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Executives

Françoise Lauvin - Head of Investor Relations

Jean-Paul Agon - Chairman and Chief Executive Officer

Christian Mulliez – EVP, Administration & Finance

Sophie Gasperment - Group General Manager Financial Communications and Strategic Prospective

Analysts

Celine Pannuti - JPMorgan

Iain Simpson - Barclays

Hermine Bentzmann - Raymond James

Gael Colcombet - MainFirst

Rosie Edwards - Goldman Sachs

Eva Quiroga - UBS

Catherine Rolland - KeplerCheuvreux

Chas Manso - Societe Generale

L'Oreal Co. ADR (OTCPK:LRLCY) Q1 2014 Earnings Conference Call April 14, 2014 12:30 PM ET

Françoise Lauvin

Good evening. Welcome to this conference call for the release of L'Oreal's First Quarter 2014 Sales. Together with me today are, Jean-Paul Agon, Chairman and CEO.

Jean-Paul Agon

Hello. Good evening.

Françoise Lauvin

And, Christian Mulliez, CFO.

Christian Mulliez

Good evening.

Françoise Lauvin

We also welcome Ms. Sophie Gasperment, Group General Manager, Financial Communication and Strategic Prospective.

Sophie Gasperment

Good evening.

Françoise Lauvin

I hope you all received the press release which was sent out at 6:00 pm. As usual, I shall make a few introductory comments and we will then be pleased to answer your questions.

At the end of March 2014, our consolidated sales reached €5,638 billion. Please note that in accordance with IFRS 11 accounting rules, Innéov has been consolidated under the equity method since the start of 2014. In addition, the announcement on February 11 of the disposal of our 50% stake in Galderma lead us to consolidate this business as a discontinued operation, in accordance with IFRS 5 accounting rule. Therefore, Innéov and Galderma's sales are no longer included in our reported turnover and data for earlier periods have been restated accordingly. On this basis, reported sales decreased minus 2.2%.

The impact of changes in the scope of consolidation was slightly negative by minus 0.7% during the first quarter. This is mainly linked with our decision to terminate the mail order business of Beauté Créateurs. Currencies were strongly adverse in Q1 with a negative minus 5% impact on sales, in particular as the Brazilian real, the Russian ruble, the Japanese yen and the Canadian dollar depreciated double-digit against the euro over the quarter.

As a result, sales increased 3.5% on a like-for-like basis of which plus 3.7% for the total cosmetics division while The Body Shop sales decreased minus 3.4%. By division on a like-for-like basis, Active Cosmetics continued to lead growth up plus 8.7%, L'Oréal Luxe advanced plus 7.2%. The Professional Products Division continued to improve and posted plus 3.7% growth. The Consumer Products Division was as announced impacted by North America and recorded plus 1.2% growth.

By region, Western Europe confirmed its recovery with plus 2.8% overall growth. Note that Southern Europe is positive for the first time since 2007. North America is slightly down at minus 0.6% impacted by a high comparison base in the Consumer Products Division, due to the very important launches of Advanced Hair Care by L'Oreal Paris and of Olia hair coloring by Garnier at the beginning of last year and by a flat mass market in the U.S. at the beginning of this year.

New markets continued on a dynamic pace of plus 7.5%. In the new markets, there was a small restatement last year as Turkey and Israel were transferred from Africa, Middle East to Eastern Europe as of July the 1, 2013. Among new markets on a like-for-like basis by region, Africa, Middle East climbed 14.9%, Latin America rose 8.2%, Eastern Europe increased 6.3% and Asia Pacific was up 6.8% with Japan up 9% and Asia excluding Japan, up 6.6%.

Let me now update you on a few technical elements for the full year. First, perimeter changes, the newly acquired businesses, Decléor and Carita, will be consolidated as of May 1 and Magic Holdings as of April 1. Therefore, the impact over full year of the changes in the scope of consolidation can be estimated at plus 0.4%.

Second, currencies, extrapolating the end of March foreign exchange rates against the Euro or €1 at around U.S $1.38 for the remainder of 2014 would lead to a negative currency impact of minus 4.3% over the full year. All-in-all, in an overall context marked by some uncertainties, particularly with regard to currencies, this encouraging start to the year confirms our confidence in our ability to outperform the growth of the cosmetics market in 2014 and to achieve another year of sales and profit growth.

