L'Oreal SA

PAR:OR

Earnings Call Transcript 2020-Q1

[Operator]

Welcome to the conference call regarding L'Oréal's sales at March 31, 2020. [Operator Instructions] The conference is about to begin. I would like now to hand over to Mrs. Françoise Lauvin. Mrs. Lauvin, please go ahead.

[Françoise Lauvin, Head of Investor Relations]

Thank you, Philippe. Ladies and gentlemen, good evening. [Foreign Language] The L'Oréal team is pleased to welcome you to this conference call for the release of L'Oréal's first quarter 2020 sales. Together with me tonight are Chairman and CEO, Jean-Paul Agon.

[Jean-Paul Agon]

Good evening.

[Françoise Lauvin, Head of Investor Relations]

Chief Financial Officer, Christophe Babule.

[Christophe Babule, Executive VP & CFO]

Hello, good evening.

[Françoise Lauvin, Head of Investor Relations]

And Group General Manager, Financial Communication and Strategic Perspective, Mark Prestwich.

[Mark Prestwich]

Good evening.

[Françoise Lauvin, Head of Investor Relations]

In this unprecedented context, overshadowed by the outbreak of COVID-19, L'Oréal's absolute priority has been to protect the welfare of its employees worldwide while also ensuring it provides help, solidarity and support to its customers, partners and health authorities wherever possible.First quarter sales reached EUR 7.225 million, 4.3% below that of the first quarter 2019. Changes in the scope of consolidation were slightly negative by minus 0.2%. Foreign currencies had a positive 0.7% impact. Note that given the recent weakening of some emerging markets' currencies, such as the ruble, Brazilian real, Mexican peso or Turkish lira, extrapolating the end of March foreign exchange rates against the euro until year-end, including for the dollar, euro at $1.09 -- or $1.10 would lead to a negative currency impact of around minus 1% over full year sales.Back to Q1. After taking account of scope and foreign exchange impacts, the like-for-like change in sales was minus 4.8%. The performances by division are contrasted. L'Oréal Luxe at minus 9.3% was impacted by the closure of department stores, perfumeries and by sharp restrictions on travel worldwide. The Professional Products Division at minus 10.5% was affected by the closures of many salons. The Consumer Products Division has seen a more moderate decrease of minus 3.6% as the activity in mass market retail has been widely maintained. The Active Cosmetics Division continued to post double-digit growth of plus 13.2%. Geographical zones have been progressively impacted by the closure of different sales outlets and the introduction of lockdown measures in China from January, in Europe from the beginning of March and in North America from end March. As a result, Western Europe sales were down 7.7%. North America was minus 4.8%. The new markets were at minus 2.9%. Africa/Middle East ended the quarter at minus 5.6%. Latin America increased 0.8%. Eastern Europe was at minus 1.4%. Asia Pacific dipped at minus 3.7%. There were progressive signs of recovery in March in Mainland China where L'Oréal achieved growth both in March and in the first quarter.The environment is changing on a daily basis and the lockdown measures in a large number of countries will continue to have an impact on the consumption of skincare and beauty products as well as on our business in the second quarter. As witnessed in China, the strong appetite of consumers for beauty products remains intact, and we are convinced there will be a quick recovery of the market once the measures to close down store outlets are lifted.Over the first quarter, L'Oréal has continued to outperform the worldwide beauty market. With our wide-ranging portfolio of powerful brands and high-quality products, our leading digital expertise, which is reshaping the connection with consumers, our well-recognized strength in e-commerce, our robust financial situation, our operational discipline, the agility of our organization and the commitment of our teams all around the world, we are convinced that L'Oréal will overcome this period of crisis in the best possible condition, and we are confident in our ability to reaccelerate as soon as circumstances allow.I thank you for your attention. We are now ready to take your questions.

[Operator]

[Operator Instructions] We have a question from Jeremy Fialko from HSBC.

[Jeremy David Fialko, Head of Consumer Staples Research of Europe]

Jeremy Fialko, HSBC here. So a question mainly on -- related to China. So do you think that the market, when the consumption comes back, will be really much sort of identical to how it was at the back half of last year? Or do you see some changes within consumption patterns in the, let's say, the post-COVID era? And from your initial observations, what lessons from China might you be able to apply to some of the other markets given they are clearly first into this but coming out the other side earlier?

