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Investing.com -- L’Oréal S.A. shares fell more than 6% on Wednesday after the French beauty group reported third-quarter 2025 sales growth below market expectations.
The company posted organic sales growth (OSG) of 4.2% for the quarter, compared with a consensus forecast of 4.7%. On an underlying basis, excluding phasing effects, growth reached 4.9%.
“While this represents an acceleration vs H1 25, it obviously fell short of consensus sellside expectations, as well as those of the buyside,” said analysts at Morgan Stanley in a note.
By division, Professional Products was the standout performer, rising 9.3% against a 5.2% consensus.
Consumer Products increased 3.8% compared with expectations of 5.3%, while L’Oréal Luxe rose 2.5% versus 3.2%.
Dermatological Beauty advanced 5.1%, short of the 7.7% projection. Overall sales totaled €10.33 billion, 1.1% below the €10.45 billion consensus estimate.
Geographically, the United States was the weakest region. North America posted like-for-like growth of 1.4%, trailing the 3.1% forecast, while scanner data earlier in the quarter had shown stronger retail sell-out.
Morgan Stanley said, “The gap between US sell-out (+6%) and sell-in (+3.8%) raised questions about inventory.”
In contrast, Europe exceeded expectations with 4.1% growth against 3.2%, and North Asia grew 4.7%, ahead of the 2.9% estimate.
L’Oréal also maintained its momentum in mainland China, where the market grew about 3% in the third quarter after being flat in the first half.
The global beauty market expanded slightly above 3% during the quarter, in line with the second quarter, according to the report.
L’Oréal management reiterated that the company “remains confident in its ability to continue outperforming the global beauty market and achieve another year of growth in sales and operating profit,” but did not issue numerical guidance.
Morgan Stanley revised its full-year OSG estimate to 4% from 4.2%, citing softer-than-expected third-quarter results.
The brokerage now forecasts 6% organic growth in the fourth quarter, supported by about 110 basis points of phasing benefit in the Luxe segment.
Its analysts also trimmed their 2026 growth forecast to 5.3% from 5.7% and lowered the price target for L’Oréal’s shares to €372 from €376, maintaining an “equal-weight” rating.
The brokerage said the quarter’s performance “leaves little margin for error” given L’Oréal’s recent valuation premium.
The analysts noted that while the company is expected to sustain margin expansion and steady earnings growth, “the bar of ‘newness’ has been set very high.”
L’Oréal’s stock closed at €398 on Oct. 21, within a 52-week range of €408.35 to €316.30. The revised price target implies a 6.5% downside from the latest close.
Morgan Stanley estimates L’Oréal will deliver sales of €44.14 billion in 2025, rising to €46.43 billion in 2026, with an operating margin of about 20.1% next year.