This concludes my introductory remarks. I thank you for your attention and we are now ready for your questions.

Question-and-Answer Session

Operator

(Operator Instructions) We have a question from Celine Pannuti from JPMorgan. Please go ahead.

Celine Pannuti - JPMorgan

Yes. Good evening everyone.

Jean-Paul Agon

Hello. Good evening, Celine.

Celine Pannuti - JPMorgan

I have a few questions. The first one is consumer weakness. If you look at the performance that you delivered in the mass market division, if you could elaborate what has been behind that? I understand that North America has been one element. If you could elaborate where the [regions] [ph] being - In fact if I go to North America, I know it's a very difficult exercise, but is it possible to quantify the performance excluding the comp. I know it's very theoretical, but just to get a feeling of what - maybe then if you can tell us what the sell out number has been. Lastly, in your introductory remarks, you talked about an overall market pace that has been difficult especially North America in the first quarter, but can you give us what market growth has been and how that tallies with your forecast for the full year. Thank you.

Jean-Paul Agon

All right. Thank you, Celine, always the first to ask the question. Regarding CPD North America, as you know in fact we have been impacted by a double issue. Number one issue was, as we said and we flagged a long time ago the history, the basis of 2013 where we launched in fact Advanced Hair Care from L'Oreal, which has been by the way the biggest launch ever in the L'Oreal company worldwide.

Then secondly, also by a very slow market in the mass market business. In the U.S. as the market has been absolutely flat, zero growth in this first quarter due to slow demand from consumers, but also as you know some weather conditions that were not ideal, so that's for the CPD U.S., so definitely an impact.

The business in the rest of the world for CPD is growing accordingly to the different regions. In fact in Western Europe, we see an improvement of the market which is pretty encouraging for the rest of the year. The market is accelerating in Western Europe, and as Françoise has told you, we are particularly encouraged by the fact for the first time in five years the market of Southern Europe are positive and we are positive too, which is very, very encouraging. Eastern Europe has been pretty positive. We have some very strong numbers in some countries like Turkey where we are doing extremely fast. Latin America has been pretty positive too.

Africa, Middle East is very positive and Asia, the market is still very solid, so all-in-all the markets are pretty comparable to what they were last year. It's not exactly the same way that last year, but the markets are positive.

The other question was, Celine?

Celine Pannuti - JPMorgan

Right. If I look at North America, can you give us the sell out number and also if I look at Q2 last year yield for a difficult comp. Is it something we should keep in mind for our forecast for Q2 this year?

Jean-Paul Agon

No. In fact, we believe that the Q2 will be absolutely better than Q1 and I remind you that we knew from long time that this Q1 would be difficult than it was announced and flagged very much in advance, because it was quite mechanical. Now for Q2, we believe that the sales in North America will be significantly better than in the first quarter.

Celine Pannuti - JPMorgan

Can we have the sell out for the total business in North America in Q1?

Jean-Paul Agon

I don't have the sell-out in total, because we don't have yet all the retail numbers, but I think that we will not be very far from the market.

Celine Pannuti - JPMorgan

That’s including Luxe?

Jean-Paul Agon

That's including everything and I think that for mass market, we will be slightly negative, slightly due to the market.

Celine Pannuti - JPMorgan

Thank you.

Jean-Paul Agon

Thank you, Celine.

Operator

We have a question from Iain Simpson from Barclays. Please go ahead.

Iain Simpson - Barclays

Good afternoon everyone.

Jean-Paul Agon

Yes. Good evening.

Iain Simpson - Barclays

Just a couple of questions for me if I may, firstly, could you talk a little bit about how you expect market growth rates to look for the full year. I mean, you said that the U.S. market was flat in the first quarter although impacts by the weather. I think last year, you reckoned the U.S. market grew at about 2%. I know it's early days, but would that 2% growth rate for 2014 feel about right? In terms of growth rates for the Global Cosmetics market for 2014, are you still happy with the sort of 3.5% to 4% guidance you provided at your full year results.

Then secondly looking at Western Europe, where it's clear, things are going very well indeed for you. Are you seeing any sort of competitor response to the acceleration in Western Europe? I think some of your competitors have under invested there relative to you for many years. They are sort of struggling to put more money into advertising now just starting to accelerate or what are you seeing? Thank you very much.

