L’Oréal S.A. (OTC:LRLCY) Q1 2025 Earnings Call Transcript

L’Oréal S.A. (OTC:LRLCY) Q1 2025 Earnings Call Transcript August 1, 2025

Operator: Welcome to the conference call regarding L’Oréal’s 2025 Half Year Results. The conference is about to begin. I now hand over to Eva Quiroga. Mrs. Quiroga, please go ahead.

Eva Quiroga-Thiele: Good morning to all, and thank you for joining us for the presentation of our first half 2025 results. I’m here with our CEO, Nicolas Hieronimus.

Nicolas Hieronimus: Good morning.

Eva Quiroga-Thiele: Our CFO, Christophe Babule.

Christophe Babule: Hello. Good morning.

Eva Quiroga-Thiele: And the Global Head of Corporate Finance and Financial Communications, Laurent Schmitt.

Laurent Schmitt: Good morning.

Eva Quiroga-Thiele: As always, Christophe will comment the first half results. Nicolas will then share his takeaways from the first 6 months and tell you why we remain confident in the outlook for the rest of this year and beyond. After that, we will open for Q&A. You can find the slides of both presentations on our website already. You will be able to access the replay of this call later today, and the half year report will be available at the beginning of next week. And with that, over to you, Christophe.

Christophe Babule: Thank you, Eva. Ladies and gentlemen, good morning. L’Oréal delivered a solid performance in the first half. My 4 key highlights are the robust like-for-like growth of 3% in a dynamic market, the sequential acceleration in like-for-like growth, adjusted for the phasing related to our IT transformation; the record operating margin of 21.1%, up 30 basis points from last year; and the operating net cash flow of EUR 2.7 billion, up 38% versus last year. Sales increased by 1.6%. Foreign exchange had a negative 1.9% impact as the euro appreciated against most of our key currencies. You can find further detail in the appendix of this presentation. If the exchange rates on the 30th of June were extrapolated until the 31st of December, the full year impact of currency fluctuations on sales will be a negative 3.7%.

The change in scope of consolidation contributed a positive 0.5%. It reflects the acquisition of Dr.G on 31st of March and the impact of hyperinflation accounting in Argentina and Turkey. On a like-for-like basis, growth came to 3%. This was driven by a positive contribution from volume, up 1.2%, and value, up 1.7%, the majority of which from mix. As you can see on the chart in the center, like-for-like growth adjusted for the impact of our IT transformation in North America and China, accelerated from 2.6% in the first to 3.7% in the second quarter. The first half stood at 3.2%. While I’m on the subject of adjustments, I thought it might be helpful to give you an update on where we are in our IT transformation. To date, we have finalized around 1/3 of the process, which has included a number of our smaller countries as well as some of our larger countries.

We promised you earlier this year to be transparent on the impact of these bigger projects once they have been implemented, which take us to the chart on the right. You will recognize the 90 basis point impact we disclosed in the first quarter, and 130 basis points effect we quantified in the second. The difference between the two comes from the fact that it took a little over a quarter to reverse the impact of our North American phasing in Q1 last year. In the third quarter, there will be a positive phasing impact of around 70 basis points, the net effect of two factors: first, a negative 40 basis points stemming from the gap I just explained; and second, a positive 110 basis points related to the IT transformation of our Luxe business in North America in the third quarter of last year, which we commented but did not quantify at the time.

With that, let’s move on to look at our divisions. They all grew on a like-for-like basis. Driven by the ongoing boom in premium haircare, Professional Products advanced 6.5%. Consumer Products progressed 2.8%, perfectly balanced between volume and value. Luxe grew 2%, with fragrances maintaining their double-digit win. And Dermatological Beauty advanced 3.1%, reflecting a particularly challenging basis of comparison. All four key brands contributed. Let’s now turn to our regions. Emerging markets continued to grow in double digit at 10.4%. SAPMENA-SSA and Latin America, both contributed from it. In North Asia, sales declined 1.1%, held back by Travel Retail, excluding which, growth turned positive in the first half driven by Mainland China.

Momentum in Europe remained robust at 3.4% with particularly strong performances in the DACH and Iberia clusters as well as in Central Europe. In North America, progress was solid at plus 2%, implying a gradual acceleration in the second quarter. And finally, let’s look at our categories. At 12.1%, haircare was the most dynamic with professional, mass and derma contributing. Perfumes maintained their impressive double-digit pace at 11%. At 2.4%, makeup continued its gradual rebound, boosted by new launches. Hair color advanced by 0.5%, led by mass, and skincare declined slightly, impacted by the situation in North Asia. Let’s now move to the profit and loss account. In the context of ongoing economic and geopolitical tensions, we continued to deliver strong progress.

Gross profit amounted to more than EUR 16 billion, resulting in a very healthy margin of 74.7%. The slight 10 basis points decline versus last year reflected a number of factors, including adverse currency movements and tariffs. Research and innovation expenses came in at EUR 672 million, stable at 3% of sales, in line with the long-term average. Advertising and promotional expenses stood at EUR 7 billion or 31.9% of sales, a slight 20 basis point decrease versus last year as we continued to see the benefits of the gradual rollout of our BETiq optimization tool. SG&A expenses of EUR 4.2 billion decreased by 20 basis points in relative terms, reflecting our continued focus on cost control and operational efficiencies. Operating profit increased by 3.1% to more than EUR 4.7 billion.

The operating profit margin advanced by 30 basis points, reaching a new first half record of 21.1%. As I do in my first half presentation every year, let me remind you that L’Oréal is managed on an annual basis. Therefore, the profitability of group and divisions in the first half cannot be extrapolated to that in the full year. All of our divisions reported operating margins in excess of 22%. Three of them reached record first half margins. The profitability of Professional Products came in at 22.4%, up 30 basis points. Consumer Products improved their profitability by 50 basis points to 22.5%. L’Oréal Luxe increased its margin by 40 basis points to 22.3%. The margin of Dermatological Beauty stood at 28.2%, 70 basis points below last year as we are progressively reducing the existing imbalance between the two halves.

Non-allocated expenses, consisting mainly of corporate and fundamental research costs, were down by 10 basis points at 2.3% of sales. Net financial expenses amounted to EUR 102 million. For the full year, you should expect to see an increase owing to the acquisitions of Medik8 and Color Wow. Sanofi’s dividend came in at EUR 348 million, a 22% decline compared to 24%, reflecting the sale of a 2.1% stake earlier this year. The adjusted income tax stood at close to EUR 1.2 billion, representing a rate of 23.7%, broadly in line with that in the first half of 2024 at 24%. Net profit excluding nonrecurring items amounted to EUR 3.8 billion. We will now complete the review of the P&L account. Nonrecurring items amounted to a negative EUR 415 million compared to a negative EUR 89 million in the first half of last year.

Other income and expenses stood at EUR 269 million and included, first, restructuring costs at EUR 93 million related to projects in the Luxe division as well as Europe, North America and Travel Retail; second, costs related to product liability lawsuits amounting to EUR 85 million; and then last, the impact of the disposal of Carol’s Daughter amounting to EUR 41 million. Nonrecurring tax items came in at EUR 146 million. This reflected the impact of the exceptional temporary surcharge approved by French parliament earlier this year. It stood at EUR 198 million in the first half and is expected to amount to around EUR 250 million in the full year. Considering all nonrecurring items, net profit after noncontrolling interest came out at EUR 3.4 billion, a decline of 8%.

