L'Oréal S.A. (OR) Earnings Call Transcript & Summary

Good afternoon from Paris, and welcome to the third edition of our Let's Talk Beauty. I'm delighted to be here today with Cyril Chapuy, President of L'Oréal Luxe Division. Over the next 30 minutes, Cyril will explain what makes L'Oréal Luxe truly unique in the world of luxury beauty. We will then have time for questions. [Operator Instructions] And with that, over to you, Cyril.

Thank you so much, Eva. Welcome to everyone behind the screen. We are live from Levallois, the HQ worldwide of L'Oréal Luxe. So in my presentation this afternoon, I'm going to have 3 parts. First, I'm going to take you through the context in which we evolve our markets, our customers. Then I'll give you some key numbers regarding our results. And then I'll try to decode a bit for you our secret sauce. And then, of course, we'll have time for Q&A. So let's start by the luxury markets and the luxury clients, the luxury [indiscernible]. We are acting on the market of luxury personal goods, which is a market which has been dynamic over the last 10 years, plus 4.8. And we are actually the #1 category of luxury personnel goods. As you can see, we used to be the second category after fashion and apparel and now Beauty is the #1 category of luxury personal goods with a nice CAGR growth over the last 10 years of 6.3%. So it's a nice market to be in. It's a nice category to be in, Luxury Beauty. Who are the customers? As you can see, the customers are pretty well split across different ages. You hear the weight of business of these different customers. And what matters to me is that over the last 10 years, the number of customers increased by 3%. So as I mentioned in the previous slide, the market grew itself by 6.3% CAGR. It means half of the growth came from penetration from new customers, and this across the different age groups. Luxury obviously is driven by young generation in terms of trends, but luxury is very much driven also by GenX and Boomers in terms of purchasing power. The regions of luxury. The regions of luxury are very well split around the globe. As you can see in the 2024 numbers, the #1 region remains North Asia. Even though this region has slowed down in growth since 2019, since COVID, the second region is North America, which tends to accelerate. It was at plus 5 during the first part of the decade and now it's at plus 7. And the third region is Europe, which is pretty stable in growth, plus 3 during the first part of the decade and plus 4 in the second half. Then huge reservoir growth, obviously, for Luxury Beauty is emerging countries, which are accelerating. They just represent today a rather small portion of the market, but they are accelerating very fast, and they are the fastest-growing part of the Luxury Beauty market. The categories of Luxury, interesting changes here, too, that I'd like to spend a little time on. So as you can see, over the decade, the 2 most dynamic categories were skincare and fragrance, but over the last 5 years, fragrance took over in terms of dynamism versus skincare and is today the second category. Obviously, this is linked also to the geographical footprint, and you've understood it. When Asia slows down a bit, skincare was down a bit. But fragrance to cover and is now an extremely dynamic category, as you can see, plus 10 over the last decade. The weight of business are 40% for skin care, 34% for fragrance and 26% for make-up. In these markets, what are the results of L'Oréal Luxe? Well, the results -- our results were quite proud of because it has been a steady and progressive conquest. The division over the last 10 years went from EUR 7.2 billion to EUR 15.6 billion, i.e., a CAGR over these last 10 years of 9.3% versus a market that's at 6.3%. So over 10 years, the division has had an index of around 15% versus the market and has more than double size, as you can see on this chart. The market share of the division went from around 14% in 2015 to above 19% in 2024. We are close to weighing 1/5 of this market of Luxury Beauty worldwide. We have been outperforming the market for 14 years in a row. This is very important. This is the signature of L'Oréal Luxe teams. This is the commitment outperforming the market. And we have been outperforming the market for 14 years in a row. And we became the worldwide leader of this category of Luxury Beauty in 2023 as you probably know. You see the difference with our competitor #1 in 2013. We were EUR 2 billion smaller than them. And today, we are almost EUR 2 billion bigger than them, probably at the end of this year. That will be EUR 2 billion bigger than them. And I can tell you even though the [indiscernible] publication is not at out, but I can tell you that in 2025, we're going to have yet another year of [ sheer ] performance versus market. We're going to beat the market. And other time, I have the results until end of October. And I'm confident we're going to beat the market for the 15th year in a row in 2025. The point I want to stress because it also underlines the quality of our performance is our profitability. L'Oréal Luxe has a profitability of 22.3% before non-allocated items. And it compares to the #2, #3, #4 and #5 of the market, which are here portrayed on this side by descending order of net sales. As you can see, we were more profitable than all our key competitors. And this is a real pride also for the team to be #1, to gain share every year whilst developing a level of profitability, which is, I think, of a decent level. So what's our secret sauce. We call it like that internally, what's our secret or secret sauce? And I'm going to try to give you a few insights on that. I won't reveal everything