Jean-Paul Agon

Thank you for question. Regarding the market growth, it's still very early to tell because it's only one quarter, but I think that if I had a bet, I would bet that the year will be more or less the same than last year in terms of growth, so we are seeing probably growth of between 3.5% and 4% for the year.

Maybe with the different balance between the zones this year compared to last year, probably the U.S. will be a bit maybe slower than the year before, because the beginning of the year in the consumer market in the U.S. has been very slow as I told you. It's been flat and honestly I don't remember a flat market for many years in the USA for our consumer division.

On the other hand, on the contrary, as you say also we see a very positive evolution in Western Europe. That's true for the mass market. It's also true for luxury that has been positive at the beginning of the year, which is also very positive. As I told you, the very good news for us of the recovery of the southern Europe markets. All-in-all, I would say probably a market like last year between 3.5% and 4% with a different the balance between the zones.

Regarding Western Europe, you are right. Western Europe for us, we have always said that it's a very important market and we have never thought that it was something not strategic, so we are we are making progress, so we are growing. We have some very good performance and in some countries. We are growing 6% in Germany, which is as you know a very competitive market, we are growing 6% in the UK, which is also a very competitive market.

The growth for the a moment in France is a bit below last year, but it's also the mostly because some big beauty that they call Operation Beauté, which are big beauty promotions in big retailers in France are in fact this year in April instead of March, so this bodes well for our sales in April in the second quarter and for the first time again, we are also growing under four countries in Southern Europe, so we are pretty optimistic for Western Europe this year for our performance in Western Europe, and as it is the most profitable region for us, this is also a very positive element for the profitability of the year.

Iain Simpson - Barclays

Very clear. Thank you very much.

Jean-Paul Agon

Thank you.

Operator

We have a question from Hermine Bentzmann from Raymond James. Please go ahead.

Hermine Bentzmann - Raymond James

Hi. Good evening to everyone.

Jean-Paul Agon

Good evening.

Hermine Bentzmann - Raymond James

I have two questions please. The first one on the cosmetic market growth, can you give us precisely the growth in Q1 in total but also for each region and each channel. Second question is on Active Cosmetics. I was wondering if there is any particular launch or region that will be under very strong momentum in Q1. The last question on the pipeline of innovation, what major launches are you planning in Q2 or in H2?

Jean-Paul Agon

Thank you. I am a bit sorry for the first question because honestly first we don't have all the data as yet, because it's pretty early this year. We are only April 14, and it's pretty early for data and to be honest we are not data bureau for the cosmetic industry, so we don't have everything, so what I can only tell you is that probably if you want global numbers. We estimate the total luxury business market to be around plus 5% in the first quarter. We estimate the global mass market to be around plus between 3% and 5% and 4% like the market in sales and we don't know yet exactly for professional and Active Cosmetics, so your question regarding Active Cosmetics, in fact this division grows very well everywhere in the world, so it's gaining market share everywhere in the world, so there is no particular region or country, where we have to note some specific results Françoise, you want to comment anything special?

Françoise Lauvin

No. I think it's also probably the result of the work we have been doing behind the brands and especially Vichy, which is really confirming its turnaround and growing in all markets, including Western Europe and continued strong momentum behind the La Roche Posay and skin surgical.

Jean-Paul Agon

Yes. In fact the growth of Active Cosmetics, which as you have seen is very strong impact the results. Strong in Western Europe, it's strong in North America, it's strong in new markets, so it's really strong everywhere, and your third question was about?

Hermine Bentzmann - Raymond James

The pipeline of innovation for the rest of the year.

Jean-Paul Agon

Yes. Pipeline, as you know is always pretty strong at L'Oreal, but it's launches that are usually very strong at the beginning of the year and we have other launches at the end. For example what the Consumer Division, we have a very, very strong launch in hair care with a new module for L'Oreal hair care, which is called Fibrology, which is a very strong one. We have some strong innovation in terms of skin care with L'Oreal Paris. Same for Garnier, very strong plan for Maybelline and we have also in every luxury brand some strong innovations for every brand, so the idea here is really brand-by-brand to really nourish the growth with strong innovation, but also innovation that builds every category in order to do some sustainable growth, which is the most important thing, so we have more or less the same rhythm of innovation that we have every year which is something between 15% and 18% of innovation rate. Okay?