[Jean-Paul Agon]

All right. So yes, I think the experience in China is very interesting and very telling for the other parts of the world as we have seen it unfolding in the past few weeks. What we have seen in China is a pretty quick bounce back of the consumption of beauty product and especially true for our L'Oréal brands. In fact, in March already, the -- our sales in China were again positive, and we are also on a positive trend for April at between 5% and 10%. And we are, by the way, pretty confident to achieve a pretty strong double-digit growth in sales in China for the second quarter.What we are seeing -- I think that we have to separate the consumption during the confinement and after confinement. Of course, during confinement, what we see is -- what we have seen in China is a pretty good consumption of skincare, hair care. And what we see also in Europe is a very strong consumption of hair color, one of the reasons being that women cannot go to hairdressers to get their color done. And we have seen, obviously, a weakness in makeup. And after confinement, we see that all categories are gaining traction. And consumption, as I said, is bouncing back to be positive with still progressive recovery for makeup, especially, obviously, in China where everyone is wearing mask. It is not, of course, a great incentive to wear lipstick or makeup in general.But personally, I think that once the stores will be open again and once the confinement measures will be stopped, I think that we will be back to a consumption probably pretty similar to what we have seen before. And what -- also an interesting point that we see in China. I was discussing with our General Manager of China yesterday, and he told me that, for example, in the Wuhan department store, Wuhan being really at the epicenter of the crisis in China, as everybody knows, the department -- in the department store that showed the most strong bounce back was the beauty department among all departments. So I think that -- and it's also true based on the previous experiences that we had that when consumers will be able again to shop and to get access to their brands, beauty will be back to a very good consumption. All right?

[Jeremy David Fialko, Head of Consumer Staples Research of Europe]

Okay.

[Operator]

We have a next question from Fulvio Cazzol from Berenberg.

[Fulvio Cazzol, Senior Analyst]

I have a couple. The first one is on price mix. Since much of your growth in recent years has been driven by price mix, how should we think about this going forward, particularly for 2020? I mean how important is innovation to this? And is there any risk that the new product pipeline will be impacted by the lockdowns, particularly in Europe and the U.S.? And then my second question is if you can comment at all on the risk to operating margins, particularly in the first half. If not, can you comment on the flexibility of your cost base today compared to the '08, '09, particularly for the Luxe division, please?

[Jean-Paul Agon]

All right. So these are very different questions. So regarding the first one, price mix. At that stage, we don't see any reason for an evolution of price mix different from what we saw before. And even in the first quarter, what we saw was, of course, a decline in units but a positive evolution in value. So we think that the dollarization process that has been happening these past years will still happen this year, and we -- I don't see presently any major reason for a change in that direction.In terms of innovation, definitely, the innovation plans and the launch plans will be impacted by the lockdown measures. Obviously, it doesn't make sense for us to launch great new products in the middle of the confinement period. So for our different divisions, we have first postponed some of the key launches that we have planned for the second quarter. And we will, of course, postpone them to a later stage in the year during the third quarter or fourth quarter, in order to give them the full potential. And it's true also that for some launches that were done in the first quarter, we will probably also relaunch them once the confinement measures will be over in order there again to maximize their potential. So I think it will be a temporary reset of innovation, but that really makes sense in terms of business.Regarding the operating margins, of course, it's too early to say anything about H1 or about the year. A lot will depend as for the sales trend about how long will the confinement measures will last and also how long country by country because, as you know, these measures are really taken not only zone by zone but even country by country. And so we are, of course, following very precisely the timing of the reopening of the stores or the end of the confinement measures. And so it's very difficult to make forecast right now. And -- but we are in terms of cost, we have taken already some very strong measures. We have -- as we put in the press release, we have installed early February a headcount freeze, a travel freeze. We have reviewed completely all our cost and investment and eliminating any cost or investment that was not really indispensable for this year. And we have also reexamined completely our business drivers to make sure also that we were not spending money in a business driver that would be irrelevant in a time of confinement for consumers. Obviously, it doesn't make sense to advertise, for example, on TV, on products when consumers just cannot purchase them when the stores are closed. So there is definitely a flexibility on the cost structure, and we are addressing it very aggressively, as we should, in order to protect the profitability and the cash of the company.

[Operator]

Our next question is from Iain Simpson from Barclays.