obviously, but I'm going to try to depict a bit how we work. First thing I want to insist on is L'Oréal Luxe is a mix of L'Oreal and Luxe. Seems obvious, but it's very important. So L'Oréal Luxe the unique combination of the L'Oréal Group Powerhouse and the exceptional luxury know-how of this division. And I'm going to try to depict that. Obviously, the L'Oréal Group Powerhouse is first and foremost, R&I. And L'Oréal Luxe benefits from all R&I discoveries first. It's the famous strategy of cascading of our company. And we always have the best R&I discoveries first, be it in skincare. I'm going to mention a few of these last years like Pro-Xylane, that we now have at 50% a formula like the new Replasty by Helena Rubinstein, be it [indiscernible], be it incredible new textures, like [indiscernible] textures. R&I discoveries in skincare are benefiting to L'Oréal Luxe brands first. In makeup also for instance, the very spectacular [ FMK ] technology for [ long wear ]; the famous UTF, ultra thin film, that allows to have lipstick extremely beautiful color payoff with a very thin film. These are technologies, which always benefit first to L'Oréal Luxe. And I would mention also fragrances because fragrances is not just a dream far from that. Fragrances is also R&I, is also technology. And all fragrances are superior to any other in intensity in lastingness in bloom, thanks to the work done by our R&I team from L'Oréal Group. So this is the first secret of L'Oréal Luxe. The second is that we are obviously at the forefront also of L'Oréal Beauty Tech. Why? Well, because we have lots of corner stores around the world where OBAs can harness the power of Beauty Tech to give our consumers the best service. The best service in terms of diagnosis, the best service in terms of performance. You have here on screen 2 examples of Beauty Tech we are using on Lancome. The first one is the skin scanner, which is the Nexa technology, which is a technology which comes from the actually hospital world for the medical world, but allows to get incredible skin scan and a perfect diagnosis of your skin condition even under the regular appearance. And the other one is the famous Cell BioPrint, which was introduced in Las Vegas at the beginning of the year, which allows to read your biomarkers, i.e., to really define the biological age of your skin. And these are 2 very strong Beauty Tech innovations from L'Oréal Group that L'Oréal Luxe is benefiting from. But it's also in the world of devices, -- here also 2 examples from Lancome, but I could have shown some of Saint Laurent like [ Rouge Sur Mesure ], which allows to customize your lipstick. But here, I have [ porphyry 2 ] of Lancome, the micro needling pen of Lancome, which has hundreds of micro needles that allow you to get your skin cream to penetrate much deeper into the skin. It's the equivalent of what you do in microneedling in medical cabinets. And on the other side, HAPTA, which is this device that allows people with handicaps to apply lipstick because it corrects the movement of your hand. So if your hand is shaking because you have a handicap, this device allows to correct totally your movements and allow you to apply lipstick, mascara, et cetera. These are amazing products of L'Oreal Group Beauty tech that are first applied by L'Oréal Luxe. The L'Oréal Powerhouse is also extremely instrumental to our success in the world of operations. We have 6 L'Oréal Luxe factories around the globe. We produce almost everything in-house at L'Oréal Luxe. We control most of our production around the globe. It allows us to have a great flexibility, a great also cost effectiveness and also, which is critical in a [indiscernible] sense of quality and safety, which is exceptional. I think our quality and our safety is probably unbeatable. And frankly, I don't think any indie or dupe around the world can ever reach this level of quality and safety. And this is due to our strategy of in-house L'Oréal Group operations approach. Now the last but not least, point of synergy between L'Oreal Powerhouse and L'Oreal Luxe is obviously the talents. We have an incredible talent pool of people we can develop. We have 90,000 employees worldwide at L'Oreal Group, 33,000 out of them are at L'Oreal Luxe. There are of [ 40 ] nationalities and from extremely diverse expertise, and they are obviously the ones who are behind the success. And our HR strategy of L'Oreal Group is one that is absolutely essential to the success of L'Oréal Luxe. Now what is specific to L'Oréal Luxe. We use, obviously, every day, we harness the power of L'Oréal Group Powerhouse, but we also have specificities and it's our luxury knowhow or [Foreign Language] as French like to depict it. So first, it's the obsession to build exceptional products, products that justify the price premium you have to pay when you buy a luxury beauty product. Yes, luxury beauty products are more expensive, more valorized than other products from the mass world or the derma world. So they have to justify this price. So they have to be exceptional. So our products are of the greatest guarantee you can imagine. They have a sense of detail, which is something we work on every day. I'm, as the President of this division, extremely obsessed by the detail, be it, for instance, on this slide, on the design of the caps of our fragrances. For customer fragrance, the cap says it all in terms of the quality of the fragrance, the way it closes, the weight of it, the quality of the texture. We spend hours defining, getting the best quality, working with the best vendors around the world, working with the best designers around the world to get this level. It's the same for makeup. The way