there's going to be more, but in the end it's good for the beauty industry to have players that invest in it, and it's always good for us to be stimulated.

Thank you.

The last question is from Robert Ottenstein of Evercore ISI. Please go ahead.

Terrific. Thank you very much. I'd like to drill into the China market a little bit more and parts of your business there. I think you said that In the quarter, China was up 1% to 2% and continues to show rebound, sequential rebound. Can you maybe just give us a little bit more detail in terms now of how that market splits between online and offline and how each of those channels is doing? You also then mentioned that prestige or what you're I think now calling selective was doing much better perhaps maybe just tell us how much better or at least how the market is doing in terms of prestige growth versus mass which we think is down and then my last question again related to China I'd like to understand better the development of the Helena Rubinstein brand there. From the data that we've seen, I think there was an initial Helena Rubinstein brand that started off very high price and then came down. But then you've, I think, launched another very high price, very premium Helena Rubinstein brand. I think that's the PX50. So maybe if you could talk a little bit about the strategy around Helena Rubinstein in China and how that's doing. Thank you.

Okay, so on the Chinese market, first of all, in China, the majority of the market, a little bit more than half, is online. And, of course, then the weight depends on the categories. There's probably more offline on hair care and more online on a number of of prestige products, and if we look at the market overall, most of the growth, if not all of the growth of the market, is driven by online, which doesn't prevent us at L'Oréal from, at least in Q1, as it was in the last two previous quarters, to be going both online and offline, because of course we are also on the way luxury and that's where the importance of both lines to have consumers feel the experience of the brand which by the way will tie to have an orange type is very important and indeed you're right to say that the mass market is is a slightly negative and that the other whether it's luxury or or or dermatology are growing more in the mid single digits so and in both cases we are we are winning share and doing better so it is a market that's indeed right now seeing a stronger growth of more premium products and more premium brands including by the way high weight of in recent months of Western brands and ours in particular And so that's what we see today on the market, and we've had really a strong momentum in luxury. And when I was referring to selective or prestige brands, I was including, you know, in some of our other divisions like dermatological beauty or professional, we have brands that are more premium, like Kerastase or SkinCeuticals, and they are doing particularly well in China. As far as Helena Rubinstein, there's absolutely no change in strategy. There was one, a decade ago, when we decided to reposition that brand, which was a brand with multi-category doing makeup and even fragrance, into a brand focused on premium skincare, and of course, with a particular focus on China. And we've never, since then, we've never changed strategy. The previous Replasty night cream, which had 30% propylene, was the number one selling cream. in China in value in 24, and what we did, and there you're right, we launched a more premium one on top, which is called PX50, that has got 50% proxy lane, which we launched in the fall of last year, and that cream is indeed driving the growth of the brand, because this brand, which is really positioned on the most affluent, demanding consumers, is, of course, very successful when it launches very innovative, unique products that have no equivalent. And I was talking about offline. Helena Rubinstein has got, you know, counters and stores. In all of them, you have where these VIPs can get treatments, and that's also contributing to the desirability of the brand, which is, you know, paying... now that the Chinese market is turning again positive on selective. So, no change in strategy, just a confirmation that on brands such as Helen Irvingstein, you have to go with superior quality, superior service, and demanding Chinese and affluent consumers are craving for it. Voila, I think this ends

And can I just say that we are, again, apologizing for this technical issue, and the webcast will be available in 15 minutes. So you will all have access to the full call in 15 minutes. Thank you very much.

Thank you. Bye.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect. Thank you.