[Iain Edward Simpson, Analyst]

A few questions from me, if I may. Firstly, it would be very helpful just to hear a little bit about what the Travel Retail channel did in Q1? I mean guessing very heavily impacted but -- and how we should think about that channel going forward? Secondly, in the professional business, clearly, this has got to be quite a difficult time for salons, many of which are sort of fairly small and vulnerable businesses. A number of your competitors have mentioned that they've been extending working capital support and similar to hair salons just to kind of help keep them around through the crisis so that they're still there post-crisis to supply. Have you found yourself doing anything similar? Or how should we think about what the salon market will look like post-crisis? And then just lastly, you talked about very aggressively addressing the cost structure, but one of the things that's always marked L'Oréal out in previous crises has been its determination to continue to overinvest versus the competition through a crisis in order to come out stronger. So I understand completely your commentary about no point advertising products that consumers can't buy, but just wanted to get some sense that if you felt you had to choose between spending the right amount of money to supporting your brands and defending a particular margin level that your prioritization would continue to be supporting your brands.

[Jean-Paul Agon]

All right. So many interesting questions. So first, Travel Retail. In fact, the Travel Retail resisted pretty well during this first quarter with a total at minus 12% in term of sales. Obviously, that was linked to the fact that Travel Retail had a very strong January; then a so-so, I would say, February; and then a weak March. And so -- but all in all, the number for the first quarter was not that bad. Clearly, the number for the second quarter will be not as good. But it's not all dark. We are seeing some reopenings of shops and business, especially in China and Asia and with Chinese consumers to Hainan and Macau and other places. So Travel Retail will be definitely impacted, but I know that our Travel Retail teams are fighting tooth and nails to make sure that they can grab any business available, especially in Asia right now.So professional business, I know that you didn't have time to read the press release, but when you will read it, you will see that, in fact, L'Oréal has been the first company to take some very strong measures to help the salon. You know that L'Oréal is the leader in the salon business but not only that but, in fact, started from the salon business. So we are very attached to this industry and to our salon partners. And we have chosen to help our small professional clients by deferring the payments of their debts in light of their cash flow difficulties that they may be facing until their activities recover. So this has been done. And if I remember well, it's something like 70,000 salons or something like that, that are -- that will be helped around the world, in Western Europe, in Latin America. And so we will be definitely helping this profession to pass this difficult period of time.Obviously, it's going to be difficult for the salon for the weeks to come because, clearly, in many countries, they are closed. But personally, I'm pretty confident that once -- because I have had many personal insights of women looking desperately for salon, and I'm pretty sure that once the salon will be open again, there will be a very strong also bounce back of the business in the hair salon, of course, respecting all the health measures and sanitary measures that are -- that have to be respected. But -- so I'm not worried for the salon for the middle term and long term, and our mission and our role is to help them past this difficult period that I hope should not be too long.Third, about the investment. I would like to mention something which is important. As you may know, I have been through many crises. I was in the Chinese -- in the Asian crisis in '97. I had September 11 in New York, the 2008 crisis. And -- but this crisis is very different from the previous one. And especially if you compare with 2008. 2008 because it started with the financial crisis, then it generated the kind of demand crisis. There was a crisis on the demand, and consumers were, in fact, buying less. Here, it's not a demand crisis. It's a supply crisis. In fact, consumers are really eager to buy beauty products, all type of beauty products, even luxury or professional products, but they just can't do it because the stores are closed. So I think it's very different because it means that it will -- it should be really temporary. So I think that's 2 conclusions.The first conclusion is that, as I've just said before, when stores are closed, it doesn't make sense to advertise on products, and it can be even frustrating to advertise on products that consumers just cannot buy. So definitely, we will cut on these advertising spendings for this short period of time. And also, the second factor is that the difference with 2000 -- 2008, 2009 is that this would be for a very short period of time. We are not talking about a year here. We are talking about weeks or month. So what is clear is that we will adapt -- we are adapting right now our business drivers to -- very pragmatically to the situation, division by division, even brand by brand and country by country to adapt to the real situation of the shopping possibilities. So it will not change. So I think that we will be able to, first, adapt this spending but, at the same time, without obviously compromising on the strength of our brands. And we are also making sure that we would be ready to reinvest strongly as soon as consumers will be able again to visit stores and shop the brands -- our brands that they like.

[Operator]

Our next question is from Richard Taylor from Morgan Stanley.