a lipstick closes, the way a [indiscernible] of a cushion or a powder closes, the way it feels in the hand, the way it never gets any issues when it's in the bag. It doesn't -- the quality of the bag, it doesn't get affected when it's in a bag. All of this is details of utmost quality that define luxury. And in skincare, same story, the finishes and the air, waterproofness of our packaging, the air tightness, the water tightness of our packaging have to resist all this to preserve the formulas. This is what I call ultimate quality, and this is part of the know-how of L'Oréal Luxe. Second element of this know-how is innovation. We are obsessed by innovation at L'Oréal Luxe. Every year, my teams around the world are delivering a double-digit level of innovation on the net sales, and we need more than 10% of our net sales in innovation on each of our 3 categories. And you have here on the slide some of the latest innovations, for instance, in skincare, in makeup or in fragrances. And these innovations are absolutely essential also to justifying the luxury positioning. If you are luxury, if you are more expensive, you need to be more innovative. You need to surprise, you need to disrupt, you need to [indiscernible] create. And this obsession of innovation, this obsession of the new, better, different is essential in our culture. Now beyond products, in the L'Oréal Luxe luxury know-how, there is the portfolio management. We have an exceptional portfolio of brands. I would even say we have the best portfolio of brands on the market. It's crafted with a very strategic point of view, which is complementarity. Our portfolio has been built to cover all price levels of the luxury market around the world. Here, you have, I would say, simplified vision of the strategy with this pyramid that summarizes the way we see luxury. There is access luxury below EUR 50. It's where some of our brands are positioned. It's the world of indies. You have prestige luxury, it's the world of historical legacy luxury brand, and then you have super premium luxury, which has developed very fast with recent years. The whole strategy of L'Oréal Luxe is to be strong on these 3 levels of the pyramid and this across the 3 categories. In skincare, we want to be on the 3 levels; in makeup and in Fragrance, we want to be under 3 levels of the category, which obviously ties to the way we choose the brands that are in our portfolio to cover all these price levels, but also to balance our business. Very important, I don't want to be a fragrance player only. I want to be very balanced across the 3 metrics. Today, we're #2 worldwide in skincare, #3 in makeup, #1 in fragrance, and the objective is to balance very well these 3 categories across the different geographies where we operate. Our market share, I told you earlier, is slightly above 19% total luxury. It's 22% in fragrance, it's 20% in skincare, and it's around 15% in makeup. And so we are pretty balanced across the 3 categories, and it's very important in the way we see this business of luxury. Tied to the portfolio is another very important part of L'Oréal Luxe now of my team. It's our exceptional M&A power, some will way M&A skills. We have 27 brands at L'Oréal Luxe and they all were acquired in the history of L'Oréal. So we have been built 100% through acquisition across the years. And I want to show you some of our more recent ones. 2021, we acquired Takami, probably the most sophisticated medical luxury brand from Japan, amazing clinic, luxury clinic in Omotesando, Tokyo, the best knowledge in the science of PL, very important in our skincare conquest for the world. In 2022, we acquired Youth to the People, organic luxury directly from Los Angeles, the art of cleansing, the art of squeaky clean skin, which is so dear to Americans, and this brand is also a great tool for us in our skin category. Then 2023, Aesop. And it's 400 unique retail addresses around the globe -- retail stores around the globe that are the epitome of design and wellness that get together. Incredible brand, Aesop, and we are very proud that it joined the division. Then in 2024, we acquired the license of Miu Miu, the hottest fashion brand out there right now. You probably all have a look at the list index that allows you to see the hotness of the fashion brands or you probably attended the meetings -- investors meetings or analyst meeting of the Prada Group. As you know, the Miu Miu brand is exploding right now. We acquired the license in 2024, and we just launched Miutine, the first fragrance by Miu Miu. 2025, Medicaid, medical luxury as well like Takami, but from U.K. this time with a very specific knowledge in formulation of vitamin C and vitamin A, i.e., retinol and is the fastest-growing luxury skincare brand in the U.K. and probably amongst the fastest growing in the whole Western Europe, a great new acquisition for the brand -- for the division also. 2025, JACQUEMUS, very hot French fashion brand, rooted in Provence, extremely aspirational, very successful in the U.S., very successful in Europe. And more recently, of course, the Kering Beauté acquisition with Creed, #3 fragrance brand in the top of the pyramid of France, i.e., the super premium fragrances, the exceptional fragrances, the -- i.e., perfumery -- good perfumery. A very beautiful brand, seventh generation of perfumers, a brand which has an incredible DNA, incredible story, and we think has an incredible potential. Bottega Veneta, exceptional artisanal know-how, extremely high level of sophistication that will translate very well into fragrances. And Balenciaga, this audacious, subversive fashion brand, but as a territory also that will work very, very well in fragrances. And