L'Oreal SA

PAR:OR

Earnings Call Transcript 2020-Q3

[Operator]

Welcome to the conference call regarding L'Oréal's sales at September 30, 2020. [Operator Instructions] The conference is about to begin. And 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. Good evening to all. [Foreign Language] Thank you for joining this conference call for the release of L'Oréal's sales at the end of September 2020. Together with me tonight are Chairman and CEO, Jean-Paul Agon.

[Jean-Paul Agon]

Good evening.

[Françoise Lauvin, Head of Investor Relations]

CFO, 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]

We hope you all had a chance to read our press release which was sent out a short while ago. Let me briefly give you the highlights of this release before we move to the Q&A session. At the end of September, sales reached EUR 20.1 billion, 8.6% below that of the first 9 months of 2019. Foreign currencies had a negative minus 1.7% impact, mostly linked with the decline of the Brazilian real, the Mexican peso, the Russian ruble against the euro, the erosion of the Chinese yuan and the weakening of the U.S. dollar in recent weeks. Note that extrapolating end of September currency rates against the euro or EUR 1 at USD 1.17 until year-end would lead to a negative minus 2.6% ForEx impact over full year sales. The change in the scope of consolidation was positive by plus 0.5%. It consists mainly of the first-time consolidation of Mugler and Azzaro perfumes from April and of the U.S. natural skincare brand sales from June, partly offset by the disposal of Roger & Gallet. Excluding scope and foreign exchange, the like-for-like change in sales was minus 7.4%. In this unprecedented context of the ongoing epidemic crisis, L'Oréal's absolute priority continues to be to protect the health of all its employees worldwide. Turning to the third quarter figures. Sales came out at EUR 7.037 billion, only 2% below that of the third quarter of 2019 in reported terms. After taking account of positive 0.8% impact of the changes in the scope of consolidation and of a negative minus 4.4% currency impact, the good news is that L'Oréal was able to return to growth in Q3 with a plus 1.6% like-for-like growth. All divisions showed a substantial improvement in the third quarter. Like-for-like, the Professional Products division posted its best quarterly growth in many years at plus 11%, ending the 9 months period at minus 10.9%. The Consumer Products division returned to growth at plus 0.8% in Q3 despite its detrimental makeup footprint and posted a minus 6.2% decrease at the end of September. L'Oréal Luxe, which continues to be negatively impacted by very limited international air traffic, significantly outperformed its market at minus 6.2% in the quarter and minus 13.1% over 9 months. Active Cosmetics achieved stellar growth both in the third quarter at plus 29.9% and over the first 3 quarters at plus 15.2%. By region, Western Europe improved significantly over the summer at minus 2.5% like-for-like in the third quarter and minus 11.8% at the end of September. All other geographic zones returned to growth in the third quarter. On a like-for-like basis, in the third quarter, growth was plus 1.3% in North America; plus 4.2% in the new markets, with plus 2.4% in Asia Pacific, plus 7.7% in Eastern Europe, plus 8.7% in Latin America and plus 8.6% in Africa, Middle East. Note that in Mainland China, our business continued to shine with growth of 20.8% at the end of September. As a result of the remarkable commitment and mobilization of all our teams in all areas of the group and in all countries in order to stimulate the demand for our brands and our products, L'Oréal has continued to outperform the beauty market, which is still on the road to recovery. We know that the environment remains volatile and uncertain. However, our performance in the third quarter reinforces our confidence to outperform the beauty market. It also strengthens our ambition to achieve like-for-like growth in the second half and to deliver solid profitability. I thank you for your attention. We are now ready to take your questions.

[Operator]

[Operator Instructions] We have a question from Celine Pannuti from JPMorgan.

[Celine A.H. Pannuti]

So I have a few questions. So I'll start with the first one on the outlook. So could you tell us -- obviously, you're saying that you're expecting like-for-like to be growth -- to be positive in the second half, and it was positive in Q3. Should we expect it to be positive as well in Q4? Or are there any elements of maybe sell-in, sellout that could reverse given some of the amazing performance in Professional and active, whether there was a bit of a catch-up there that will not recur in the fourth quarter? Also on the outlook, I think I had asked you that already at H1, about solid profitability, but now we are almost 10 months down the year. In terms of the reinvestment in the second half, are you able to fund that through your savings in SG&A? That would be my first question.