Hermine Bentzmann - Raymond James

Okay. Thank you.

Jean-Paul Agon

Thank you.

Operator

We have a question from Gael Colcombet from MainFirst.

Gael Colcombet - MainFirst

Yes. Good evening.

Jean-Paul Agon

Good evening.

Gael Colcombet - MainFirst

I have a question mostly on Asia, and actually two-fold. First of all, your growth in Japan seems quite strong and I was wondering if there was any impact in terms of anticipation of the VAT increase, which happened on April 1. The second question is on, if you look at overall rates of Asia, it seems to be a bit weaker than what you had in the previous quarters and I was wondering if you could comment on the various trends by country and also if there was already a negative impact from the Garnier exits. Thank you - from China.

Jean-Paul Agon

Okay. Well, first, I mean, your guess is right. I mean, definitely the strong acceleration in Japan in quarter first absolutely are mostly due to the VAT increase on April. If you can stop the noise, and that's the first point. Second point, Asia, we are starting - it's true that our rhythm in the first quarter is below the rhythm that we expect to have during the year and we are pretty confident that the rhythm will accelerate during the next quarters and this should be done already in the next one. Third, no, Garnier in fact, on the contrary, Garnier, the fact that we stopped Garnier will be a cause of acceleration of growth. We will be having also very soon the integration of Magic in China, and so with the exit of Garnier and the integration of Magic, we are pretty confident that we will accelerate our growth under China market, so all-in-all we are very confident for Asia this year and we are pretty confident to keep it very higher rhythm of growth.

Gael Colcombet - MainFirst

Thank you.

Jean-Paul Agon

Thank you.

Operator

We have a question from Iain Simpson from Barclays. Please go ahead.

Iain Simpson - Barclays

Hello and thank you very much for allowing me a follow-up. I just wondered if you could talk a little bit about how Chinese luxury was doing. I think that's something where you saw a little bit of a slowdown in the fourth quarter I’d be interested to see how that's trending and if there were any other sort of sequential changes in Asia-Pac that you noticed in the first quarter relative to the fourth quarter.

Then just to touch very quickly on Body Shop. I think you sort of overhauled management structures there a little bit during the last year and integrated its management a bit more. Do you have any idea when you sort of expect to see that being reflected in result if there is sort of innovation [inaudible] or anything coming at Body Shop that we should look out for? Thank you very much.

Jean-Paul Agon

All right. Regarding luxury, the luxury market has slowed down in China. That's a fact, but it was a very high. It was around 16%. I remember well being in the Q1 2013 and now we think that the profit growth of the market is more around the 8% which is where it was, but that slowed down progressively during 2013.

On our side, we are very happy with our performance in the luxury in China. We are growing double-digit, at least 1.5 times the market and what I have seen recently when I was there is that we are definitely gaining market share in the division and Lancôme in particular is definitely gaining the battle of the luxury business in China, so very confident and very confident for the rest of year.

I mean just to give you a few examples Lancôme is back to number one, Yves Saint Laurent is a great beginning. Giorgio Armani is doing extremely well, so all our brand Kiehl's is going to become one of the, I think the top-three or four brands in China very soon, so we have really fantastic run on the luxury market in China, so it's not exactly the same as you said for The Body Shop. The Body Shop is not yet this homerun, but we all expect, but I'm pretty confident that with the new organization as you said, new strategy that is being defined now and the new team, we are really expecting an acceleration and we hope that this acceleration will come this year.

Iain Simpson - Barclays

Thank you very much. Just to clarify if I could very quickly. You said Asia-Pacific should accelerate later on this year. What will be the regions of the cash [increase] [ph] that will drive that if Japan is slowing with VAT rise? Thank you.

Jean-Paul Agon

Japan for us is pretty small in China. Good thing with us is that we have decided a few years ago that we didn't want to invest much in Japan and the contrary we wanted to invest in the growing markets of Asia, so we really believe that China for us would accelerate in the next quarters and that we will see also some improvement in several countries like Thailand. Thailand has been quite impacted by some troubles in the first quarter, so we think that the situation would improve. Indonesia should accelerate too, so we think that Asia will accelerate in the next quarter.

Iain Simpson - Barclays

Thank you.