obviously, when it becomes available, when the license expires, Gucci, which is part of the top 4 most famous fashion brands in the world and which has a great potential untapped yet in beauty. So we are aggressive in acquisitions, yes. And we also have a unique track record of success in acquisitions. Look at Saint Laurent. We acquired Saint Laurent in 2008. The brand was around EUR 300 million. It had been pretty stable. And under our management, Saint Laurent went from EUR 300 million to more than EUR 3 billion. It passed the EUR 3 billion last year. And obviously, this year, it's going to keep going up. I can't give you a number, but it's a very good number for Saint Laurent this year. So unique track record, proven by Saint Laurent, proven by Valentino. Valentino under the previous owner was a EUR 50 million brand. It's a EUR 600 million brand, probably a digit higher in 2025, I mean, the first digit. So a big, big success of Valentino also in this story. And Prada, which under the previous owner of the license was EUR 100 million, and which is now EUR 500 million. So yes, we are aggressive in acquisition, but the whole strategy is to really potentialize this acquisition, globalize them. We have a unique footprint. We are really global, and this allows us to scale these brands and also define very clear DNA for each of them and then potentialize this DNA. Great link with my next point with our know-how, which is our commercial cloud. We have a great global commercial cloud. We are #1. We were #1 in 3 of the 4 publication regions. As you know, we've been a historical #1 in Europe. As you know, we became #1 in North America last year. We had become #1 in emerging countries in 2022. And we were until this year, #2 in North Asia, but I can already announced you that this year, L'Oréal Luxe will be #1 also in North Asia. So this is a unique commercial cloud. We are #1 of luxury beauty across the 4 regions of publications. And this is a know-how. This is a talent that the teams of L'Oréal Luxe around the world have. This applies to channels. We are #1 in offline. We are #1 in online. Online is growing fast in luxury. Online is around 30% of the luxury market. It's growing fast. You cannot discount online at all. You have to [Technical Difficulty] online and our teams are doing it. And we are #2 in travel retail. So across the 3 big channels of luxury around the world, we are well positioned and well balanced. All of this, obviously, are, I would say, objective know-hows or factual know-hows. Now there is one know-how, which is extremely unique and which is very L'Oréalian, which is our culture. The culture of seizing what's starting, [Foreign Language], and being on the quest of the extraordinary. And this is very deeply rooted in our DNA. This is very deeply rooted in the way all our teams around the world think. They always craft extraordinary customer experiences, be it offline, which is the natural territory of luxury. Offline needs to be an incredible experience. It needs to be enchanting, it needs to be disruptive. It needs to be surprising. It needs to be entertaining. And you hear about the examples of Miu Miu, which was just launched around the globe or the example of Prada [ Padding ] or an Aesop store, always an incredible moment of architecture of design and then when in the store, a unique moment of experience. Or Valentino at this store is probably, I think, is a Dubai store of Valentino, which is very spectacular. But in this offline experience, it's not only design, it's not only architecture, it's not only a statement, it's also a service, which is incredible. And we have more than 20,000 BAs around the globe that are at the service of our customers worldwide and help them have a great diagnosis, a great moment and get out of the store with a great product, tailored to their needs and with a smile and hopefully, with emotions, which is what we are trying to create always. And then we permanently try to replicate this online. Yes, online is 30% of luxury, but online cannot be a disappointing experience for luxury customers. So we are permanently upgrading the level of the online experience. You have here the beautiful D2C site of Aesop on screen, which is very spectacular. You have here the new Lancome U.S. site, which I just saw the results of today, and they are spectacular because the level of experience is pretty incredible, but also the experience on Amazon. We, for years, did not accept to go on Amazon because we thought the experience was not elevated enough, magic enough for luxury. And Amazon accepted to work with us. And we were first movers with Amazon in luxury because we think now the experience is pretty outstanding and is at level versus what a luxury brand should be. So exceptional extraordinary experiences offline and online, whenever the channels. And as mentioned it, the obsession to seize what is starting, to seize what is beginning, which, as most of you know, is a very L'Oréalian value, but it's more important than ever in a business like luxury because obviously, it also justifies your price to be ahead of the game, to be up and above. And for that, we strategized a very specific culture, which is like Culture de l’Écart, which means the twist culture, which means the culture of always being one step ahead or one step aside. And I propose to show you the trailer of documentary on Culture de l’Écart, which is available online that you can very well if you desire, look in its entirety. It's around 45 minutes, but you're going to see a trailer of 1 minute, which has been crafted with some of our outside partners, the great creators, great crafters we work with on luxury. [Presentation]