[Jean-Paul Agon]

Wow. Only one question?

[Celine A.H. Pannuti]

No, no. I have another one.

[Jean-Paul Agon]

Yes, yes. But this one was already several questions in one. Anyway, we are always happy to start this conference call with you, Celine. So first, on the Q4, it's still too early to tell for -- the guidance for the Q4, and we have to be cautious regarding the bounce back of the epidemic here and there. But we are -- we confirm our confidence of being able to be positive on the S2. And normally, this would translate also in a growth, in a very fine positive territory for Q4, but it's not a guidance because, again, we don't know what will happen with the epidemic. We are seeing some bounce back of the epidemic, and we have to be cautious. So -- but what I can tell you is that there are no factors of, as you said, sell-in or sellout that could -- that should jeopardize business. In Q3, there were some positive factors. It's true, but we are -- what we see, there was no creation or building of inventory in Q3. Sellouts were also positive. So nothing into Q4. I would -- in the Q3, I would say, prevents us to do a good Q4, if I'm clear. But again, I cannot promise anything mostly because of the uncertainty of the evolution of the epidemic. Number two, outlook, profitability. We are still where -- on what we said before. We have, as we said, reinvested. We -- as we said, we did a strong plan on the -- during summer, and we prepared a strong plan for the fall. And we are executing our plan. So it means many launches. All the launches that were prepared for the first quarter were postponed to the summer and were executed. All the launches that were prepared -- that were planned for fall are being done. So number one, launch; number two, investment in media and business drivers; and number three, all the operations that we talked about before, this Back to Beauty operations in all channels that were also executed with the great support of our retailers in every channel. And so it means that we are investing more, but at the same time, as you can see, we have also a much stronger top line. And as you know, at L'Oréal, the top line defines bottom line. And so we are confident to keep the guidance that we gave before, that you will remember was to deliver handsome profitability in the S2. Okay? I'm sure you will ask what does it mean, handsome, and I will say that it means beautiful.

[Christophe Babule, Executive VP & CFO]

And solid.

[Jean-Paul Agon]

And solid.

[Celine A.H. Pannuti]

Okay. And then maybe my second question. Beside the great Q3 that you printed today, there was as well a big announcement about the change in leadership that will happen next year. There seemed to have been quite a competitive process, and you appointed Nicolas Hieronimus. Could you tell us what -- I mean it seems to have been the logical choice, but if you could tell us what the Board, why the Board made this choice. And also, I understand that Mrs. Lavernos will have 2 functions. So could you tell us what will be her role as Deputy CEO?

[Jean-Paul Agon]

Yes. I have given several interviews where I explained the process that has been going on for now 18 months, initiated by the nomination and governance committee that met several times; many times, in fact. There was a process, there were several candidates examined. And the Board finally decided -- pardon, the nomination committee recommended with my -- of course, my support, recommended to the Board the nomination of Nicolas Hieronimus as the future CEO in -- after the General Assembly of April 2021. And also, at the same time, I recommended also to the Board, with the full support of Nicolas Hieronimus, to appoint Barbara Lavernos as Deputy CEO in charge of research, innovation and technology. As you know, Barbara has just been appointed in charge of research to succeed Laurent Attal, and she keeps her responsibility as in charge of IT, technology and the big project that we have, the beauty tech. And so she will have this responsibility of, again, research, innovation and technology and will be beside Nicolas. In fact, in terms of choice, the -- I think you understand that Nicolas Hieronimus is also someone extremely well prepared to become CEO of L'Oréal. He has 33 years at L'Oréal. He has been the President of the professional division. He has been president of the Luxury division with a great success. He has been for a while president of the 3 divisions that we called at that time selective divisions. Then, I appointed him Deputy CEO in charge of all divisions. I've been working with him for 30 years and very closely for 3 years. So no one is better prepared than Nicolas to become CEO. And at the same time, it's clearly a choice of continuity as everything that we have done in the past 3 years or even more, we have done them together. Nicolas was Deputy CEO, and the strategy of L'Oréal, the development that we made on all fronts were clearly something that we did together. So what you can expect is a great continuity in the strategy and the execution of the strategy by L'Oréal.

[Operator]

We have the next question from Eva Quiroga from Bank of America.