Gross cash flow of EUR 4.4 billion was down 3%. Our working capital amounted to EUR 861 million, down from EUR 1.7 billion last year. This can be attributed to several factors, including fluctuations in the fair value of foreign exchange derivatives as well as the increase in tax debt. Capital expenditures stood at EUR 766 million or 3.4% of sales, broadly in line with last year. Operating net cash flow of EUR 2.7 billion increased by 38% that of last year and residual cash flow was a positive EUR 310 million, driven by the sale of the stake in Sanofi, which more than offset the impact of acquisitions and share buybacks. The balance sheet remained robust with shareholders’ equity of EUR 31.2 billion or more than half of the total balance sheet.

At the end of June, net debt amounted to EUR 4 billion and to EUR 2.1 billion excluding financial lease debt. The gearing ratio stood at 12.8% and the financial leverage at 0.38x. The financial situation remains very healthy. I thank you for your attention.

Nicolas Hieronimus: Good. Up to me now. Good morning, everybody. Since Christophe has already commented the numbers in detail, let me jump right in and address some of the questions I know many of you are keen to ask. The first one is about the market. So let’s start with the market. At the beginning of the year, we told you that market growth would gradually accelerate over the course of the year, and that is exactly what happened. In the first half, the market advanced slightly more than 3%, implying a clear acceleration from the first quarter at slightly over 2%. This acceleration was broad-based across all regions. Most remarkable was North America as the U.S. improved significantly after a challenging start of the year.

In Mainland China, market growth was broadly flat, a significant improvement from the 4% decline last year. But what is even more important is that luxury started to outperform mass, which is obviously helpful given our footprint. Emerging markets remained dynamic with both regions growing in double digits. In Europe, market growth remained solid albeit below last year’s level, which was boosted by pricing. Second, let’s look at our performance. Considering the impact of the phasing relating to our IT transformation, my comments will refer to numbers net of this phasing unless I tell you differently. As anticipated, our like-for-like growth accelerated from 2.6% in the first quarter to 3.7% in the second. This takes us to 3.2% in the first half.

Yes, this was broadly in line with the market, but the devil is in the detail, and we outperformed the market in 3 out of 4 divisions. Luxe outpaced the market in all regions and across all categories, especially fragrances, where it grew thrice as fast as the selective markets. The strong innovation pipeline added 300 basis points to the contribution from new products. Professional Products continue to grow multiple times faster than the market driven by the unstoppable boom in premium haircare. Our Kérastase billionaire brand grew in high teens, boosted by the launch of Gloss Absolu. As you know, Elvive was up against a particularly challenging comparison base in sell-in. Sell-out was significantly better and well above the dermocosmetics market at a multiplier of 1.3x.

Emerging markets in North Asia grew in double digits, reflecting the division’s focus on geographical expansion. In the U.S., CeraVe started to regain traction, with successful entry into haircare health, but we also saw an improvement in the core skincare business. Consumer Products slightly underperformed the market. This was partly due to its unfavorable footprint as the division overindexes in U.S. makeup, which remains soft, and has no exposure to fragrances, the fastest-growing mass category. The division significantly outperformed the market in haircare and makeup. It showed encouraging trends in skincare in markets with a strong innovation lineup like Latin America. And we are reassured by the recent green shoots in the U.S., including in makeup, where our innovation has started to kick in, as you will have seen in the most recent Nielsen data.

By region, our emerging markets are starting to pull their weight. They’re accountable for 17% of our sales and continue to grow in double digits. The large markets all grew, the vast majority above 10%. Four of the emerging markets were among the top 10 contributors to growth at group level: Mexico, Brazil, India and Thailand, well balanced between our two emerging regions. Growth was driven by a healthy combination of volume as we recruit new consumers and mix as we premiumize our offer. In North Asia, adjusted growth improved sequentially. The key driver was Mainland China, which turned positive for the first time in 5 quarters as we continue to outperform a stabilizing market. Sales increased in each of our four divisions. We were encouraged by 6.18.

The market advanced around 7%, our brands were up double digits, and we had 4 of our brands in the top 10; and 8 in the top 20 in this year’s ranking. In North America, adjusted growth accelerated in the second quarter, including first green shoots in Consumer Products as well as Dermatological Beauty, as I just explained. In Europe, growth was ahead of the market in sell-out, with particularly strong performances in Luxe and Professional Products. Sell-in was impacted by a high comparison base particularly for Elvive given last year’s strong suncare presale. Third, let’s look at how we think — we should think about the rest of the year. What we have seen so far this year makes us confident that global beauty market growth will come in around 4% as we had predicted at the start of the year despite the many economic and geopolitical uncertainties.

We expect the market acceleration to continue, helped by an easier comparison base as market growth slowed from 4.5% in the first half to 3.5% in the second half of last year. The appetite for beauty has never been more dynamic. Today, over 2/3 of people around the world consider it important to look fit and attractive. That’s 6 points higher than just 3 years ago. This is a global trend whether you look at the U.S., Brazil or India, just to name a few. Social media conversations over all things beauty remain incredibly dynamic, with 6.5 billion beauty searches on TikTok in the first half alone, up over 50% from last year. Last but not least, beauty market growth could be boosted by price increases related to the announced and pending tariff hikes.

And we have every ambition to outperform the market. Critically, our Beauty Stimulus Plan will accelerate further in the second half. Our ambition is to increase the weight of new launches by more than 300 basis points versus last year. We’ll of course continue to roll out our more recent blockbusters such as Kérastase Gloss Absolu; L’Oréal Paris Infallible; from SkinCeuticals, P-tiox; and we have an even fuller basket of launches in the second half. In the Luxe division, for example, we have a new men’s fragrance from Prada, the inaugural fragrance of Miu Miu and the latest skincare innovation from Helena Rubinstein. In the last 12 to 18 months, the contribution from online to total beauty market sales has been accelerating. In the first half, online grew twice as fast as the market, and we are uniquely well placed to benefit from this shift given our long-standing investment in this channel.

In the first half, e-commerce accounted for almost 29% of our sales, more than 2 points above last year and grew in the low teens. Over the weekend, Europe and the U.S. reached tariff agreements, imposing American tariffs of 15% on beauty imports from the EU. I can’t give you a definite number for the impact tariffs will have on our margins since we are still missing certain elements. What I can tell you, however, is that it will be manageable. Our 36 factories and more than 150 distribution centers around the world give us significant flexibility as most of the units we sell are manufactured where we sell them. The one exception are luxury fragrances, which are made in Europe. We have ensured that we have built sufficient inventory and we consider raising prices to offset at least part of the tariff impact.

Looking ahead, I’m super excited about our prospects as we continue to future proof our business by adding highly complementary fast-growing brands to our existing portfolio and by continuing to widen our innovation moat across all parts of the business. Over the years, we’ve built and carefully curated a portfolio of 37 international brands which ensures that we cater to all beauty consumers’ wants and needs, and we continue to add to our portfolio when we find a brand that will enhance our long-term growth profile and that is highly complementary. In that spirit, we recently announced two very exciting acquisitions. The Luxe division took a majority stake in Medik8, a premium scientific skincare brand based in the U.K., best known for its CSA, vitamin C, suncare and Vitamin A routine.