We are back. Q&A time.

Indeed. So I think we start with a roam-up question, which is if the global beauty market grows at 4% to 4.5%, where do you see the long-term growth for the Luxury Beauty segment?

Well, actually, I'm confident for the growth of the Luxury Beauty segment, very confident even. As I mentioned to you, over the last 10 years, it grew by 6%. And actually, this growth gain, half of it came from new consumers. I have the precise number, but I'm going to give you. In 2015, there were 410 million affluents buying luxury beauty. In 2024, 540 million. And if we follow the evolution, the macroeconomic evolutions of the planet, there will be 700 million people who can buy luxury beauty on the surface of this planet by 2030, which means clearly that there is a big reservoir of growth. Big reservoir of growth in the emerging, for instance, it's only 10% of our business when it's around 17% of the total beauty market, not on a luxury only total beauty market. So huge space in the emerging, huge space still in China, where at the end of the day, there is only 20 million people buying luxury beauty today. Huge potential of penetration across the categories. Yes, fragrance is booming all over the planet. We all know this, but the penetration of fragrance is not even higher than 55% on a global scale. So a lot of potential for luxury beauty. So I'm really confident on the growth of this market. And obviously, when consumers are confident, the market grows even faster. When the consumers are a bit less confident, it grows a bit slower. But overall, structurally, it grows, it develops. And don't forget also that luxury beauty is very accessible luxury. At the end of the day, lipstick is EUR 50 to EUR 60, fragrance is EUR 90 to EUR 200. So it's very accessible luxury. So even in moments of doubt, it's a treat that consumers are very happy to indulge into.

Great. Thank you. We have a very interesting question, which is about how you decide where innovation goes first in terms of brands?

Well, it's very much based on our cascading approach. Obviously, I tend to give the best innovations to my most valorized brands, obviously, to amortize the cost of R&I first on the brands that have the most premium price. That's the first criteria. The second criteria is obviously depending on the brand territory, the brand DNA. Each brand has a very different territory. And so the innovation can correspond to this territory or not. For instance, when it comes to Pro-Xylane, well, it's the territory of Helena Rubinstein. So when there is a new amazing technology with [indiscernible] and Pro-Xylane, it goes to Rubinstein more than Lancome and other brand. So mix of cascading based on, obviously, the level where the brand is in the pyramid and relevance versus the brand territory.

Great. Quite a few questions, as you can imagine, about fragrances. So there is a question about growth in fragrances. We've seen the market slow. Where do you see the category land? And how can you ensure that we continue to outperform that market?

