L'Oréal's Q3 sales fell short of expectations, with a recovery in high-end demand in China but disappointing performance in North America, leading to a stock price plunge | Earnings report insights
In the third quarter, L'Oréal's same-store sales grew by 4.2%, marking two consecutive quarters below analyst expectations; the same-store sales in North Asia saw a significant turnaround, changing from a nearly 9% decline in the second quarter to an increase of nearly 5%, achieving moderate single-digit growth in mainland China, thanks to the recovery of the high-end skincare market; the same-store growth rate in North America slowed from over 8% in the second quarter to 1.4%, far below the analyst expected growth rate of 4.4%. After the earnings report was released, L'Oréal's U.S. stock, which had risen by 2% during the session, turned to decline, at one point dropping over 6%
The beauty giant L'Oréal Group saw a halt in its sales decline and a return to growth in the third quarter, although it still fell slightly short of Wall Street expectations. The slowdown in sales in the North American market, impacted by tariffs, partially offset the boost from the recovery in luxury goods demand in China.
On Tuesday, October 21, local time, the France-based L'Oréal Group announced that its total sales for the third quarter of 2025 reached €10.33 billion, a year-on-year increase of approximately 0.5%, reversing a 1.3% decline in the second quarter, but slightly below analysts' expectations of €10.44 billion. Same-store sales grew by 4.2% in the third quarter, significantly exceeding the 2.4% growth in the second quarter, but still lower than the expected growth rate of 4.85%.
Thus, L'Oréal has now experienced two consecutive quarters of sales and same-store sales growth that fell short of expectations. The North American market performed the weakest in the third quarter. L'Oréal hinted that the performance in North America was partially affected by last year's IT system adjustments. Although L'Oréal did not mention the impact of the 15% tariff on imported EU cosmetics in the U.S. for the third quarter, Wall Street Journal previously noted that about 30% of the products sold by L'Oréal in the U.S. market are imported.
In its financial report, L'Oréal pointed out that the continued recovery in performance in mainland China and North America drove the group's growth in the first three quarters of this year. It stated that in the first three quarters of this year, same-store sales in North Asia, including China, grew by 0.5%, marking the first positive growth in two years, with growth exceeding the market average.
After the financial report was released, L'Oréal's U.S. stock, which had risen about 2% near the midday trading session, plummeted, quickly turning negative. Within about five minutes, the intraday decline expanded to over 5%, and further dropped, hitting a daily low of $86.33 in the U.S. stock market's closing session, down 6.4% for the day, ultimately closing down over 5.1%.
Significant Reversal in Same-Store Sales in North Asia in Q3, North American Growth Slows More Than Expected
By region, in the third quarter, L'Oréal's sales in its largest market, Europe, accelerated, with year-on-year sales growth more than doubling that of the second quarter, and same-store sales growth nearly doubling that of the second quarter.
In North Asia, including China, the year-on-year sales decline in the third quarter significantly narrowed to 0.1% from over 11% in the second quarter, with same-store sales experiencing a surprising turnaround, growing nearly 5% in the third quarter after a nearly 9% decline in the second quarter, stronger than the analysts' expected growth of over 3%.
L'Oréal noted that in the first three quarters of this year, sales in mainland China recorded low single-digit growth, outperforming the market average of slight growth. In the first quarter, L'Oréal's sales momentum in this market continued to improve, reaching moderate single-digit growth in the third quarter. This was attributed to the improvement in the sales of the premium cosmetics division, reflecting the recovery of the high-end skincare market, as well as a series of innovative product lines such as Lancôme Absolue Longevity, Helena Rubinstein Re-Plasty50, and Yves Saint Laurent Vinyl Ink L'Oréal stated that inbound tourism has driven sales growth in Japan. In South Korea, all businesses contributed to growth, including the recently acquired local skincare brand Dr. G.
Sales in North America returned to a downward trend in the third quarter, declining over 4% after a more than 2% increase in the second quarter, with same-store sales growth of less than 2%, far below the over 8% growth rate in the second quarter, and the growth rate expected by analysts slowing to less than half of that in the second quarter.
L'Oréal mentioned that considering the impact of last year's IT system upgrade transformation, the same-store sales growth rate in North America for the first three quarters of this year can be adjusted from 1.8% to 3.2%, which has not slowed compared to the 2.0% growth rate in the first half of the year, but rather accelerated. This indicates a steady improvement in the market environment and that recent innovations are beginning to take effect.
Sales data for the three major markets are as follows:
Europe: Third quarter sales amounted to €3.573 billion, a year-on-year increase of 4.6%, with same-store sales growth of 4.1%, compared to a sales growth of 2.0% and same-store sales growth of 2.4% in the second quarter.
North America: Third quarter sales amounted to €2.972 billion, a year-on-year decrease of 4.3%, with same-store sales growth of 1.4%, while analysts expected a growth of 4.41%, compared to a sales growth of 2.4% and same-store sales growth of 8.4% in the second quarter.
North Asia: Third quarter sales amounted to €1.953 billion, a year-on-year decrease of 0.1%, with same-store sales growth of 4.7%, while analysts expected a growth of 3.22%, compared to a sales decline of 11.3% and same-store sales decline of 8.8% in the second quarter.
Among L'Oréal's four major divisions, only the sales of high-end cosmetics, including luxury perfumes, declined year-on-year in the third quarter, although the decline has narrowed by more than half compared to over 5% in the second quarter. Sales data for the four divisions are as follows:
Mass Market Cosmetics: Third quarter sales amounted to €3.763 billion, a year-on-year increase of 0.4%, with same-store sales growth of 3.8%, compared to a sales decline of 0.4% and same-store sales growth of 3.3% in the second quarter.
Premium Cosmetics: Third quarter sales amounted to €3.720 billion, a year-on-year decrease of 1.5%, with same-store sales growth of 2.5%, compared to a sales decline of 5.3% and same-store sales decline of 1.9% in the second quarter.
Professional Hair Products: Third quarter sales amounted to €1.618 billion, a year-on-year increase of 1.1%, with same-store sales growth of 5.1%, compared to a sales decline of 0.4% and same-store sales growth of 3.5% in the second quarter.
Dermatological Beauty: Third quarter sales amounted to €1.233 billion, a year-on-year increase of 6.1%, with same-store sales growth of 9.3%, compared to a sales growth of 7.3% and same-store sales growth of 11.5% in the second quarter