The Professional division acquired Color Wow, a U.S.-based prestige haircare brand that is one of the fastest-growing and most innovative in the industry. Since the start of the year, both brands have been growing well into double digits, building on several years of very strong momentum. And they fit right in by filling two clear gaps in our portfolio. At a time when consumers continue to obsess over skin health, Medik8 as a premium brand will focus on selective distribution at the health end of the spectrum. In the midst of the haircare boom, Color Wow adds to the glamour and prestige scale of our Professional brands. Now let’s talk about innovation. From its very inception, L’Oréal has been driven by a deep-rooted culture of innovation.

One of the innovation highlights this year has been around our first Longevity summit in Paris, where we showcase how the beauty industry will need to shift from symptom correction to root cause intervention to extend the skin’s cellular health span. We introduced the L’Oréal Wheel of Longevity, which decodes the skin’s biological aging. It uses our proprietary Longevity AI cloud based on 280 biomarkers. We launched technological innovation, like Cell BioPrint, which enables consumers to understand the aging trajectory of their skin and find solutions that can reverse it. And we introduced product innovations like Absolue Longevity Cream from Lancôme with its first-ever DNA extraction from a rose. Another important scientific development was the implementation of our research cooperation with Galderma.

We recently signed an agreement for a joint project to use our complementary technologies to develop a new easy- to-use imaging method. This method will show how the skin’s internal structure changes in a noninvasive way. But for us, innovation goes far beyond the lab to include our creative processes and our beauty tech leadership. And we constantly widen our digital moat with our investment in AI, which strengthens everything we do. In R&I, AI helps us to accelerate molecule screening, raise testing standards and develop sustainable formulations in collaboration with external partners like IBM. Take haircare. Using GenAI, we developed digital twins of all hair types, enabling us to accelerate the discovery of new molecules with over 150 new polymers being explored in just 6 months.

We use AI to optimize trend prediction, streamline international internal operations and enhance our supply chain, making production facilities more agile and responsive. AI drives personalized experiences. Take agentic AI, the famous AI-powered Beauty Genius. Since its U.S. launch last October, it has driven over 500,000 conversations and is now integrated with all major retailers. Or Noli, the first of its kind AI-powered multi- brand marketplace that decodes each user’s beauty profile and provides the right product recommendation. AI enables us to sharpen our content creation and marketing. We recently announced a partnership with NVIDIA that uses their Omniverse platform to create incredibly detailed 3D models of our products that can be placed in various contexts and settings, significantly reducing time and cost.

And of course, we continue to roll out BETiq, our A&P optimization tool, adding France and Mexico to our existing roster of 6 countries. As a result, we were incredibly proud when Fortune Magazine named us as Europe’s Most Innovative Company first-ever ranking last month. Not just because among 300 companies, we made it into the top spot from the get-go, but because the ranking assesses innovation based on three pillars: product innovation, process innovation and innovation culture, validating our conviction that innovation fueled by science, technology and creativity is the very best way to succeed. With that, let me conclude. We have delivered a solid first half with the anticipated acceleration in top line growth and yet another increase in operating margin, showcasing the quality of our P&L management.

We are confident in the second half as market growth is set to continue to improve, and we have what it takes to outperform the market boosted by the second act of our Beauty Stimulus Plan. And we are excited about the future. More than ever, we are a beauty tech company, and that will allow us to continue to augment everything we do, further widening our competitive moat. I thank you for your attention.

Eva Quiroga-Thiele: And with that, we are ready to go to the Q&A. Operator, please.

Q&A Session

Operator: [Operator Instructions] The first question is from Guillaume Delmas, UBS.

Guillaume Gerard Vincent Delmas: Two questions for me, please. First one, on Europe. It did slow a little bit in the second quarter. I think it was your lowest quarterly like-for-like sales growth performance since the COVID years. So question here is, any particular temporary factors or any country that you would highlight that may have had an adverse impact on the region’s growth in the quarter? I mean it seems to have been also a bit of a discrepancy between sell-in and sell-out. So whether that should continue going forward. And I guess also looking ahead, Nicolas, are you still confident that the beauty market in Europe today is structurally different than what it was a decade ago when L’Oréal’s like-for-like sales growth was more muted, like low single-digit like-for-like?

So still optimistic about Europe despite this small deceleration in Q2? That’s my first question. And then the second one is on your Beauty Stimulus Plan and how we should think about it. I mean do you see it as a one-off, as in you’re doing it in 2025 because the environment is particularly volatile and challenging. But after that, you’re done? Or do you see scope for another Beauty Stimulus next year, basically doubling down, raising the bar further for 2026? And I guess related to that, in terms of funding this Beauty Stimulus Plan, would it be fair to say that initiatives like BETiq or expanding your shared services are key enablers for this beauty stimulus?

Nicolas Hieronimus: Okay. So let’s take it one by one. Well, on Europe, I’ll start with the end, I remain optimistic because I see, first of all, the market overall remaining quite robust. The market in sell-out was around 4% growth in first half. So it’s still significantly above the growth that we were experiencing pre-COVID. And one of the explanations of what appears to be a slowdown is what also is impacting our LDB division at global level is the impact of the last year’s unfortunate strong presale and slow sell-out of the suncare season, which is particularly important for Europe. Overall, the market is at plus 4%. And if I look at countries, because you were asking about countries, some are doing really great: Germany, Spain, Eastern European countries in general, Greece.

The one country that is a bit disappointing on the first half is France. Unfortunately, this is where the market is still growing but slower than the rest of the other markets. So it’s our role to stimulate it and then also probably, I would say, a mood context in France, that’s not as good as everywhere else. And we have — we are broadly in line with the European market, above in three divisions and slightly below in CPD and with pretty strong plan in the second half. I was just in the U.K. a couple of weeks ago, and the teams there are quite positive and ambitious. Overall, I remain optimistic in Europe. And probably the why is that — is this appetite for beauty that I see. I was talking about TikTok. But in Europe, the social media engagement on beauty is really high.

And you have this double phenomenon of consumers, young consumers entering and being passionate about beauty. And of course, they shift from one category to another. Fragrance is super hot and haircare is super hot right now and makeup, a little bit more in no-makeup, makeup or lower color makeup trend. But overall, there’s a great appetite for beauty. And we have this aging population that is very involved into skincare. So overall, I remain optimistic for Europe to remain above the pre-COVID level over there. So factors, suncare, sell-in and, in terms of countries, most doing great, France a bit subdued. As far as the Beauty Stimulus Plan, no it’s not a one-off. Clearly, there’s more competition out there. Everything goes faster. So we have — we will be on, I would say, on an increased innovation rhythm, and what we’ve designed for 2025 which in the end is impacting mostly our second half even though a few of the launches started pretty well in the first half.

