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