[Richard Taylor, Equity Analyst]

It's Richard Taylor here from Morgan Stanley. Just a few questions from me. The first one is pretty straightforward. Can you give us an idea of the profile, I suppose, particularly in terms of the age profile of the most frequent, highest value visitor to the hair salon? Because I'm just wondering how quickly she will be allowed to go back to the salon as this crisis unfolds.The second one is a kind of bigger-picture question. I'm really interested in your perspective of the changes to consumer behavior. I suppose from a strategic perspective, one thing that might help L'Oréal in the long run is a real acceleration in e-commerce in the U.S. It's a region that's been somewhat behind Northwestern Europe and Asia in terms of the consumer buying products online. So I'm just very interested in your insight in terms of permanent changes that you're expecting from this crisis. It's supposed to be 21 days to change a habit and 2 months to make it permanent. It looks like people are going to have plenty of time to change some habits.And then the last one, you always talk about creating desire and the importance of creating desire. If your A&P is not available to you, how should we think about creating desire within this environment for the L'Oréal flotilla of brands?

[Jean-Paul Agon]

Okay. So I'll start with the last one because, again, maybe I have not been understood well. I have never said that we're going reduce investment on our brands for the full year 2020. I've just said that we're going to -- and I think it's a smart decision -- reduce advertising on brands that consumers cannot just shop right now. And again, I think it's also pretty wise not to create, as you say, the desire, an excessive desire for a brand that you cannot just shop. If you want me to -- for example, spending a lot on La Vie est Belle fragrance when all perfumeries and department stores in Western Europe are closed, I don't -- right now, for the weeks to come, I don't think would be that smart. But to take this precise example, when, for example, the perfumeries will open again, and we hope that it could be done for Mother's Day, definitely, La Vie est Belle will be a top advertiser at that period, and it's in the few weeks to come. So honestly, we are absolutely not compromising on the creating desire or supporting our brand, but we are just adapting wisely our investment to the shopping possibilities of our consumers.So regarding the age profile of the salon, I don't know exactly what you mean. If you mean by this question that you suppose that most of the consumers who go to salon are over 70 years old and could be asked to stay confined after some of the confining measures, I think you're wrong. Definitely, women and men of all ages go to salon, and it's true everywhere in the world. And I'm very personally optimistic and confident that when the salon will open again, there will be a rush to salon everywhere because right now, it's a dire need for many, many women.And by the way, I even think that this frustration of not being able to go to salon for several weeks will create a strong return to -- strong return trend to salon because the women will understand how much it's great and good to go to salon regularly, and it could be very positive for the professional business in general. I can bet that with you if you want.Third, acceleration of e-commerce. Yes, thank you for this question. We had a quite very strong move, an acceleration of e-commerce during this quarter. Once again, of course, e-commerce accelerated. You saw that it grew by 53% -- no...

[Christophe Babule, Executive VP & CFO]

53%.

[Jean-Paul Agon]

Yes, 53%. 52.6% very precisely during this period. And it's true, by the way, for the 4 divisions. It grew by 44% for professional, 45% for consumers, 57% for luxury, 62% for Active Cosmetic. And the other interesting number is the fact that now e-commerce is almost 20% of our sales. It has become extremely significant. Obviously, this crisis is accelerating the move as for several -- for example, for luxury or professional products. In some countries, it's the only way to get access to the products right now. But I think it's a good -- it's an acceleration, and that will definitely be a milestone in the evolution of e-commerce for L'Oréal, okay?

[Operator]

Our next question is from Marion Boucheron from MainFirst.

[Marion Cohet Boucheron, Research Analyst]

A few questions for me, please. The first one will be on Asia Pacific and the growth you recorded in Q1. Would you give us some color on what happened more precisely in China and Southeast Asia? And I was very surprised by the Travel Retail numbers, so I guess it was a bit maybe below for that region, but then some color on that would be helpful.Then the second question is what are you seeing online? Not buying, I'm just talking YouTube, Instagram, but I know you have quite strong tools to monitor that. On the beauty category interest these days in the western world where everyone is a bit stuck at home and rising interest, more use of tutorials. Will be interested in some color on that one.And then what really explains how Active Cosmetics remain that strong? Is it that it was less impacted by the lockdown in the western world afterwards because this channel is a bit more open still? Or is it Asia was the other region that really helped it outperform strongly?