This is going to be — to have to be a new habit. So of course, as always, in launches, some are overperforming, some underperforming expectations. But clearly, the — we want more launches. And you’re right to say that overall, we need and want to develop our shared services, to develop the productivity of our investment to be able to support everything and to target really properly every cluster of consumers. Because of course, when you’re selling to boomers like myself or to Gen Zs or very young consumers, you need to use different channels and that needs constant optimization. So no worries about Europe and clearly an intention to continue to boost and stimulate the market with more innovation.

Operator: The next question is from Patrick Folan of Barclays.

Patrick Folan: Looking at North America specifically, it was a very strong Q2 like-for-like. Is this largely due to the hair performance and CeraVe regaining traction? Or was there any other market dynamics playing out where maybe competitors were raising prices to offset any tariff risk? Is that kind of a benefit for you guys from a competitive standpoint? And was there any pretariff buying in the U.S. in the quarter? And then maybe secondly, just on North Asia, looking at Consumer which underperformed a bit. Can you talk about maybe where the underperformance was specifically? And do you see that improving sequentially as we go into Q3 and Q4? And I know you talked about the shopping festival 6.18 looked quite strong. How has that been since, I guess, the festival? Conscious it’s only a few weeks, but are we planning to see sequential acceleration in China in Q3 and Q4?

Nicolas Hieronimus: All right. So North America, I would say that the overall acceleration first comes from the market. Of course, we’ve done a bit better in CPD at the end of the quarter, which is good. But really, the market growth has been accelerated, which was flattish in the first quarter, closer to plus 2% or 3% in the second. And I think what was probably unusual and under expectation was the first quarter of the market. And I guess there was a little bit of consumers waiting, expectations about the new policy and there was a little bit of pause in consumption. And we see as consumers, I would say, are overall a bit reassured. We see consumption going back. It’s a lot accelerated by online which is, by the way, a global trend.

We see online overperforming brick-and-mortar in most parts of the world, true for us, true for the market. And so in the U.S., we’ve seen the market accelerating. Some categories indeed are strong. We have haircare that remains strong. Fragrance remains strong. Makeup, which was dragging us down, is improving. Still slightly negative in the U.S., but we see clearly an upward trend. It’ll be stimulated by innovation but also probably by the same slight improvement in the mood. So I mean, we are confident that the U.S. market will continue to grow. As far as we are concerned, we gained share in three divisions, a lot on PPD and LDB, thanks to La Roche-Posay doing great, SkinCeuticals growing double digits. And CeraVe, to be honest, is a bit better but it’s still — it’s not yet as great as we would like it.

But it’s moving back into better territories in skin and haircare. Nothing that competition gave us. There was no pre-tariff increases that other competitors have done and we didn’t. So there’s no benefit there. On Luxe, we are on par with market and, of course, driving the growth with fantastic performance in fragrances. The Valentino Born in Roma became recently #1 female fragrance in the U.S. Superb performance. And on CPD we’re slightly below market because CPD is overweighted on makeup which, as I said, is still in the recovery process. And not present in mass fragrances and hygiene, which are the categories that are driving the market up. But we’re really winning on haircare in CPD. So overall, we are quite confident. I must say that the early weeks of July where there was — which are again a bit biased because there was the Prime Day festival for Amazon but overall it was pretty positive.

So without going crazy, we see the U.S. market gaining traction on the second part of the year. On China, it’s true that we are very happy with the 6.18 festival because in net GMV — because we often — the platforms publish their GMV. We look at net of returns because that’s the real performance. We saw that the market was at plus 7% during this period. We were at plus 10%, so that was quite positive with a good performance of luxury brands, L’Oréal Paris, #1, and Lancôme, #3. Biggest, of course, this festival — and we know in China, this festival are hyped. So I don’t see a major change in the Chinese market. The only thing is that the second part of the year will be much more favorable in terms of comparable because the last year second half for the market was much more difficult.

Last year, the first half the market was at minus 2%. It was minus 4% on the full year. So it means that the second half was much lower. So in China, we see the market getting a bit better, mostly thanks to easier comps. And as far as the CPD performance in China, it’s true that there’s a fierce competition of Chinese brands, some of which, by the way, that were very negative in the 6.18 festival, so which confirms the kind of perception that there’s always a high churn in the brands that — in the indie brands phenomenon. But L’Oréal Paris is doing okay. We’re struggling in makeup. And L’Oréal Paris has a pretty nice second half plan with hyaluronic acid filler and Age Perfect relaunch that should help a little bit. And we have also a very strong plan for Luxe.

As we talk about Beauty Stimulus Plan, we have talked a lot about fragrance, but we’re launching — we’ve just placed on the market a new cream from Helena Rubinstein on Replasty. Replasty Age Recovery is today — the existing product, is the #1 beauty item sold in China. And we are adding 1 SKU to that range with 60% Pro-Xylane, which is the highest concentration of this great ingredient, to the product. So we have high expectations on this product which is, by the way, a product that will be sold close to EUR 500. So when it sells, it’s money in the bank. So China, the market for me, remains flattish which is better than last year and will have an easier comparative. And the U.S., we are optimistic for the second part of the year.

Operator: The next question is from Callum Elliott, Bernstein.

Callum Elliott: I wanted to start asking you about skincare. I’m struck by the negative organic growth in the first half of the year that I’m sure you guys are not happy with. You’re obviously still allocating capital to skin, you just bought Medik8, so you clearly don’t see it as a structural problem with the category. So just hoping to get you to talk about what’s going on with skincare today, how much of this is the weak market versus issues in your own business? And in particular, what are you doing to stimulate the market in skincare? Specifically, we’ve heard a lot about fragrance but interested in stimulus for skin. And then my second question is on gross margins. 10 basis points of compression, gross margin compression in the first half of the year.

Obviously, Christophe, as you said, you manage the P&L on an annual basis. But I was struck by that, which obviously means that the majority of the margin expansion that you’re seeing is coming from the cuts to ad spend, which I guess is probably not what you would consider to be the optimal kind of shape of the P&L to be driving margin expansion from ad spend cuts. So just hoping to get you to talk a little bit about the drivers of the gross margin compression in H1 and whether we should expect those to persist.

Nicolas Hieronimus: Okay. So I will take the skincare section. You’re right to say we’re not happy, I’m not happy about skincare, but I would just take it with a pinch of salt. The first one is that as you know, and we had to live with this until the first half of this year, skincare is the category impacted by the — the biggest — by the discrepancy between sell-in and sell-out, and the same as suncare stocking of last year. If you take LDB, just to go back to that division, which is our skincare champion which is doing great, as you saw in invoicing, the division is at a plus 3% growth; where in sell-out year-to-date, the division is at 6.7%. So you have twice — you have more than 3.6 points of gross difference. So that impacts — that would make skincare net positive instead of being slightly negative.

This being said, we are not very happy. The second impact is clearly as long as North Asia, which is the biggest worldwide market in skincare and particularly China, doesn’t recover, it’s hard to get strong traction in skincare. That’s what we are trying to stimulate with launches on L’Oréal Paris in China; on Helena Rubinstein, the new Absolue Longevity Cream; and there’s more to come. There’s a lotion on Génifique. So we’re trying to animate that Chinese and North Asian market, which is right now taking the category down. And then overall, if we’re totally honest, there’s also more competition. Everybody’s got excited about indeed skincare and particularly medical positioned skincare. So we’re happy that we grow faster than the market with LDB.