This category is still very dynamic. It's going to end the year probably in the area of 6% to 7% growth. So it's still a very dynamic category. Okay, last year, it was 9%. So it's a bit less dynamic than last year, but it's still super dynamic. How many markets are as dynamic as that worldwide? Very few. And we overperformed systematically. This year, I think we're going to end way, way above the market. We are growing double digit year-to-date. And as you know, November, December is the peak season of fragrances and with the quality of the launches my team has crafted, with the quality of our portfolio, we'll land way, way above the market. So we're going to still overperform and grow double digit in fragrances. And I'm very confident in this market for, I would say, 3 reasons. New targets, men, who used to be, I would say, very classical consumers of fragrances. The new generations of men, they layer. They love having a fragrance wardrobe, i.e., several fragrances depending on the occasion, depending on the moments. They are no longer attached to just one fragrance, but they rebuy just every 2 months, 3 months. They have overall fragrance wardrobe they play with. And this young generation of men consumers has explained a big part of the growth. Then emerging, all the emerging world is adopting fragrances at high speed. The level of growth I have this year in fragrances in North Asia, in South Asia, in Latin America is extremely impressive. So these are the 2 main reasons. And the third reason why I think this market is going to keep growing is because it's a very creative market. A lot of surprises, a lot of newer fashions, a lot of new trend and a lot of new gestures. There was a great, for instance, move last year towards mists, which is another way of fragrancing during summer, for instance, that was successful. So overall, this category is innovative. This category is interesting new targets, new geographies. So it's going to keep growing very nicely.

We're going to go a little bit niche on fragrances now. We asked about China. So in the U.S. and in Asia, especially China, penetration rates are still quite low. Do you see these penetration rates catching up? And in China, where we've seen a lot of focus on ultra-high-end consumption, is that becoming a mainstream market for fragrances? Or do you see that more as a niche market going forward?

No, it's -- I have to say it's one of the most exciting fragrance market in the world because the consumer is very demanding. The consumer likes original high-quality fragrances, high-quality bottles and the consumer is very playful in its consumption. Historically, Chinese consumers were offering fragrances. It was a gift, but people were not really wearing it. The new generation loves wearing and loves changing. What I was mentioning regarding the fragrance wardrobe is very much happening in China. They don't wear the same juice, the same choice depending on the season. They don't wear the same juice, the same choice depending on the day of the week -- workday, weekend day, depending on the social occasions, be it an office situation, a dating situation. They love changing because -- they consider fragrance as part of their signature -- as part of their personality signature. So this is very interesting. And second, they also consider fragrance as a sort of a wellness gesture also when it comes to certain fragrances with essential oils like the one we have of Aesop, which are working extremely well. So it's a new interesting kind of consumption, very experts, very demanding. So only the best brands and the best quality/technology will win in China, but I have a lot of faith in this market in China. I think today, it's smaller than skincare, obviously, but it can become a very big part of the market.

Great. Very glad to hear it. Still on fragrances, obviously, a lot of our portfolio in fragrances comes from licenses. However, you've just showed us that in the last few years, we've acquired brands like Aesop and now Creed, which are fully owned. How do you see the trend develop from here? Why one or the other?

Well, I think licensed fragrance will always be a huge part of the market. Why? Because those fashion brands are extremely inspiring, extremely creative, and they allow us to create fragrance territories, fragrance stories, fragrance archetypes, which are very interesting, very exciting. And frankly, we have a unique way of working with our licensees, which is an extremely collaborative way. We see each other a lot. We take immense inspiration from them, and we bring them immense knowledge of the category. And this is a real win-win between our fragrance partner -- our fashion partners and on fragrances. So I think this will remain a huge part of the fragrance market. Then at the top of the pyramid, in what I call oud perfumery, high perfumery, I think brands like [indiscernible], like Margiela, like Aesop will remain dominant because here, consumers don't buy a fashion projection. They don't buy the creativity, the imagery of a fashion brand translated into [indiscernible] French. They buy artisanal compositions. They buy raw materials. They buy ingredients. They buy somehow the mastery of fragrance, the mastery of composing of fragrance. And they even don't like when there is a storytelling that I would say, cannibalizes the pure story of the ingredients and of the composition. And so it's a very interesting part of the market. It's already 20% of the market on the top of the pyramid. And it's a part of the market on which L'Oréal Luxe was weak. I have to acknowledge and confess, and that's why Creed is a perfect fit because it's the #3 brand and reached of the top of the pyramid. And as I told you before, seventh generation of perfumers, a brand which has been in the market ever since the 16th century, 220 incredible formulas in the archives with incredible composition, secret of composition, which are super precious. Very few brands have such archives. It's a bit like an incredible fashion brand, which has archives of the design of accredited, the archives of Chanel, et cetera. Well, in this world of high performance, it's the statement. They have 220 incredible formulas that we can today relaunch, repurpose for consumers of today.