[Jean-Paul Agon]

Okay. So Asia Pacific, China, as I said, had a good quarter, and I have to say it's a pretty remarkable performance. China was able to close the quarter at plus 6%, which is pretty amazing when you think about the difficulties that they had due to the pandemic. Some countries were pretty positive, too, like what, like Australia, and some countries did okay. Taiwan was positive, too. India and some countries were slightly negative. So all in all, it was a quarter when all countries fared pretty well. Definitely, the second quarter will be more difficult in some of these countries as there is some -- there is a lockdown in different countries like India, Indonesia and others. But as I've said, on the other hand, we expect China to fare very well and to have a very strong second quarter.Regarding Active Cosmetic, there are several reasons why Active Cosmetic is doing well. First, let's remember that Active Cosmetic was the fastest-growing division in 2019. And there are several factors this year. Number one, it's true that for Active Cosmetic, all the stores are, by definitions, are open because the Active Cosmetic products are sold either in pharmacies in Western Europe or in drugstores in the rest of the world, and all these stores are open. No lockdown on these stores. Number two, Active Cosmetic is doing very well on e-commerce, too, so it's a very strong engine of growth. And also, of course, the Active Cosmetics brands, as they are skincare brands, recommended by dermatologist and medical professionals, are absolutely the right brands in this environment. So many reasons for a good performance. And I have to say that the Active Cosmetic division was positive in all zones in this first quarter, was very positive -- it was positive in Western Europe, was very positive in Asia Pacific but very positive also in Latin America, Eastern Europe, everywhere, in fact. So a very strong, very strong growth everywhere in Active Cosmetics.And last, regarding e-commerce. We are using every opportunity of e-commerce everywhere. But again, it's a decision that is taken by the divisions and brand by brand. And this is -- they are in charge of maximizing every opportunity. Thank you very much.

[Operator]

Our next question is from Stephanie Wissink from Jefferies.

[Stephanie Marie Schiller Wissink, Equity Analyst and Managing Director]

We have 2 follow-up questions. Hello, can you hear me okay?

[Jean-Paul Agon]

Yes, yes.

[Françoise Lauvin, Head of Investor Relations]

Yes.

[Stephanie Marie Schiller Wissink, Equity Analyst and Managing Director]

So 2 follow-up questions for you. We've heard a lot about things that you expect to kind of be the same following this crisis period. Are there anything that you would highlight for us that you do think will be different? And I want to -- have you unpacked that channel shift a bit more, channel shift by online versus off-line, anything you think that will be more permanent as we exit in terms of online penetration? And does that change any of your investments around demand activation in terms of where the investments are?And my second question just relates back to the price mix question that was asked earlier. I want to ask it a slightly different way if I could, because your response suggests that you haven't necessarily benefited from an economic expansion period in driving price mix. How do you think about the conditions of the world economy over the course of the next couple of years? And does that change the level of advantage you've had in price mix? Should we think a bit more about a slightly less advantageous environment for that strong driver of your business?

[Jean-Paul Agon]

Okay. My experience, again, in these different crises is that during crisis, people fantasize a lot about all the changes that will happen after the crisis. And very often, things are just the same after. So we are just 2 months in this crisis. And I think that any type of imagination about what will definitely change, how the world will change after, is a bit premature. And I will not build our strategic plans just on these hypothetical assumptions. If you really want my opinion, I think personally, that personal care, beauty product will, in fact, be even stronger after the crisis because people will realize even more how important it is to take care of yourself, to take -- to indulge yourself with this personal care and beauty products that do not cost a lot of money and really are very beneficial. And so I think that I'm not worried at all, on the contrary, on the -- how the market would emerge after the crisis.So there will be maybe some inflections to the market rather than big changes, but we will see. Definitely, there are some obvious ones, that's for sure. Obvious one, for example, is e-commerce. It's clear that when stores are closed, more consumers are, in a way, discovering, because they have no other choice, the e-commerce opportunity. And it may last after the crisis because consumers will discover that, after all, it's very convenient, it's pretty simple and it's pretty nice to buy your products on e-commerce. So that's a very obvious one. Regarding categories, I would not personally bet on any major change today. I think it's very, very early. And we will see. But again, for L'Oréal, I would say that it does not make a big difference. As we are the only company present on all categories, all channels, all geographies, at all price points, so we are always adapting to the evolution of the trends and following consumers in their -- where they want to go. So if there are some changes, we will adapt, and I don't think it will change anything for our business.Price mix. Price mix, again, it's a bit early to say that -- I don't think that we should bet everything on the fact that there will be a long and hard demand crisis after this pandemic. What we have seen in the past few years is a permanent trading up not because consumers have a lot of money but just because consumers -- in terms of beauty and personal care products, consumers want permanently better, more performing, more innovative with higher-quality products. And I don't think also that this should change. But maybe we will see, okay?

