Luxury drives record profitability for L'Oreal

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"Time, Work, Money: Let's change the rules" on April 13, 2011 in Clichy-sous-Bois, north of Paris, during a demonstration in front of the headquarters of French group L'Oreal.

"Time, Work, Money: Let's change the rules" on April 13, 2011 in Clichy-sous-Bois, north of Paris, during a demonstration in front of the headquarters of French group L'Oreal.

FRANCE – French cosmetics giant L&39;Oreal said Thursday that spectacular sales growth of its luxury products helped raise its operating margin to a record last year.

Net earnings jumped over 15 percent to 3.58 billion euros ($4.38 billion) although sales edged up only 0.7 percent to 26.02 billion due to adverse changes in exchange rates.

Operating profits, at 4.68 billion euros, came in at a record 18 percent of sales.

"In a beauty market that pursued its steady growth in 2017, L&39;Oreal had a good year with sustained sales growth momentum, and robust profits," chief executive Jean-Paul Agon said in a statement, adding that sales picked up in the second half of last year.

While all divisions recorded growth in sales, Agon singled out "L&39;Oreal Luxe which is delivering spectacular growth, particularly in Asia".

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The owner of Maybelline cosmetics and Garnier shampoo brands, L&39;Oreal has also been pushing into the luxury segment, with the makeup and fragrance lines for Giorgio Armani, Yves Saint Laurent and Lancome.

While sales of its mass market brands edged one percent higher, the luxury unit saw sales jump by 10.6 percent last year to stand at 70 percent of the level of mass market brands.

In the fourth quarter of 2017, luxury sales narrowed the gap to just 20 percent.

The Asia-Pacific region is the firm&39;s third largest market, and is growing at a much faster rate than either North America or Western Europe.

"Chinese consumers are driving growth, particularly for the L&39;Oreal Luxe Division in China and Hong Kong," said L&39;Oreal.

Agon said he was confident that in 2018 L&39;Oreal will once again outperform the market and increase profitability.