But there’s lots of competition out there. So that’s why we acquired Medik8 because it’s a fantastic brand that has great formulas. And it’s interesting because it’s both a derm positioning that is very hot but also a premium and luxury positioning. So it’s a channel where you don’t see many of these brands. So that, I think, is going to get us a lot of traction. It’s a brand that’s mostly U.K. today, and half of their business — a bit more than half of their business, they are a little bit in the U.S. So a big opportunity on Medik8. We have also — I mentioned the launches of Lancôme. And I think on CPD, that’s where we have to do an even better job. So we have a few good things happening. We are rolling out Mixa again, which is a dermatological mass brand, so very affordable.

It’s at plus 35 or something and it’s flying across Europe. So it was a French-only brand and now every country in Europe wants it and we’ll see about the other countries in the world. We have acquired Dr.G to boost the CPD skincare presence in North Asia. And we have one small but growing skincare specialist brand in America with Dr. Thayers. So more brands, more specialist brands in skincare, more innovations trying to occupy all the price points of the spectrum. So it’s the fight ahead of us. And we have both — because we are not happy, we are eager to fight back.

Christophe Babule: Okay. Regarding the gross margin, maybe I will add a little bit of color on where do we stand. So basically, what you see in the P&L end of June is a negative impact of 10 basis points, which is actually the structural effect linked to the integration of Dr.G and hyperinflation. And then we have two opposite impacts. On one side, we have a positive 30 basis points due to conversion, this will last; and a negative impact of 30 basis points on comparable. And this we have inside, of course, positive effects from Mixa, from pricing, and this may further improve in the second half. And we have a one-off that will disappear, it’s a technical aspect because of the change of methodology. So we have a negative 25 basis points on supply chains.

That will disappear. So objective is, of course, as you know, keep our high level of gross margin and absorb the impact of tariffs that is stronger in the second half than the first half. And well, we’ve been already preparing the mitigation plans, mainly in the U.S. So we are quite confident on our capacity to keep our gross margin high.

Operator: The next question is from Fon Udomsilpa, RBC.

Wassachon Fon Udomsilpa: So two questions for me, please. One — another one from Beauty Stimulus Plan. So with more active launches, could you provide any color on how much these new products and new launches contribute to growth in the first half? And the second one is on A&P spending heading into the second half. Is it fair to assume that the benefit from BETiq will increase with more rollout but, at the same time, with more launches coming when marketing campaigns also step up as well? Any color on that would be great.

Nicolas Hieronimus: Excuse me. The sound quality was not great. Would you mind repeating the second part of your question? Because I got the question about the contribution launches on the first half, but not the end of the question. Apologies.

Wassachon Fon Udomsilpa: Yes, of course. So the second one is on A&P spending into the second half. Is it fair to assume that benefit from BETiq will increase with more rollout but, at the same time, with more launches coming, will marketing campaigns also step up? So how should we think about momentum of A&P spending for the rest of the year?

Nicolas Hieronimus: Okay. So contribution of launches, in the first half, it was around 100 basis points. And the objective, of course, with all the uncertainties related to new products, it’s 300 in the second half. So we expect more launches in the second half. In the first half, we had some — the ones that blew my mind because it’s really well above expectation is Gloss Absolu from Kérastase, which makes the brand growing in the high teens, and that’s just starting to be rolled out. We have a few others coming. We’ve just launched a new mascara on Maybelline called Colossal Bubble, which is also growing over expectations. And as always, we have a few others that are a bit below expectations. So more launches in the second half.

Of course, fragrance, we’ve known fragrance, quite a bit of skincare and makeup, too. And as far as A&P are concerned, I wouldn’t make specific extrapolations. Yes, BETiq will improve more, will give us more flexibility and more productivity. We will have to support these launches and the catalog. But also, we have to be very agile because as I said, now the name of the game in this world of influencers, very fast rocket takeoffs and some others that do not react as well, we have to be super agile to allocate permanently and reallocate our resources to whatever is flying. I think that’s a bit the new name of the game, this idea that you would consistently support a pillar brand forever is a bit past. You have, of course, to keep you supporting your catalog.

But when you have fast-flying engine rocket or whatever, you have to instantly put more fuel in to potentialize it in the maximum way. So it will be, as always, at L’Oréal all about real-time management, flexibility and when we can add, we will add. And sometimes, if we have to reduce some others, we’ll do it, too.

Operator: The next question is from Olivier Nicolai, Goldman Sachs.

Jean-Olivier Nicolai: Two questions, please. First of all, going back to the tariffs in the U.S., I understand it’s a sensitive topic. But I would expect — would you expect an impact from Q4 this year or perhaps even next year considering your level of inventories already in the U.S.? And what can you do to mitigate the impact on the 30% of products which are imported from Europe and sold in the U.S? And then secondly, I’ve noticed that Aesop has been growing double digits in H1. I think last year, you indicated it was more like in the high single digits. So it’s been certainly accelerating. Could you give us more details on the performance? Is it driven by fragrances there? Or is it the store rollout? And how much run rate do you see for this brand which you bought, I believe, 18 months ago?

Nicolas Hieronimus: So I’ll start with Aesop, and you want to jump in on tariffs?

Christophe Babule: Okay.

Nicolas Hieronimus: So Aesop is doing great. It’s, of course, as always, it’s a blend of like-for-like growth and store opening. The brand is doing pretty well in China. By the way, I visited the stores, there’s lots of people there. We’re overall very happy with the brand. I think it probably meets the needs of many people to find some relaxation, peace of mind and bliss in this crazy world we live in. So overall very happy. We are indeed enhancing the visibility. And we’ve just launched two new fragrances, but so we are we’re working on making the fragrances which were a bit of a hidden gem within Aesop a bit more visible in the store. But I wouldn’t say that’s the reason why for the acceleration. I think the brand has got good traction.

It’s been perfectly integrated right now in the team. They have a good combination of L’Oréalean at the helm, and 1 of the 2 founders are still working with us and very happy to see the brand developing. So yes, so I would not make predictions about the run rate, but let’s say, we’re on track. Clearly, we lost a year at some point at the beginning with the second COVID closure of China, but we’re happy right now. And clearly, we keep the strength of the brand on whatever — whether it’s cleansing, body products, and we are bringing skincare innovations with our lab’s formulas that will kick in probably a bit more next year. And we are indeed enhancing the fragrance visibility. So overall, happy and confident.

Christophe Babule: So coming back now to the tariff. Well, first, we have now much more visibility on what will be the second half. Maybe to give a little bit more color on what could be the impact. As of today, because of course there are some maybe tariffs that will still move in Canada or in Mexico, but when Nicolas says the situation is manageable, it means that the impact could be less than 40 basis points as of today. Second, as you know, we’ve been building a little bit of stock there to mitigate the impact on the second half. So this, of course, is helping. And obviously, there are some divisions that have been already planning for a tariff increase in the second half, and this also will help on the P&L of this year.

What is important is already to foresee what will be the impact on 2026. And here, I have to say that we have different initiatives mainly in operations to see, on some categories, we’re thinking in the perfume, for example, what can be done to mitigate those tariffs on the long term.