[Operator]

Our next question is from Celine Pannuti from JPMorgan.

[Celine A.H. Pannuti]

So first question, I would like to talk a bit about the 2 main divisions, so luxury and mass. So I think you said that lux, the market was down 16% and you outperformed quite a fair bit. So could you explain to us why a bit that this has been the case? And then I was a bit surprised that mass was negative 4%. Maybe there were some stores that are closed as well. But could you explain as well why is it as a number? I would have expected a more resilient performance. That's my first question.Second question. You said that Q2 -- you provided the beauty market was down 8% in Q1, thank you for that. Q2 will be more impacted. Is it possible to have a guesstimate of how bad Q2 will be at same extent?And then my third question is 2 of your -- 2 consumer -- French consumer goods company this evening have said that they will pay a lower dividend. You have postponed your AGM. Will L'Oréal as well reconsider the dividend that get proposed at the beginning of the year?

[Jean-Paul Agon]

Okay. So let's start with the easiest one, which is the dividend, because the dividend, as you know, is decided by the Board, and there will be a new Board meeting. As you know, we postponed the AGM to June 30. So there will be a new Board meeting in May that will propose some newer resolutions that will be proposed to the shareholders at the AGM at the end of June, and it will be the responsibility and the job of the Board in May to decide upon the dividend. So this is everything I can tell you tonight about that.Regarding the quarter, so we gave an estimate of the market for the first quarter. We have to say that it's an estimate. It has to be taken with a pinch of salt, because it's -- in general, it's never easy to give 15 days after the end of the quarter an estimate of the growth of the sellout, and it's even more difficult right now, for reason that you can understand. So -- but our best estimate, because we think that it's our mission also to give you our best estimate that we had, is an evolution of minus 8% for quarter 1. And as you know very well, like me, this market in the first quarter was, on one side, influenced by the weakness in Asia and China in February and March and with the beginning of the weakness in the -- in Western Europe and North America at the end of March.In -- for the second quarter, it will be a little bit the opposite. Definitely, the market will be impacted by the fact that many stores are closed in Western Europe and apparently will stay closed until beginning of May, middle of May. Country by country, decisions are being taken; and also in North America, probably at the same time. So the market for the second quarter will be impacted by this weakness in the western world and on the opposite, by, we think, a strong growth on the Chinese part. So it's very difficult. It has never been -- it's always difficult to do -- to give a guidance for the market. But honestly, this year, in my 42 years at L'Oréal, I've never seen such a difficult exercise, so I would not try to do one. Probably though the market will be more difficult in the second quarter than in the first one, that's for sure.So then regarding the divisions. It's true that if our estimate of the luxury market at minus 16% is right, and Mark in front of me is nodding because he did the job, and so apparently -- and apparently, from what I heard, from what has been published by another company tonight, it seems to confirm these kind of numbers. So it shows that if the market was around minus 16% for luxury. Our performance was pretty good for our brands. So you are asking why, I find that a bit insulting, but I would -- I'm surprised that you are surprised with our good performance on the luxury division.

[Celine A.H. Pannuti]

No, no. But it is quite a bit -- I mean at the end of the day, when a shop is closed, it's closed for everybody. So that's why you did not [ perform ].

[Jean-Paul Agon]

I know. You're right. But let's not forget that the shops did not close until middle of March. So -- and I think that it's a combination, first, of a very good performance in China. I think that we have -- our teams in China have really strongly outperformed the market. They were really -- I think that L'Oréal in China was the first company to reopen, the first company to reactivate the business, the company that was the most operational and effective on e-commerce. And we don't have all the numbers, but I think that luxury -- our luxury division in China did a very good first quarter, at least compared to our competitors. And our brands have a good momentum. So I think that that's the explanation.And regarding Consumer Division. Again, if the -- our estimate of the market at minus 3% is right, I think the minus 3.6% of the Consumer Division is a pretty good performance because don't forget that our footprint in terms of category is pretty adverse because we are, as you know, overweighted in makeup and definitely underweighted a bit in hair care. And right now, of course, makeup is pretty adverse. The good thing for the Consumer Division is and will be for the months to come is a very strong overweight in hair color because hair color is really booming. It was not yet the case in the first quarter, but what we are seeing everywhere right now is that if -- and it's perfectly logical, everywhere where salon are closed, our sales in Consumer Products hair color are at plus 50%. So -- and as we have a very high market share in this market, this will help the division, okay?