So moving away from fragrances towards makeup. So one of the questions is, are designer brands still gaining market share in makeup? If they are, where do we see potential to add a second access to our Couture brands?

Well, makeup is the obvious second step for Couture House after fragrance because makeup is very close also to fashion, to style, to self-expression. So obviously, the territory, the DNA of Fragrance House can translate very well into makeup. The very young, [ edgy, rock ] side of Saint Laurent translates very well into Saint Laurent Makeup, which has become, by the way, #1 in China and which is #3 worldwide. All more minimalistic expression of the Prada feminity, works extremely well also in makeup for face makeup, for instance, or eye makeup or lip balm instead of lipstick. So every fashion house has a vision of feminity, a vision of self-expression that we adapt into the world of makeup. Mr. Armani was the maestro of glow. This is what he was really obsessed with, women who glow. And that's why the whole Armani makeup line is all about the glow and it's working very well. Luminous Silk by Armani is at the very top of the Sephora rankings in the U.S., especially around this idea of glow. So easy to translate a fashion house imagery into makeup. And then you need amazing technologies, beautiful packaging, incredible storytelling to make it a success.

So I think before we move on, there's one question on the third category, which is skincare. Nicolas Hieronimus has often said that skin care is an area where the group can do better. What role do you think luxury will play in that journey?

Skincare is, as I showed you in my presentation, is in critical category of luxury. It's 40% of the luxury market. It's still the biggest category of luxury. Skincare is especially critical in the eastern part of the world, i.e., the Asian part of the world where their skin condition is a very strong element of sophistication for luxury customers. So obviously, we have a key role to play. And as you all know, Helena Rubinstein, which is a very strong brand in Asia went from less than EUR 50 million 10 years ago to more than EUR 1 billion today. So we -- all skincare brands can be very big. That's why we acquired Takami. It's going to be a very big skincare brand. That's why we acquired Medicaid as long as we keep justifying the prices of luxury skincare. So what does it mean? It means superior performance. We need to do formulas with incredible level of actives, patented actives, exceptional active, unique actives, incredible experience. We need to do textures, which make the skincare moment a moment of pure bliss, including, by the way, fragrances in the skincare that make office moments a real moment of a relaxing moment, wellness moment. So exceptional performance, exceptional experiences and a really exceptional service. Skincare is a lot about service, luxury skincare. A woman that comes into a corner in China, that comes to a store in Japan, that comes to a back wall in Korea, has to have an incredible moment of experience. She needs to be diagnosed what product is right for her. She needs to be explained how to use it, what kind of routine, when, how, et cetera. So this mix of performance, experience, service is what makes luxury skincare unique and what we focus on to improve our skincare numbers, which are much better this year, by the way, versus where they were last year.

Great. Now I think let's start a little journey of the globe, and let's start in China. Everyone was obviously very pleased to see that the market has been improving since the start of the year. Is your view that that's the beginning of a gradual recovery in the near term? And how do you think about the potential in China in the longer term?

The market is improving. It's a fact. It's not a radical improvement, but it's improving as -- to remind everybody of the facts, it was -- the market was negative in H1 in China. And on H2, it's positive in a nice way since, for instance, October, November, I just got the results of the market. The market is going to be around plus 5%. So it's a very decent level of growth. It's not the level of growth that we had before COVID, where China was double digit, but it's a very decent level of growth at plus 5%. So I'm very happy to see these numbers, especially because they are, I think, structural. Chinese consumers are back into confidence, although it can change. But for now, we are back into confidence. I think the improvement of the stock exchange has helped this new level of confidence. And also because I think -- because we challenge ourselves to bring new surprises, new experiences that they are interested with. And so it's too early to say, "Oh my God, China is totally back." But what I'm sure about is that this market is, for sure, going to remain one of the biggest markets of luxury. And as I told you, we have only 20 million people who buy Luxury Beauty in China. Imagine. So the potential -- imagine the potential in Tier 2, Tier 3, Tier 4 cities. Imagine the potential in fragrance, it's still tiny. So China is going to be one of the key drivers of growth for the future, no doubt of that.

And we have a very similar question about the U.S. We've seen momentum improve after what was a fairly slow start to the year. Can you maybe talk a little bit about what you're seeing? And again, how you think about the potential in the long term?