Nicolas Hieronimus: So short term, it’s manageable in the P&L this year. If we look midterm, I think we are really waiting for, if I can use that expression, for the dust to settle because there are other bilateral discussions that are happening between the U.S. and Mexico, the U.S. and Canada, the U.S. and Brazil. So we are waiting for — to have the clear picture to see whether we need to make any production moves from here to there and a few other mitigations, like you can do first sales in products that are exported to France, which we use as the base for tariff applications. So there are several mitigations being studied, and we’ll see when they are done. And by the way, I’m not giving up on trying to convince the European authorities to negotiate some exemptions for cosmetics. Who knows? You have to try.

Operator: The next question is from Sarah Simon, Morgan Stanley.

Sarah Simon: I’ve got two questions. First one was on sun sell-in. I think the really big — the really tough one was in Q1 and that it sort of eased in Q2 and then got a bit easier in Q3. Can you just remind us of the phasing there, please? And then the second one was on — in China, I think Helena Rubinstein had a pretty strong performance, particularly during 6.18. And it’s obviously quite a mature brand. I’m just wondering what’s behind that. Is it just a resurgence after a period of being a bit quieter? Or were there particular kind of strategies behind that?

Nicolas Hieronimus: I’ll take Helena Rubinstein whilst we try to find the data somewhere on the question on suncare. With Helena, you’re right overall on the phasing you’re describing. But I will let Christophe see where he can find that. No, Helena Rubinstein is a fantastic success story in North Asia. And it’s linked to, I would say, three main phenomenons. One is the fact that, I would say, the upper classes of China are really aspiring to high-quality luxury and high-end luxury. And if you look at the overall performance of the Chinese market, the top, top end, be it in fragrance or in skincare remains stronger and more dynamic than the what I would call the mid-premium brand like Biotherm, which is more affordable, is less protected.

So there is this appetite for quality. Then the second reason is that we have — frankly, I think we have the best skincare formulas. I think they have the best skincare formulas in the L’Oréal Group and, therefore, they have the best skincare formulas, I think, in the market. And this Age Recovery Replasty jar, which the Chinese called the black bandage because it acts on skin like a bandage, is the #1 selling beauty product in China and maybe in North Asia in value because it’s just a fantastic formula. But it goes beyond that. There’s also the question of service. Because it’s premium, you go to any counter or mini boutique that we have in China, you have cabins where services, skincare facials are provided. So here, we are talking about a brand that has a limited number of consumers but that are super loyal and very high spenders with a very strong CRM and great services.

So that makes it a beautiful jewel, and that’s why the launch of this Replasty P50, so with 50% Pro-Xylane that has just been shipped at the end of June and is now going to be supportive for the second and third quarter, raises a lot of expectations for us. And if you have the chance to use that cream, I’m sure Eva can send you one, it’s just phenomenal. So very, very excited about that brand, which is a niche brand but a very successful one. Suncare, you want to — you found?

Christophe Babule: Yes. Maybe I will give you some more information on suncare, of course, speaking on the Dermatological Beauty division. So as you know, suncare is important for this division, it’s probably less than 15% of the sales. And coming back off the pattern of our sales last year, it’s true that we had a very strong sell-in in Q1. Actually, we are still fighting with a plus 40% that we did in Q1 last year.and then gradually sequentially has been decreasing very fast. Q2 was already a plus 1% and then negative in Q3. So of course, there is a big gap between what you see in the sell-in linked to that and what is happening on the sell-out, what I think Nicolas explained very well. That’s why we are actually happy about the results of our sell-out in suncare, but still impacting the visibility of our growth in…

Nicolas Hieronimus: This being said that unfortunately, this is — suncare is the most unpredictable business we have because if I look at this year, the start of the summer was phenomenal in Europe. It was — the sun was shining and everything. It’s been a week, at least in France, where it’s raining every day. And in the U.S. was the opposite. They had a very pretty bad July, early July, end of June. Now it’s sunny. So it’s only at the end of the season that you really know whether it’s going to be great or not. But the good thing is that we will have finished offsetting our inventory overload at the end of the first half.

Operator: The next question is from Celine Pannuti at JPMorgan.

Celine A.H. Pannuti: My first question is on market growth. If I look at Slide 3 where you look at the acceleration in the second quarter, North America, it seems was mid-single digit in Q2 in terms of growth. So I would like to understand if you could explain which category grew mid- single digit in North America. And then as well, emerging market accelerated in Q2, which is a bit contrary to some of your peers across different categories, talking about the deceleration, for instance, in Latin America and maybe a bit cautious comment on Asia. So if you could comment on this. And then my second question is on North Asia. We’ve seen the better performance in Mainland China. At the same time, it seems that Travel Retail was down.

Can you say how much down was Travel Retail? And what does that mean for the second half of the year? I understand you said that there is an easy comparative in Mainland China, but I think the Travel Retail was better in the second half of the year last year. So net-net, where do we stand on North Asia from — for the second half of the year?

Nicolas Hieronimus: Okay. So I think on North America, we gave some of the questions — we answered that question, but happy to talk about it. So indeed, the market accelerated between the first quarter and the second one. And I think the first quarter was artificially low. All categories have been growing except makeup. And makeup is improving, it’s still slightly negative but has been improving. And the categories that have most driven the growth in the U.S. market are haircare and fragrance. And if we exclude our own footprint, hygiene has also been pretty dynamic in the U.S., but we are not really playing in that domain. So the categories that are the drivers of growth are fragrance and haircare.

Celine A.H. Pannuti: Can you comment by channel? Is the Luxe market and the mass market back to mid-single digits in the U.S.?

Nicolas Hieronimus: The mass market is the one that is the most dynamic today. Like by the way, if you take it at the group level, it’s quite true. But — and luxury remains — you see that overall, the luxury market at global level is flattish. So in the U.S., it remains slightly positive and it’s mostly a fragrance play. Dermo is positive but it’s the one channel that had slowed down the most from last year, but it’s slightly positive, low single digits. And Professional is a mix of two stories between salon market, which remains sluggish, and the professional haircare markets, be it in selective or online, which is extremely dynamic. And overall, the online market in the U.S. is more dynamic than the brick and mortar. So that’s what I can tell you about the U.S. market. Your second question, Celine, was on?

Celine A.H. Pannuti: Sorry, it was the same question, the acceleration in emerging markets, which — well, great for you, but it seems a bit differentiated commentary that we get from Consumer in emerging markets feeling the pinch, especially in Latin America.

Nicolas Hieronimus: Well, for us, Latin America remains pretty dynamic. It has slowed down a bit, particularly in Mexico, which has a little bit of uncertainty regarding their situation in the U.S. So the underlying market growth has slowed down from low teens in 2024 to high single digits in the first half. So it’s slower than last year. But you have some markets that are very dynamic. Brazil is very dynamic. Mexico is quite resilient. We have less bad news or, I should say, more good news from Argentina, though it’s quite small. We see that there is, in some categories, we are gaining share from the door-to-door players. It’s particularly true in makeup. So we are growing ahead of the market, gaining strong shares in Brazil with CPD.