[Eva Quiroga-Thiele]

I have 2 questions, please. I would like to come back to the leadership change and to understand a little bit better what the benefit of the Deputy CEO is. As you've said, you've worked alongside the deputy for the last 4 years. What were learnings? And what were the advantages of that role? And still on the leadership question, I mean innovation has obviously been the lifeblood of L'Oréal since its creation. What do we have to read into the fact that Barbara who is now in charge of innovation as well has that role? And then secondly, I was wondering if you could put your category growth into perspective, especially in makeup. Where have you come out? And how does that compare to the market, please?

[Jean-Paul Agon]

Okay. So the role of deputy CEO, I think, is a very useful role because it's a kind of a partner of the CEO. And when you're a CEO, you are very often alone. And being able to exchange with someone who is close to you, with, in a way, first among peers is something very useful, especially when there is a complementarity. And I think in the case of Nicolas and Barbara, this will be the case. Nicolas is obviously -- has obviously a great track record and expertise on managing brands, products, businesses around the world. Barbara comes with another track record, which is she's an engineer. She was leading the operations for a long time with great success. She has been also taking over the IT department and revolutionizing the IT department and with this great project of the beauty tech. And for her, I think the combination of research and innovation with all the science and the IT and technology is a very powerful combination. I think that we are the only company to bring these 2 departments together. And this is clearly in the sense, in the vision of the beauty tech that we have had for a few years. And I think that it would give us a very, very powerful competitive advantage regarding the invention of the beauty of the future. So that's for the role of Deputy CEO. And also for the role of innovation, Barbara as the Head of Research, again, you know that in the research and innovation department, we have more than 4,000 people. That is the -- as you said, the lifeblood of L'Oréal. Beauty -- the beauty industry is more than ever an innovation game. Those who are the best at innovation win the game and -- but also at innovation based on science and technology and real innovation and quality and added value. And I think that Barbara will be fantastic in this role, especially in the development of all the new tech application that will also be related to beauty. And last but not least, regarding categories, Françoise will be happy to give you the numbers.

[Françoise Lauvin, Head of Investor Relations]

Eva, so for the categories, we also had nice improvement in all the categories in the third quarter. And if we look at this third quarter, we had double-digit growth in skincare, in hair coloring and in haircare.Of course, makeup continues to be a headwind, but it's much better in the third quarter. And it was down high teens in the third quarter compared to a market which is still probably under pressure by 25%. And lastly, the fragrances were although slightly negative high single digit in a market that also remains very depressed, being down 25% or 30%.

[Operator]

We have a new question from Iain Simpson, Barclays.

[Iain Edward Simpson, Analyst]

A quick question from me, if I may. So it sounds as though third quarter '20 saw a significant wave of innovation launches and that this was very successful at a time when many bricks-and-mortar outlets were presumably seeing reduced foot traffic. How did you find this experience of activating those launches with less reliance on bricks-and-mortar channels? What are the key learnings? And how was it different to previous launch cycles? And then secondly, if I may, you've clearly pressed ahead on innovation at a time when many of your competitors have not. Has this meant that you've had a sort of deeper relationship with retailers as someone who's still bringing new products into the market at a time when competitors have pulled back? And are you seeing any movement from competitors in terms of product launches or similar?

[Jean-Paul Agon]

