L'Oreal Shares Are Diving After Weak Sales

Girl pulling her own hair

Photo: Evil Erin via flickr

L’oreal is having a bad hair day.Shares are down over 4% after its fourth-quarter sales and margins came in below expectations.

Both UBS and Deutsche Bank downgraded the stock because

  • The company is seeing slowdowns in Like-for-like sales growth, which is key to valuation
  • ┬áSales were up 4.1% for the fourth quarter below a forecast of 5.3%.
  • Rivals Estee Lauder and Elizabeth Arden both came in above analyst expectations and raised their full-year forecasts

This week’s departure of L’Oreal Chairman Lindsay Owen-Jones may be a sign that the company is buying a direct sales company which would help decrease costs and expand into other markets.

Owen-Jones was always against direct sales but his successor Jean-Paul Agon has not taken a firm stance yet and his advisors say he is open to discussions.

Agon told a French newspaper he was interested in making acquisitions in Brazil or India. After nearly paying off all of its debt, the company has available cash for acquisitions.

Foreign expansion would help with the company’s goal to bring on 1 billion new customers over the next 10 years in more emerging markets.

Estee Lauder and Elizabeth Arden have strong operations in both China and Russia.

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