By the way, there was an earlier question on skincare. That’s one of my highlights because we launched this on Garnier, this product, this little jar called Toque Seco, which are incredible new formulas that are flying. And that were initially a Brazil play and that we’ve decided to expand to the whole emerging hot climate countries because it’s a texture that’s perfect for them. And so we outperformed in three divisions in Latin America, PPD, Luxe and CPD. And LDB, we have a — we’re challenged in Brazil but winning anywhere else. So overall, I wouldn’t say — I can have a crystal ball and say that Latin America is going to be flying. But I was in Mexico 2 weeks ago. And of course, there’s a lot of expectations like what’s going to be the outcome of the discussions on tariffs with the American administration.

But we see — we continue to see a dynamic market. So we remain ambitious for Latin America; as we are for SAPMENA, where we are basically gaining share everywhere but Indonesia. But still have potential to accelerate. So what we see is a market that is a bit slower than last year, but overall pretty dynamic. I don’t know what competitors say. That’s…

Christophe Babule: There was also a question on North Asia. Maybe I can give you a few information. First on Mainland China because I think it’s very important to remind what has been the dynamic in the last quarters in China. As you know, when we look at the market, the situation where we see the market really negative was Q3 last year and then progressively catching up, still negative on Q4. This year, we’ve seen a market at around 0% both in Q1 and Q2. So at least we are out from this negative territory. And in this context, of course, we have our sell-in that is turned to positive territories. So that’s why we feel that the second half will be helped by prices. And when it comes to the Travel Retail, here the situation is still complex. The market in Asia is still negative.

Nicolas Hieronimus: Yes, in high teens negative. What’s happening in the Travel Retail market overall, so the market is high teens negative and we are low teens negative. So gaining share. And it’s really a tale of two cities because you see, on the one hand, because the traffic is increasing, the airports are really growing. The markets in airports is overall very positive, like plus 8 or something like that. And it’s very negative in what used to be called the downtown stores, which had been opened by many players back in the days probably to — when there was less traveling and also were fueled with the daigou business. And you’ve seen Korea, many of these downtown stores in Seoul that are closing. You see the example of France, as France Samaritaine has been transferred under the leadership of Bon Marché because as a tourist destination, as the Chinese tourists do not travel so much in groups, it was less relevant.

And we see that Hainan despite being pretty heavy in traffic, it remained very negative in the minus 25-ish in terms of sell-out. So we have a reconfiguration of Travel Retail back to what it was and should have remained, which is travelers, individual drivers, business opportunity and a brand exposure opportunity. And clearly that’s what — as we said, had it not been for Travel Retail, our North Asia business would have been positive for this first half.

Operator: The next question is from Ashley Wallace, Bank of America Merrill Lynch.

Ashley Wallace: And firstly, well done on the Q2 revenue acceleration, strong margin progression in the half. Can I just start with a follow-up question on derma, please? Sell-out trends were obviously much better than sell-in for half 1. But I was wondering when you expect sell-in and sell-out to align. And will this already be true for Q3 in your view? My second question is just on the contribution from new channels. You mentioned a few times in the presentation TikTok Shop. But obviously, we also have Amazon Premium Beauty. I was wondering if there will be any more brand launches on these platforms in the second half. So just, I guess, helping us to understand how much more white space opportunity or distribution push that exists on some of these newer channels for you.

And then finally, just on EBIT margin. I know Christophe mentioned not to extrapolate half 1 performance. But any reason why the full year EBIT margin can’t be up 30 basis points even with the impact of tariffs building in the second half?

Nicolas Hieronimus: You mentioned the reason.

Ashley Wallace: Tariffs. Okay, fine.

Nicolas Hieronimus: Tariffs and support of our launches. In the end, we have to — as Christophe — I’m stealing his answer, but he’s always reminding us that our focus is top line, brand fuels, stimulation of demand. So we know that we could deliver a higher margin, but we don’t want to do it at the expense of the top line goals. And on top of that, this year, we have to offset these tariffs that we cannot fully mitigate. We mentioned around 30, I think 40 basis point impact. So — and it’s all on the second half so — well, mostly on the second half. So Christophe, I’m sure you want to add something, too.

Christophe Babule: Don’t worry, Ashley. We are predictably as usual targeting both supporting the growth at first. And when there is growth, of course, there is also an improvement in our profitability.

Nicolas Hieronimus: So on derma, I expect, at least from my teams, they should realign sell-out and sell-in on the second half. So that’s their objective. It will, of course, depend on again success of launches, competition. But that’s — there was really a very specific effect and impact on the first half of this year. The only negative thing that they will have against them is that the pipe, their haircare launch in the U.S. second half of last year, I don’t remember exactly, weighted. So — but overall, they should realign. That’s the objective they have. And your second question was?

Eva Quiroga-Thiele: TikTok Shop.

Nicolas Hieronimus: TikTok Shop and Amazon. I will speak on Amazon. Amazon, first of all, we are very, very happy with the quality of the relationship, the way the brands are expressed, the way we recruit consumers with this partner. Short term or midterm, it’s not so much about adding brands with a couple of small things that can happen. I think Margiela is going to join at some point. But it’s more a geographic expansion because, of course, where we have truly maximized Amazon today in the U.S. even though our market share online in the U.S. remains below our market share off-line. So it seems that we have lots of growth opportunities. But it’s more the expansion in Europe, where we just put some of our — typically, for example, LDB brands in Amazon in Europe, and they are really flying.

Consumers really want that brand online. And of course, there are countries around the world, whether it’s Japan, Australia, India, the GCC, where we can start growing our business. And we have, by the way, other partners: Mercado Libre in Latin America; we have, of course, Rakuten in Japan. So it’s not just an Amazon play. And as far as TikTok Shop, I would say on TikTok Shop, we look at it — we’re going — we come first with mass and a few of our new products. It’s — we are seeing this channel both as a product discovery channel as much or probably more than an e-commerce channel so far. So it remains smaller, but it’s really — we really bet on TikTok today, not the shop, a little bit the shop, but more the TikTok social media as a way to engage consumers with influencers, promote our brands, make them discover it than a big retail channel today.

Operator: Next question is from Tom Sykes, Deutsche Bank.

Thomas Richard Sykes: Yes. Just following up actually on Amazon. So in the U.S., do you directly fulfill your sales on Amazon? Or do you sell in ahead of, say, Prime Day? And does that sell-in particularly for that festival would fall in Q2 or Q3, please? And anything just on sort of inventory levels at Amazon perhaps compared to other retailers. And then I just had a sort of follow-up on your comments on A&P. Just where you’re actually acquiring a customer, is the cost of that acquisition at all going up a little? Like do customers or individuals need like a bit more prompting and a bit more A&P to get them to transact? And are you — is it then that you’re offsetting that with cutting underperforming A&P? Or is that not quite the dynamic that’s happening at the moment, please?

Nicolas Hieronimus: Okay. So I’ll answer the two questions. On Amazon, we have two different models. If I take the two extremes, typically, CPD business will be a first party business. So we invoice Amazon and they sell the product. Our mature business, our most premium business for both quality and overall control reasons, our model which is a 3P model fulfilled by Amazon, we call that 3P FBA. So it’s two different things. And so clearly, on the 3P FBA, there is, by definition, no inventory. And on the mass business, which is the first party data, to my knowledge, there is no inventory issue. So if I look at the Prime Day, here, I’m guessing — I’m sure that for luxury, typically it’s just — it’s a Q3 business. For mass, there’s probably some — part of the invoicing has probably been done in Q2 as it was early days of…

Christophe Babule: Well, if I can add, it was a 3 days operation this year. We’ve been massively improving our sales in — so I guess that there is no stock anymore in their warehouse. It’s been a great, great Prime Day for the L’Oréal brands this year.