Yes. Thank you for your question because I have to say that we are at L'Oréal pretty happy with the strategy that we chose and the bet that we took. It's true that as early as May this year, May, June, we decided really to reignite growth during summer and after summer at a time where things were still uncertain. But we took this bet because we thought that it was very important to reignite consumption, reignite beauty appetite for -- appetite for beauty from consumers and also to help our retailer partners to also bring back consumers to their stores, being pharmacies or department stores or hypermarkets, supermarkets, hair salon, everywhere. And so this is what we have done, thanks to what I explained, launches, new launches, new innovations, media support, digital support and also great operations that were in all channels by the way. It was brick-and-mortar and e-commerce. And -- but this worked very well. And first, as you said very rightly, I mean, our retailer partners were extremely happy to see us activate like that the market and bring back consumers to stores because, to be honest, we were a little bit the only one to do it. And number two, it's true that it translated in very strong sales, sell-in and sell out, by the way. And this explains why, I think, that on this quarter, we will have one of the largest or biggest overperformance compared to the market in many, many years. We estimate -- it's still an estimate because it's a bit too early to have the final numbers, but we estimate that the market -- the global beauty market on the third quarter was around minus 6% when we delivered this plus 1.6%. And I did a little computation also without travel retail because travel retail -- we were not really able to reignite travel retail because, unfortunately, the stores in the travel retail world are mostly empty. And if you take theoretically out travel retail, the growth of the group was around 5%. So this is a very strong gap between our growth and the evolution of the beauty market. And it's true that, honestly, it was a very favorable period for us because we were the only one to bring novelties, innovations, new products to the retailers and to the consumers. In the luxury world, we had 3 -- we are having 3 big successes with our fragrances. The new Mugler fragrance was a big success during summer. My way from Giorgio Armani is a huge success, the highest market share ever for a launch. Maybe the fact that there were not so many competitors helped, but that's the game. And also, Viva Voce (sic) [ Voce Viva ] Valentino is off to a very good start. But it's true also for Active Cosmetics, as you've seen the number. It's true for our professional division. One of the reasons of the plus 11%, which is fantastic, is also the fact that -- I believe, that our division was the only real super active player in the professional world. And it's also true in -- for the consumer division, where the consumer division finally caught up with the market. And now it's totally on par with the -- year-to-date with the evolution of the mass category. So it's -- it was a strategic bet. We explained it to you, by the way, 3 months ago. And I have to say that it worked very well. And I think it's going to keep working until the end of the year because many of our competitors have postponed their launches to next year. First, I'm not sure that the conditions will be better next year than they were during this summer or this fall. And secondly, during that time, we are gaining market share, recruiting consumers, launching our products, and I think it's extremely positive.

[Operator]

We have a next question from Guillaume Delmas from UBS.

[Guillaume Gerard Vincent Delmas, Analyst]

A couple of questions for me. The first one is on the growing importance of health and wellness in a COVID-19 world. I mean we can clearly see that in your Active Cosmetics division's performance. But is it fair to say that we are also seeing this now in mass? Because I think Garnier was up in double digits in the quarter, and I would assume Logona or Sanoflore must have been doing also quite well. So any color on that would be helpful. And also, related to that, I guess, more broadly, does it create an even bigger incentive for you to accelerate the reformulation of your products? And then my second question is on professional. I mean still trying to reconcile the 11% like-for-like sales growth, which I think is the best performance you've seen in more than 2 decades. And the comments we've been hearing during the quarter about hair salons not operating yet at full capacity because of social distancing. So what's driving this? And if it's really down to the success of the new strategy, I mean, what's the new like-for-like sales growth run rate of professional?

[Jean-Paul Agon]

All right. So let's start with the professional -- the question regarding professional. The plus 11%, to be honest, is pretty exceptional, and I'm not sure that the division will be able to repeat it quarter after quarter. So -- I hope, but honestly, I wouldn't be sure about it. I think there are 2 reasons -- there are several reasons to that. Number one reason is that it's true that the traffic in salon is not yet back to what it used to be before COVID. So the -- I would say that the market is still not very positive. But I think 3 -- 2 or 3 factors. Number one factor is that we have been really the only manufacturer very close to all the salons of the world during the pandemic. You will remember that we were the only company that froze all the debts of the little salon in the world, more than 100,000 small salon mostly and perfumeries. We froze their debt at the beginning of the crisis, and they were -- they were extremely grateful for that, number one. Number two, we have helped them to reopen their salon. And clearly, when they reopen their salon and when they got out of the crisis, the manufacturer they wanted to work with is us more than anyone else. So I think that the market share taken by the division after the end of the lockdown is very strong. Number two, probably there was a little bit of not restocking but reshipping, I would say, because for several periods, salons didn't buy too much. So when we visited them again, they were -- that was also the opportunity for them to purchase -- repurchase some products. And number three, let's not forget also e-commerce. There has been a clear revolution in the -- for the professional division, is that the professional division has really jumped on the e-commerce opportunity. And e-commerce was very minimal for the professional division until last year. And it was 19% this -- it's 19% of the sales so far with a growth of 87%. And so you could say how can you cut hair through digital. So we are not cutting hair, but we are selling professional lines, professional brands like Kérastase or Matrix or Redken that consumers are very happy to buy and that they are also happy to buy now on online. So this is definitely an explanation of the fantastic bounce back of the professional division. So regarding your question about health and wellness, I think it's true but it should not be exaggerated. Honestly, the success of Active Cosmetic is, yes, based on good trends. But if you look at the total market of Active Cosmetics, at the end of September, it's still slightly negative, minus 1%. So it means that not all brands are -- the global market itself of this skincare, pharmaceutical with doctor recommendation is not really growing that strongly. The market is still at minus 1% year-to-date. So the health aspect of it is not enough to make it a strong growth for the category, for the market. And the performance of the division is really mostly related to the fantastic success of the brands. CeraVe is a huge success. I don't remember CeraVe at the end of...

