Wednesday, May 15, 2019

A Current AIM International Equity Holding: L’Oreal SA Unsponsored ADR (LRLCY, $54.00): “You can’t makeup this growth” By: Andy O’Neill, AIM Student at Marquette University


 L’Oreal SA Unsponsored ADR (LRLCY, $54.00): “You can’t makeup this growth”
By: Andy O’Neill, AIM Student at Marquette University


Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

L’Oreal SA Unsponsored ADR. (NYSE:AIG) manufactures and sells beauty products, including cosmetics, high end skin care and beauty products across the world.

• L’Oreal’s 2018 sales growth is highest in a long time and Q1’19 surpassed those numbers.

• New e-commerce growing rapidly, as well as travel retail sector.

• New CFO has led to impressive sales growth results.

• Under new management keen on maintaining high ESG scores, L’Oreal is continuing to grow sales, leading to increased opportunity.

Key points: 

In 2018, L’Oreal had a sales growth rate of 7.1%, marking their highest year of top line growth since 2007. This includes a strong fourth quarter of growth, which came in at 7.7%. Their sales growth numbers are trending up, since their first quarter sales also were 7.7%. The company has grown in many different segments, and are growing most rapidly in their new markets, which is driven by the Asia Pacific market.

One of their biggest reasons for growth has been the growth of their e-commerce. Growing by over 40% in 2018 and almost 44% in Q1’19, this has been one of the largest growth drivers for L’Oreal. It has performed well across all markets, and for all of their products they have seen growth. Also, their travel retail has grown substantially in the past quarter, up 24.1%. This segment surpassed €2 billion in Q1 and is poised to grow more in the rest of the year.

Christian Mulliez was succeeded by Christophe Babule on February 8, 2019 as CFO of L’Oreal. One of his biggest focuses was continuing to increase their ESG statistics, as well as growing the sales in different regions through e-commerce and targeted marketing. L’Oreal has been recognized as a global leader in corporate sustainability, and was rated number one worldwide, across all industries, in their communication of environmental, social, governance, and human rights issues.

Under their new CFO, the company has done quite well. They have continued to be the worldwide cosmetics leader, and they have continued to have quality ESG reporting. This has led them to continue to grow their company at a large pace over the past 5 quarters, and bodes well for success into the future.

What has the stock done lately?

In the 4 months since new CFO Christophe Babule was announced, the company has done very well, with a 17.37% price increase in the new year. A strong first quarter pushed their growth to continue rising through March, and they have the continued sales growth to continue pushing their price forward.

Past Year Performance: 

LRLCY has increased 13.71% in value over the past year, and could be ready for more rises. Management has done a good job forecasting growth through their e-commerce sales, and predict that it will continue at a rapid pace. As the company keeps growing and increasing market share in new markets, this will be a rising stock.



Source: FactSet

My Takeaway:

L’Oreal has been doing very well over the start of the year. I expect this to continue based upon their ability to penetrate their newer markets in the Asia/Pacific region, as well as their ability to increase sales at a high pace in many different markets. Their new CFO has taken this company  to a very high level.


Source: Yahoo! Finance


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