Nicolas Hieronimus: Sure. And in A&P, the cost acquisition is not specifically going up. First of all, we have two different models. Again, we’re talking about luxury, where when we acquire a customer that might be a bit more expensive, then the objective is to loyalize that consumer and to increase as much as possible their lifetime value. Whereas on most of our products as beauty is not — especially on mass, on makeup, it’s not mostly a loyalty business, we have to invest constantly in recruiting new consumers. So the costs have not overall gone up because there is a multiplication of available channels and there is both a better way to target and a better way to optimize with BETiq and what we learn from it. What is true is that we constantly reassess and when we see something that’s underperforming, a channel that’s underperforming, we have to cut it.

But just to make it a little bit more complex, if you look at pure ROI, transactional — what we call transactional media, i.e., a banner with a discount on an online page, it’s always going to have more short-term ROI than a very image-driven advertising. But as our — the jewel of our crowns are our brands and their desirability, we make sure in the guidelines we give to our countries to have always a balance between transactional, short-term ROI media and long-term awareness media. And one of the specificities of BETiq, which is something I really wanted and as the team — which is kind of unique versus all the AI optimization tools that are in the market, is that we have included a long-term benefit, long-term ROI criteria which, by the way, we optimize year-after-year because as you can understand to truly measure a long-term effect, you need more years than to measure a short-term ROI.

So it’s a bit more complex than that. But we of course are trying to systematically optimize; and the cost of acquisition, to my knowledge, is not going particularly higher.

Operator: We still have two last questions. The next one is from Jeff Stent, BNP.

Jeffrey Patrick Stent: Just a quick housekeeping question. I think the impact of IT phasing was a little bit bigger than we would have anticipated in Q2. Will that come back in Q3? And secondly, earlier in the year, you talked about further IT implementations in the second half. Could you maybe give us some color on that? And any phasing impact we may see from that?

Christophe Babule: Jeff, first, yes, it will disappear in Q3. And as a reminder, last year, we had, as I said in my comments, the impact on the luxury in North America. So when you add up these 2 elements, as I said before, there will be a positive impact of around 70 basis points in Q3.

Nicolas Hieronimus: We will need to add 70 basis points to our growth. So the growth is the net between the 40 that we have to finish offsetting in the first part of the year and last year’s 100 basis points on that. And then that’s it for this year. And then when we talk about next year, we tried to explain because — we are 1/3 of our — ahead of our IT transformation. And of course, we mentioned only the big ones in the comments we make because we were not going to include — when we do Spain or when we do, I don’t know, Thailand, we will not comment on that. So it’s only the big — U.S. that are really material that we have to communicate. Is that clear, Jeff?

Jeffrey Patrick Stent: Did you — had you previously mentioned the U.K. and Australia would take place in the second half?

Christophe Babule: Yes. This will be — the go-live of those two important countries will be next year. So go-live is, for the time being, scheduled on March of 2026. So of course, we’ll keep you posted of how the developments are going on our IT transformation.

Nicolas Hieronimus: By the way, the good news is that we did China and, frankly, that’s a big country for us. And it happened without a glitch, which when you change your IT systems, there’s always a scare. It was very well prepared by our teams there and things went very smoothly.

Operator: The last question is from David Hayes, Jefferies.

David Hayes: Two from me as well, if I can. Just going back to AI and the A&P marketing efficiencies. Do you have a sense of how far ahead of competition you are in terms of using AI? And then I guess if you are ahead, should we assume that this A&P trim that we saw in the first half is something that we could expect to see sort of going on moving forward rather than the very consistent increases that we’ve seen over the years on A&P as a percentage of sales? Are those effectively over now? And then the second one was on devices. We’ve not mentioned the devices that I think were launched about a year ago. I’ve noticed them appearing in shops as I travel around. So just on the AirLight hair dryer and the water-saving showerheads, can you give us a sense of the scale and the success of that rollout and where we are with the rollout in terms of markets and ongoing?

Nicolas Hieronimus: Okay. So on AI, I will be — I’m always very careful, first of all, because AI is a technology, is an enabler that goes across the whole organization. So it’s very hard to assess who’s doing what. I know what we are doing. I know we are — I think we are advanced. Where we are the most advanced in AI is within R&D or R&I, as we call it, because I think both with the partnerships we’ve delivered, we’ve done and the way we are formulating, reformulating, scanning molecules, doing predictive formulation, I think here, we have a true AI moat, if I can use that term. On the BETiq, so on A&P [ modelization ], there are other tools out there. And I would say that, for me, the main difference between what we do have and what I read and hear about others, and again, I don’t know everything, but it’s the fact that it’s precisely that we’ve made sure that this tool was not going to bias with exclusively a short-term vision.

So we clearly want to make sure that, of course, we get the bang for our bucks in terms of net sell-out, in terms of sell-out right after we invest in media. But I want to be sure that I keep on fueling the magic of Saint Laurent or Grupo L’Oréal Paris. So as far as the weight of A&P on the P&L, as we said earlier, it has no reason to go up than the rest. It will depend on the activity of the launches and all the needs we have to boost our top line. So we’ll keep on monitoring this with the agility we need. And as far as the tech devices we launched, it’s very early days. AirLight Pro is mostly today, and that’s a chosen strategy, is mostly a B2B activity. Yes, you will have seen it in some stores potentially outside in the U.S. But really, it’s — we really want to leverage, as we’ve always done, by the way, and it’s proving pretty effective in premium haircare right now, to make sure that we get the support and the adoption by stylists.

So right now, it’s mainly a stylist play. So it remains in terms of contribution to growth, quite limited at this time because we want to create the goodwill and then roll it out in business to consumer. So right now, it’s in France. It’s in Germany. It’s in the U.S., Spain, Portugal, Benelux. So it’s a few countries. And very few have direct-to-consumer sales. As far as the shower head thing, it’s not — as I said, it’s not a business. It’s the way to reduce significantly our carbon footprint. So we are equipping salons. I don’t have the numbers on top of my mind and in my data, but we are equipping salons in the U.S. and in Europe. And we — now that we’ve acquired this start-up, our biggest play is to improve and enhance this shower head to make sure it can reach homes because that’s where we will have the biggest sustainability impact, which is really the goal.

So AirLight Pro is a business that’s being built. The Gjosa showerhead is a contribution to our CO2 and sustainability objectives. All right. So we are — I think it was the last question. So for all those who are, like some of us, about to go on holiday, we wish you a great summer and hopefully a sunny summer using La Roche-Posay, which is the best sunscreen on the market.

Christophe Babule: UVAIR.

Nicolas Hieronimus: UVAIR, which is never leaving my pocket. Have a great one, everybody, and thank you for your questions and your attention.

Christophe Babule: Thank you very much.

Operator: Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.