[Celine A.H. Pannuti]

All right. Very good.

[Operator]

We have a question from David Hayes from Societe Generale.

[David Hayes, Equity Analyst]

Three from me, if I can. The first one, just coming back to the margin thoughts. On e-commerce as a channel -- it's a very broad question here, but any -- or is there a difference in margin on selling the same unit on e-commerce versus offline? And I guess related to margin, you talked about some of the cost offsets that you've been putting in place, but are there any costs that you'd flag that you've incurred and will continue to incur that are a headwind? I'm thinking, I guess, about supply chain disruptions and so forth.The second one was just on e-commerce in China. I don't know whether you can actually give us the percentage of growth for that channel in China of that 6.4% that you've outlined overall.And then the final question, again, is a numbers question. I don't think it's in the release, but I wonder if you can give us the split on sales performance for skin, makeup and fragrance.

[Jean-Paul Agon]

What do you want for the last one?

[David Hayes, Equity Analyst]

The last question was whether you'd give us the growth breakdown for skin, makeup and fragrance as you've done historically in the quarters.

[Jean-Paul Agon]

Okay. Françoise will -- can you give that, Françoise, now?

[Françoise Lauvin, Head of Investor Relations]

Yes, I can give you the category split and the performances. So as you know, skincare is our first category, and it represented last year 35% of total sales. And it's been up around 1% in this first quarter, and it was obviously led by strong performances in face care, in particular. Makeup, as Jean-Paul explained, has been a tough category. And the sales overall fell close to 10%, a bit more than 10%. Haircare was mid-single-digit down. But again, the performance was better than that if we just look at the Consumer Products division. Hair coloring, by the same explanation, was down mid-single digits as well and again, much better than that in consumer, in at-home hair coloring products. And fragrances has been very resilient at minus 4%.

[Jean-Paul Agon]

So regarding the e-commerce in China, the number is pretty impressive. We were at plus 67% in the first quarter. Well, it's clear also that for several weeks, e-commerce was the only opportunity for Chinese consumers to buy the products. And as you know very well, e-commerce is very well developed in China with several very good operators like Tmall, JD, VIP and others. That was very strong. And of course, it helped tremendously our business in China as the weight of e-commerce in China for this first quarter was above 50% for the first time.

[Christophe Babule, Executive VP & CFO]

And if I may, what we have seen also is the growth of e-commerce accelerating every single month since January. And this is true not only in the Tier 1, Tier 2 cities but also in the lower-tier cities. So there is a strong dynamism of the e-commerce today in China.

[Jean-Paul Agon]

So regarding, by the way, the margin of e-commerce, we don't have -- there is no number for that because it depends on categories, countries, brands, et cetera, but what we can say in general, and it's not new, is that e-commerce is, generally speaking, relutive to the profitability of our business. So the fact that we do more e-commerce is more relutive than dilutive.And last, in terms of cost, no, we didn't have -- there is no specific headwind in terms of cost. The only clear fact is that we -- as we have -- as you will see also in our press release, we have taken the position to keep all our employees and to pay them 100% of their fixed salary in most countries. And of course, when the top line is suffering, this is clearly, in a way, in terms of percentage of sales headwind because this is a fixed cost. Besides that, we don't see any major headwind. Christophe?

[Christophe Babule, Executive VP & CFO]

Just, of course, all the expenses that we incur is to protect our teams all over the world. So of course, as you know, we took a lot of actions regarding the production of gel, buying masks and taking all necessary measures to make sure that all our people, whatever the country, can work safely, mainly in, of course, the factories and in the warehouses.

[Jean-Paul Agon]

Absolutely. Okay?

[Operator]

We have a next question from Robert Ottenstein from Evercore.