Yes. But the U.S. is improving every quarter on a low base because we started the year on a low base too. The more recent market numbers are more in the area of plus 3% in the U.S. So it means the market is progressively getting back on track. Here also, I think it's very linked to consumer confidence. If the consumers are confident, they love treating themselves to beauty and especially to luxury beauty. So I'm very encouraged by these last numbers, especially since, for instance, fragrance is already back big time in the recent weeks, for instance, got the first numbers of Black Friday or Turkey 10 as it's not cold because it has 10 days. So it's called Turkey 10 around Thanksgiving. And it's -- the numbers are very encouraging. So as you can decode between the lines of our discussion, I'm reasonably optimistic. I don't think our market is yet back into its pre-COVID times, but it's structurally improving without any doubt.

Great. We've had a few questions asking about the competitive environment, especially the smaller brands. What do they bring to driving the market? What can you learn from them? And how disruptive are they in the Luxury segment?

Well, first, I have to say very loudly that I love competition. When you're a big company, L'Oréal Luxe is #1 luxury beauty company in the world, you need the competition to stay alert, to never step on your laurels. It's very good competition. It allows to permanently challenge us, to permanently avoid that we stay in a status quo mode. So it's great. And amongst competition, these small indie brands are very interesting because they are local. So they are very relevant towards generally local needs, and they are fast. So it's very interesting to decode how relevant they can be, why they can be so relevant and why they can be so fast. And then obviously, they will never have what we have, which is scale. We are worldwide. They are most the time local, which is capacity of innovating. We have an incredible R&I that can help you -- help us innovate. And obviously, we have brands also which have awareness that is probably difficult to meet. But it's very interesting to take inspiration from them on their creativity, speed and capacity of being relevant.

You've obviously shown us quite a few slides with recent acquisitions and presumably, the teams are busy starting to integrate some of those acquisitions. But when you think forward, where do you see the white space opportunities in the market still?

Well, we did quite a few acquisitions in the last 5 years. So I think first thing is going to be to digest them, potentialize all of them at the level which I promised to my shareholders. So this is the first step. Then are there going to be new exciting opportunities? Yes, there always are. So the question would be, are they complementary enough to what we have? Can they replace some of our existing brands because also there is no taboo on saying that we may divest some of our brands. When you have a portfolio of 27 brands, if some of them are not at level, if some of them do not perform several years in a row, well, I think it's very healthy to divest. So I do not close the door at all to new potential acquisitions in complementary spaces to where we operate today. It needs to be complementary, and this is the name of the game. Very important when you have a portfolio of 27 brands to make sure the contour, the DNA, the territory of each brand is very different from another, and it's my job to make sure of this. But if we can find opportunities which are complementary, well, we'll always be curious. We'll always investigate and we'll always make the best decision in the interest of our company.

And I have before we conclude one last question, which is very closely related to this. Everyone loves the Aesop brand. So we had a question on where are we with the integration? What have we achieved so far? And what's coming next?

We acquired definitively Aesop on September 1, 2025 and 2024 -- no, 2023, apologies. 2023, I'm losing my dates. So September 1, 2023. So we are 2 years after. And 90% of Aesop is integrated today. So it means the Aesop teams, great teams, who have an incredible knowledge in retail, in design, in capacity to develop spectacular customer experiences. The Aesop teams have joined us in 90% of the geographies. There is still 10% to integrate. The brand is doing great. It's growing double digits this year again. It grew double digit last year, and it's going to grow double digit this year again. So we're on track and we're on track with Aesop. We have great successes at the moment in fragrances. They are very original, Aesop fragrances, both the composition, extremely aromatic, based with a very specific charter formulation. So I think consumers find them very new, very interesting. So I'm very happy we have Aesop. And as I mentioned when we acquired it, I think Aesop is going to be part of the next billionaire brands of L'Oréal Luxe. We have 5 billionaire brands today at L'Oréal Luxe: Lancome, Yves Saint Laurent, Armani, Kiehl's and Helena Rubinstein. And I think Aesop will soon join this club together with Prada and Valentino, which also will join this club soon. So probably not this year, but soon, we will have 8 billionaire brands, and Aesop will be part of it.

Great. Thank you very much, Cyril, for this fascinating tour of the luxury world, and thanks, everyone, for joining us for this session.

Thank you, everybody. Thank you.