Jean-Paul Agon

Thank you.

Operator

We have a question from (Inaudible) from credit Suisse. Please go ahead.

Unidentified Analyst

Yes. Good evening. I wondered if you could help us, tell us what the M&A impact is for each of the divisions. Secondly to help us understand the U.S. number, by perhaps how each of the divisions fared in the U.S. if only roughly.

Jean-Paul Agon

Okay. I can start with U.S. and Françoise will give you the element for the M&A, but you know the M&A are not very significant on this first quarter, but I’ll let her prepare that. In fact in North America, we had a pretty good beginning of the year in all divisions except one which is of course the biggest one, which is the Consumer Division, so for the first time I would say in many years the Professional Division was back to growth with low-single digit, but positive and significantly positive.

Luxury was pretty good too, mid-single digit and Active Cosmetics was high single digit which is good too. Also, if you allow me, I would say that it's true also for the group globally it's true as we have said before and that's why we flagged it the impact of the basis for CPD North America is significant for the group in this first quarter, but if you take the rest of the performance, in fact it's a pretty strong performance of all of the divisions, very strong performance of Active Cosmetics as you have seen, very strong performance of Luxury. I think it's going to be one of the best performance in the luxury industry in this first quarter, very good recovery of the Professional Division which has been bothering us for two years and also the very positive news of the improvement in Western Europe, so many, many good news in this first quarter. That's why we believe that is encouraging and that we are pretty confident for the year, but of course impacted by CPD U.S., so Françoise…

Unidentified Analyst

Sorry, was CPD US down 10% or more than…?

Jean-Paul Agon

No. Mid-single digits. Okay?

Françoise Lauvin

For the impact of the scope of consolidation, it's actually mainly due to the decision to terminate Beauté Créateurs. You know this mail order business that we had in CPD, and so the impact on the CPD business is minus 1.3% in the first quarter and we have a slightly positive impact on the other hand on The Body Shop from the first time consolidation of Emporio Body Store, in Brazil, which brings one additional, one percentage point to the growth of The Body Shop.

Unidentified Analyst

Okay.

Jean-Paul Agon

Thank you.

Unidentified Analyst

Thank you.

Operator

We have a question from Rosie Edwards from Goldman Sachs. Please go ahead.

Rosie Edwards - Goldman Sachs

Yes. Good evening. Two questions for me. Firstly just on Latin America. Obviously it's a very robust growth there, but a slight slowing versus full year '13. I am guessing that was due to markets like Venezuela or Argentina. Is there anything else going on there? Then secondly, back to the U.S., sorry about that, I looked in my notes and found that the Q1 '13 growth in the U.S. mass-market was up 8%. Can you give us an idea of what that then went to in subsequent quarters just a sort of rough idea would be perfect.

Jean-Paul Agon

I am not sure I understood your first question. Sorry.

Rosie Edwards - Goldman Sachs

Just some more details around Latin America. Obviously the growth still robust, but have slowed versus 2013 and then Q4 '13, so trying to understand what's driving that and whether there is anything more to it than market such as Venezuela or Argentina.

Jean-Paul Agon

Yes. In fact, in Latin America the quarters are not exactly steady, so the growth is not always steady. Last year it was the same. We had some quarters at plus 15 or plus 12 and one at plus 8, I would say that it's a bit the same that we forecast this year in Latin America, so we start the year with this growth and we expect the growth also to accelerate in the remaining quarters, because we believe that will improve the sales, the growth in Mexico. We should see an acceleration also in Chile, so Colombia also. I think we are in going into good direction in Latin America. Same thing for Brazil by the way, which is doing pretty well in getting market share.

Regarding the U.S., your question was what?

Rosie Edwards - Goldman Sachs

In Q1 '13, I believe you did 8% growth in the U.S. mass market, which is obviously a very tough comp as you have been flagging, but I wondered if you could give us an idea of what that [fell to] [ph] in Q2 '13 or Q3 or any idea that you can kind of give us for the rest of the year.

Jean-Paul Agon

It would be nice. You are right. That’s maybe a bit too detailed and I don't want to give too much information to our competitors. The only thing I can tell you is that you are right. The first quarter, because it's important to understand that the first quarter was almost 9% for the Consumer Division in the US, which means of course I mean, we are now negative mid-single digit, but I can confirm that we expect to be back on growth as fast as next quarter and we expect also to accelerate also in the US for the remaining quarters.