[Robert Edward Ottenstein]

Great. A few questions. So big picture, when you look globally at the global beauty market, I would think in these circumstances that the iconic tried-and-true brands like yours would significantly outperform independent, newer brands. And I think your share gains speak to some of that. Can you talk a little bit about -- do you think that there are attractive smaller companies, some of these independent brands, that may just not be able to make it, and maybe there's a chance for you to have some M&A opportunities given your strong balance sheet? So that would be question number one.Question number two, going back to China, a lot of your success in China, besides your own efforts which are well noted, rely on partners, both the e-commerce partners but also their infrastructure into the Tier 3, 4, 5 cities. Is that fully open now so that the pathway into the lower-tier cities is fully open and you can make full deliveries? Or is there still a little bit of ways to go?And then also in terms of e-commerce in China, because I know you have very good data and very micro data, are you seeing -- can you maybe give us a little bit of sense of when you kind of break out that tremendous growth, 67% in China, how much of that is new customers and how much of that is the old customers using e-commerce more?

[Jean-Paul Agon]

So thank you very much for these very precise questions. First, we don't want to spend the whole night on the specific data of e-commerce. But maybe the partners, Christophe, in China?

[Christophe Babule, Executive VP & CFO]

Yes. What we can say today is that, at least regarding this specific channel, it's fully operating, I will say, nearly everywhere. So we've seen all our partners, be it Tmall, be it Pinduoduo, VIP, they are all now operating. And this is true across all China. And lately, even in the Hubei province, the one that has been the most affected by the lockdown.

[Jean-Paul Agon]

And regarding your first question, I can guess that you are interested in M&A, also, opportunities on your side. What we can say at this stage is that, number one, yes, big brands are definitely favored in times like these ones because consumers go to -- go back to the brand they know, they trust and this is definitely what we see. As you know, it was already a trend for our brands because in the past 2, 3 years, our big brands got more powerful than ever. But I think that in this period of crisis, it will be even more, number one.Number two, definitely in the competition on the market, it will probably be more difficult for some small players that -- than for some big ones. It's unfortunate, but it's the Darwinian side of this industry. And regarding L'Oréal, of course, we are absolutely solid. And as you know, we are -- we have a cash-positive situation, and we will -- we are pretty sure to be able to get out of this crisis even stronger. So will there be opportunities for interesting acquisitions? We will see. Okay?

[Operator]

The last question from Nico Von Stackelberg from Liberum.

[Nico Von Stackelberg, Research Analyst]

Yes. Can you hear me?

[Jean-Paul Agon]

Yes.

[Christophe Babule, Executive VP & CFO]

Yes.

[Nico Von Stackelberg, Research Analyst]

Excellent. Just a quick question on e-commerce sales. I was wondering what percentage of e-commerce sales is from the retailers that you own versus your partners. Do you have a target in terms of closing the gap and owning more of that chain? And what are you doing to get a stronger grip of that e-commerce channel? I -- we hear a lot of numbers today, but strategically on the ground, what sort of actions are you taking? And then I have a follow-up.

[Jean-Paul Agon]

This also would take hours. But what we can tell you is that it's not very different from what we said before. In fact, we have 3 categories. We have what we call our direct e-commerce, which is the e-commerce that we do with our own sites and that -- or Tmall, which is also a kind of direct e-commerce. It's about a bit more than -- it would be 40% of the total, and it's growing nicely at -- on this quarter at plus 75%. The second part of our e-commerce is the online pure players, which is about 26% of the total, growing at plus 34%. And also what is important is the e-retailers, which is the -- which means the e-retail branch of our retailers like sephora.com, macys.com or walmart.com, et cetera. And this is pretty strong, too. It's 32%, growing at 45%. So in fact, our strategy is very simple and opportunistic. It's just to maximize every e-commerce opportunity in a differentiated way country by country and of course, division by division. And so we are -- this is -- I think this is one of the reasons of our success in e-commerce is that we are really seizing all opportunities and maximizing all avenues of growth in this channel.

[Nico Von Stackelberg, Research Analyst]

Okay. Great. And just to follow up on the dividend. If you had to give a recommendation to the Board, what would it be and why?

[Jean-Paul Agon]

That's a good try. And I'm sorry, but I will not answer this one because you will know after the Board meeting in May. Too early to tell. But thank you for asking, for trying.All right. So I think that maybe it's time to conclude. So thank you very much for participating, and we'll be happy to talk to you again at the end of July. Thank you very much, and take care. Take care of yourself.

[Christophe Babule, Executive VP & CFO]

Stay safe.

[Jean-Paul Agon]

And stay safe. Bye-bye. Thank you.

[Françoise Lauvin, Head of Investor Relations]

Bye.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.