L’Oreal shares gain after strong quarterly sales for Luxe unit

L’Oreal SA shares gained after the cosmetics company reported resilient sales growth, led by demand for high-end make-up and perfumes.

The stock rose as much as 2.6% early Tuesday, the first day of trading in Paris after the owner of brands such as Aesop and Kiehl’s published financial results. It’s down about 21% over the past 12 months.

Overall like-for-like sales rose 3.5% in the first quarter, L’Oreal said last week, almost three times as much as analysts had expected. The so-called Luxe division was the strongest among the four units, with sales rising 5.8%.

Luxe saw double-digit growth rates for its fragrance lines, which include names such as Libre by Yves Saint Laurent and Born in Roma by Valentino. 

The company stuck with a goal to increase sales and profit this year, though the beauty market overall may grow at the lower end of the 4% to 4.5% range the company forecast in February, Chief Executive Officer Nicolas Hieronimus said during a call with analysts. 

In the latest quarter, sales in North America were weaker than estimates, amid soft demand for cheaper make-up, the French company said.

“There were some good and some less good surprises,” Hieronimus said in a statement. The US was “more challenging than anticipated, while China was slightly better than expected.” 

L’Oreal has built up inventory for several labels in the US in response to the threat of tariffs, and could relocate some production to the country, Hieronimus said. The company could also raise prices to offset the impact of the levies, and mostly imports Luxe products to the US, he added.   

The Luxe division showed a sharp improvement from the fourth quarter, when sales at the unit rose just 1%. It also outperformed the perfumes and cosmetics unit at competitor LVMH, which saw organic sales fall 1% during the first quarter. 

Cecile Cabanis, LVMH’s chief financial officer, told analysts last week that the perfumes and cosmetics unit had seen an initial impact from the US tariff announcements toward the end of March.

This story was originally featured on Fortune.com