[Mark Prestwich]

Plus 82% at the end of...

[Jean-Paul Agon]

Thank you, Mark. Plus 82% at the end of September. SkinCeuticals?

[Mark Prestwich]

Plus 36%.

[Jean-Paul Agon]

Plus 36%. La Roche-Posay?

[Mark Prestwich]

Plus 11%.

[Jean-Paul Agon]

Plus 11%. So this is really the explanation of the amazing success of Active Cosmetics, more than a huge boom in health and wellness. And to be honest, it's the same also in mass market. We don't see a huge boom of demand on health-oriented products. It is a trend, yes. It's going in the right direction, yes. But it is not the explanation of the very strong acceleration.

[Operator]

We have a next question from Javier Escalante from Evercore.

[Jean-Paul Agon]

Javier, we don't hear you. Javier, it appears -- maybe we have to take another question.

[Javier T. Escalante Manzo, Research Analyst]

My question has to do -- hello?

[Jean-Paul Agon]

Okay. Yes. We didn't hear you.

[Javier T. Escalante Manzo, Research Analyst]

I was on mute as the other day. So basically -- yes. So basically, my question has to do with your reinvestment in promotions. And that is -- clearly, you are gaining a lot of share. So going into Q4, particularly in China, what is your sense of competitive spending. Do you expect the market to get very promotional? And to what extent that would be a concern for the profitability of some of your categories?

[Jean-Paul Agon]

Okay. It's a great question for Christophe.

[Christophe Babule, Executive VP & CFO]

I will take the question. So I want first to confirm that the way we have been building Q3 and Q4, as Jean-Paul was saying, was really to reignite consumption. And this has been -- proved to be a very good strategy for Q3. And believe me, we have all the moneys on the Q4 to go even faster. So as Celine was reminding, we have saved the money on other part of the P&L. So we have all the means we need to keep reigniting the consumption. It's true in all zones...

[Jean-Paul Agon]

Without compromising profitability.

[Christophe Babule, Executive VP & CFO]

And of course, also in China. And this, of course, without compromising, as Jean-Paul was saying, the profitability. So we have the resources to keep pushing the consumers back to consumption. And as you know, in fact, in China, it's -- we are entering the important time because, as you know, there is a big event of 11/11. So everything is ready to keep gaining from positions.

[Jean-Paul Agon]

It's monetized.

[Javier T. Escalante Manzo, Research Analyst]

And a little bit of China/e-commerce. In the past, you have talked about basically the growth of e-commerce, basically, in the direct-to-consumer platform versus the other type, which is through retailers and Tmall. So could you tell us how is -- the growth, which is very, very strong, it's 62% I believe. Whether you -- if you can give us color with regards to your brand.com, your own direct-to-consumer platforms versus overall third-party e-commerce.

[Christophe Babule, Executive VP & CFO]

So what I can tell you is that, of course, we are still a strong leader of the B2C, growing by more than 60% and higher than the growth of the pure players. And overall, in China, this has helped to keep the growth at a very high rate, above -- I mean, bigger than 50% at the end of September. So it's really still driven by the B2C mainly.

[Jean-Paul Agon]

So it's true that we have a very strong performance in China because, in China, we estimate that the market year-to-date is around plus 0, 0, so the beauty market. It is interesting to know that because people think that we are lucky to be in China. But all in all, the beauty market in China year-to-date is only 0 in year-to-date end of September. And year-to-date end of September, we are at plus...

[Mark Prestwich]

Plus 20%.

[Françoise Lauvin, Head of Investor Relations]

Plus 20% -- plus 21%.