Obviously you remember also that the third quarter had been weak last year because of adjustment that I explained last year, so we expect a very strong third quarter for CPD US All-in-all, I think the things will get steady. We start with the three quarter. We will improve next quarter. We will have a very strong one for the third quarter and things would get back to a steady growth, I think at the fourth quarter.

Rosie Edwards - Goldman Sachs

Okay. Perfect thanks.

Jean-Paul Agon

Thank you.

Operator

We have a question from Eva Quiroga from UBS. Please go ahead.

Eva Quiroga - UBS

Yes. Good evening.

Jean-Paul Agon

Hello, Eva.

Eva Quiroga - UBS

First of all, could you tell us about the performance relative of the three big mass market trends, could you also talk a little bit about trends you are seeing in Travel Retail? Then lastly, can you talk a bit about Professional? What exactly has been driving the improvement? Is it just that the market is being so weak for so long that it's not picking up? Is it innovation and how you are doing in the international markets?

Jean-Paul Agon

Okay, so Françoise, do you want to talk about the trends?

Françoise Lauvin

The performances of the mass market brands, clearly L'Oreal Paris is above the average of the Consumer Products Division, while Garnier and Maybelline are slightly below the average.

Jean-Paul Agon

So, that's the type of information we communicate, so regarding the Professional Division, what we see was that we think we see some improvement in terms of the frequency of visits and attractivity of the channel, while it's not yet spectacular, but I think that it's more sunny than it was last year I would say. In fact for the professional business, we have seen this improvement in the different parts by many part of the world. We have seen it definitely in Western Europe, and most important in the Southern part of Western Europe, because this part of the world has been extremely negative.

We discussed that many times together that in fact the Professional business in Southern Europe has been completely, not completely, but very much destroyed in the past few years and for the first time in five years also we see some improvement. We see also some improvement in North America, after two years that had been difficult, so it's back to growth and in the rest of the world where it's very variable depending on the part of the world but we see some great growth going on in Eastern Europe. We see some growth in Latin America and Africa, Middle East, it's positive almost everywhere except Japan, in fact, because in Japan apparently the VAT did not impact the sales like the rest. Okay?

Eva Quiroga - UBS

On Travel Retail please?

Jean-Paul Agon

Travel Retail, Françoise do you have the numbers?

Françoise Lauvin

Travel Retail sales rose in the first quarter by 5.4% on a like-for-like basis and to give you a flavor by region, the Americas rose double-digit, Asia mid-to-high single digits and Europe was a bit lower, but positive.

Eva Quiroga - UBS

Thank you.

Jean-Paul Agon

Thank you, Eva.

Operator

We have a question from Catherine Rolland from KeplerCheuvreux. Please go ahead.

Catherine Rolland - KeplerCheuvreux

Good evening. I have two questions. First of all, could you give us the Q1 organic growth breakdown for the BRIC countries? The second question was about Southern Europe. You explained that Southern Europe was back to growth. Could you give us some color about this growth rate maybe for the Spanish and Italian market please?

Jean-Paul Agon

Okay. Françoise, you talk about the BRIMC and I will talk about the - I would love to about the PIIGS, about Southern Europe countries.

Françoise Lauvin

The BRIMC countries, Catherine, they accounted for 18% of the Cosmetics Division's total sales and they increased 6% like-for-like all together and for a flavor by country, India was close to 15%, Brazil and China were up high single digits, Russia up low single-digit and Mexico flat.

Jean-Paul Agon

Regarding Southern Europe, honestly, these numbers make us very happy, because it's really the first time that we see growth like this in these countries, so for example Italy was plus 2%, Spain was plus 3.5%. Even Greece for the first time in many years was plus 3.2% and Portugal was the champion with plus 6.9%, so it's really a turnaround and I remind you that we have been so impacted by these four countries where historically the market shares of L'Oreal was very high, so this turnaround for us is an extremely good news.

Catherine Rolland - KeplerCheuvreux

Okay. Thank you very much.

Jean-Paul Agon

Thank you.

Operator

We have a question from Chas Manso from Societe Generale. Please go ahead.