[Jean-Paul Agon]

Plus 21%. So there is a 20% gap in performance between the growth of -- our growth and the growth of the market. And same for the third quarter. The third quarter -- we have the third quarter at plus 28% in China when the market is probably on this quarter at plus 7%. So again, 20% gap between our performance and the performance of the market. So where does it come from? It comes from the very strong performance of our divisions, our brands, our e-commerce activity. To be honest also, it comes a little bit also from the -- what we call the ensuring of the purchase of Chinese consumers. Chinese consumers are not traveling anymore. So they don't go to Korea, they don't go to Japan, they don't go to Europe. They don't go to airports, and they stay in China. And so they buy in China. So -- and it happens. But it doesn't benefit the market in total because also, probably, they buy more of our products than of any other -- more than our competitors, probably also because we have, in China, very high market shares, higher than anywhere else. For the Luxury division, for example, we have been saying several times that our highest market share in the Luxury division worldwide is in China at almost 30%. So the fact for us that Chinese consumers do not travel, of course, it's a pity for travel retail, but it's a bonanza for the business that we do in China. So that's -- and this is a way for us also to offset a part of the business that we are not doing in travel retail.

[Operator]

Our next question is from Bruno Monteyne from Bernstein.

[Bruno Monteyne, Senior Analyst]

I'm trying to get used to the translation of the beauty word. So if the profitability of the business was the decline in the second half, surely that would be ugly and that will be weak. So if you say it's going to be beautiful and solid, I'm asking 5 -- I mean come on, Monsieur Agon, you have to agree on that. You wouldn't think it's beautiful. So it's my first question. And are you implying it? Second question is you clearly have material market share gains through these difficult times. Do you think these are largely permanent market share gains? Or is there some return to normality later? And in the early stages of the crisis, you were alluding to opportunities, potential M&A from weaker players. Is there anything more you can see in that area? Anything more you can say about what you're looking for in such kind of transactions? So over to the word of ugly and beautiful.

[Jean-Paul Agon]

All right. So anyway, first, I want to welcome you to this business and this industry. I'm very happy, we are all very happy to have you at Bernstein. So -- and we will always be ready to help your education about beauty, even if the first education is about what does it mean, beautiful or handsome profitability. But anyway, in a way, you will not have to wait very long to discover what it means because we're going to publish it in February. So I can't say more, but be sure that I don't want to disappoint you in this discovery. So you will see what it means. Market share gains, yes, definitely, we are gaining market share in this period. And to be honest, I'm pretty happy about it because it's also because of the right strategy. Sometimes you gain market share because, little by little, you do your job well as we do at L'Oréal because we gain market share every year. But this time, I have to say that I'm pretty happy because it was a clear strategy, it was a clear bet. The bet that we took was very different from all others, and it's a winning bet. And it's pretty rewarding and gratifying. And also, in this industry, you said -- in French you say ce qui est pris en pris, which means in English what is taken is taken. And when you take market share gains, you have them in your pocket, and normally, you don't lose them afterwards. So -- and market share gain is a kind of permanent benefit that we will keep after the crisis because consumers that we have recruited, consumers that we have loyalized, consumers that have shifted from other brands to our brands probably they will stay with our brands. And so the gains that we will have made during this period are probably here to stay. That's why we said that we will get out of this crisis stronger, because it's true. In terms of penetration, in terms of awareness, in terms of market share, we will certainly get out of this crisis stronger than when we entered. So in a way, it's a positive element.

[Operator]

We have a next question from Rob Ottenstein from Evercore.

[Robert Edward Ottenstein]

Great. Wondering if we could talk a little bit about the U.S. market and a couple of topics there. One, based on what you saw in the quarter, how much of that was restocking? Second, related to the U.S., what the pricing environment is. Do you see increased amount of promos to reengage consumers in that market? And then I think, really more importantly, as you think about your strategy in the U.S., given the migration to e-commerce, how are you rethinking your channel strategy and the amount of resources both in terms of assets -- hard assets and marketing behind the various different channels there traditionally?

[Jean-Paul Agon]

Yes. Okay. It's a very interesting question. So the U.S. market has been, in a way, weaker than the Chinese market for obvious reasons this year. We estimate that the market itself year-to-date is probably around minus 8% and that our own business in sell-out is also around minus 8%.