Chas Manso - Societe Generale

Yes. Good evening. Hi. Could you give us the volume value splits of this quarter and maybe sort of discuss whether there is any imported inflation in emerging markets requiring some strong pricing action or not, and still in emerging markets, could you highlight any key markets of yours where you are seeing any weakness in consumer demand in your categories?

Then the North American question, you said that the sell-in was down mid-single digits in US CPD and the market was flat. Could you just clarify on the sell-outs, whether there was a mismatch or whether you were gaining or losing market share on the sell-out in North America CPD?

Jean-Paul Agon

Yes. I think CPD, I think the US I have given you already so many numbers. What I told you is that the market was flat. We were slightly below the market which means that on this three month, we slightly lost market share and it depends by categories. For example, we gained strongly on hair care. We are - and styling. We are stable in makeup if I remember well and we lost slightly in hair color and skin care, but, okay - but it's only a three month. You will remember that we have been gaining market share very strongly in the U.S. for three years in a row, so we are really committed to get back to market share gains very, very soon and so which means in fact that our sell-out if you compare our sell-out numbers compared to our sell-in and in fact our sell-out was higher than our sell-in.

Your other question was volume value, so this is Françoise’s.

Françoise Lauvin

Hello, Chas.

Chas Manso - Societe Generale

Hi.

Françoise Lauvin

So, volume value, looking at it over short period of time is maybe not so relevant in the sense that you have some mix effect with the new product and so on, but nevertheless, in the first quarter the value component was around 15% of total, which means the volume contributed for 85% of the growth.

Chas Manso - Societe Generale

Okay, so not much, so pricing required to offset imported inflation in emerging markets.

Jean-Paul Agon

Not much yet. We are generally doing what we need to do everywhere. For example in Argentina, where there is a high inflation, but there has been a high inflation for a while. I mean, definitely our prices are also increasing and this is what it's done everywhere where it's needed, but all-in-all it's not yet very significant.

Chas Manso - Societe Generale

Okay.

Jean-Paul Agon

I have to remind you also that for us, the good thing also for us is that some of these countries that are in trouble right now, for example, even Argentina for example, it's a 1% of our sales and several of these countries, where we see some economic difficulties right now are very, very small in our total numbers, so they are not really material for us.

Chas Manso - Societe Generale

Okay. For your important emerging markets are there any of those - are you seeing any consumer demand softness?

Jean-Paul Agon

No. Honestly, we are pretty confident. I told you, China for example, the market is of course not as hot as it used to be in the past two or three years, but I would say that the growth in China is - the market is probably be around 7% which is pretty good.

We see some still good growth in Brazil. We have some market, where growth like Turkey, which is pretty good. Some countries of course, some markets have seen their growth slowdown. For example, Mexico is probably slower than it used to be.

Russia is maybe a country we are a clear leader. The growth is not anymore what it used to be, but I am sure it will surprise nobody, but all-in-all, we believe that the emerging markets are still a great reservoir of growth and new consumers for our brands everywhere.

Chas Manso - Societe Generale

Great. Thank you.

Jean-Paul Agon

Thank you.

Operator

We have a question from [Inaudible]. Please go ahead.

Unidentified Analyst

Good evening. I would like to know what is the [weight] [ph] of [Inaudible] because you spoke [inaudible] but you don't bring that [inaudible]?

Jean-Paul Agon

It's a good question and in fact it's the first time in six years that their weight is increasing. I think it was something like 12% or 13% in 2007. Last year it was 7.4% and this year for the first time it's going up again at 8.6%.

Unidentified Analyst

Thank you very much.

Jean-Paul Agon

Which is not insignificant.

Unidentified Analyst

Okay. Thanks.

Jean-Paul Agon

Thank you.

Operator

Ladies and gentlemen, (Operator Instructions).

Jean-Paul Agon

Any other questions?

Operator

We have no more questions.

Jean-Paul Agon

All right, so thank you very much. Thank you very much for attending this call. As we said, it's an encouraging even if contrasted first quarter, but with many, many good news. In fact very good news in terms of divisions as I told you, very good news of luxury, professional, Active Cosmetics, very good news coming from Europe, with the caveat of CPD US as it was well communicated before and now we are pretty confident for the rest of the year and we expect our growth to get back on a solid pace as soon as the next quarter. Thank you very much.

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