[Mark Prestwich]

Minus 8%.

[Jean-Paul Agon]

Sorry?

[Mark Prestwich]

Minus 8%.

[Jean-Paul Agon]

Yes, minus 8%. And so in year-to-date sales, sell-in, it's almost the same at minus 9%. So we are close to the market. Why? Because we are overperforming the market in 2 divisions: in professional, very clearly; and in Active Cosmetics, even more clearly, where we have some stellar results. And we are still probably underperforming the market slightly on mass and luxury. But all in all, we are now back to being on par with the market. We haven't seen -- so in our numbers in the third quarter, there were no building of inventory. It's not an issue and not a subject for us. And we have not seen either promotional excesses or price deflation or whatever. And finally, on your question on e-commerce, it's clear that the recovery of our business in the U.S. is mostly due to the acceleration that we have in e-commerce. We were a bit behind in e-commerce in the U.S., and this year, the team there have been able to realize very strong acceleration of their sales in e-commerce. In total, it's plus 83% this year. So the growth now is faster than the one that we have in China. It's 100% for the professional division. It's 109% for the consumer division. It's 116% for Active Cosmetics. It's 60% for Luxury. So clearly, the team in the -- our team in the U.S. is clearly taking the direction of e-commerce and maximizing the opportunity. And it's not over because we still have progress that we can make and that we -- they're going to make in the periods to come. So we are pretty positive. And we were happy also to deliver, as you've seen, a positive quarter on the -- in North America, which was also the first time in several quarters and which bodes well for the future. So we have many reasons of being satisfied for what we are doing presently in the U.S.

[Robert Edward Ottenstein]

Great. And if I can follow up on that. Obviously, in China, when you have such tremendous growth in the overall market, you want to continue to invest in e-commerce and department stores throughout the country. But the U.S. market obviously is very different, and the market just is not going to grow the way China is. So are you starting to make -- sort of reallocate both hard assets and marketing to the channels that are growing faster? And what does that mean for your department store strategy and investment going forward?

[Jean-Paul Agon]

Oh, yes. It's not a secret. We announced 2 weeks ago, I think, that we're going to get out of some stores in the U.S., roughly probably 1,000 stores. Of course, they're small stores, small department stores, stores that are not really productive. And of course, we do that in perfect respect and partnership with the retailers and because we have -- exactly as you said, you're right. We have to adapt to the evolution of consumption in the U.S. The evolution in the U.S. is, as you know very well, less traffic in malls, less traffic in small department stores, more consumption on e-commerce, and we have to follow our consumers. And that's why we announced -- we made this announcement 2 weeks ago.

[Operator]

We have a next question from Olivier Nicolai from Goldman Sachs.

[Jean-Olivier Nicolai]

Just got another first timer on the line actually. So just a couple of questions on the U.S., if I may. You just mentioned it, just to follow up on the restructuring that you were doing around L'Oréal Luxe earlier this month, so closing about 1,000 stores. How quickly do you expect L'Oréal Luxe performance in the U.S. to improve as you push towards e-commerce? And secondly, looking at Active Cosmetics in the U.S., very impressive performance, about 50% growth. I've heard you cannot actually keep up with demand and some products like CeraVe were out of stock with some retailers during Q3. Now do you still have a supply issue on -- as we enter Q4? And essentially, can we expect Active Cosmetics growth to continue at this pace?

[Jean-Paul Agon]

Okay. So welcome also, welcome to you. I'm impressed by your intelligent service regarding our out-of-stock of CeraVe. And I have to admit that it's true. It's true that the demand on CeraVe is increasing so much so fast that we have difficulties to keep up with the demand and produce enough. I can tell you that the whole manufacturing team is mobilized on this issue. We even discussed it yesterday at our executive committee meeting. And -- but at the same time, I would say it's a great testimony of the incredible development of the brand. This brand is really on fire. There is no other word. And I prefer to have a brand on fire and run after production than the opposite. And I can tell you that we're going to find solutions to be able to deliver the product that are demanded. And it's true that our retailers, for example, are really asking us to speed up our deliveries because they want to be able to sell the products. So this is for ACD. So I think that we can be very confident regarding the quarters to come.

[Christophe Babule, Executive VP & CFO]

Yes. And this has not prevented the U.S. to grow by 70% on the last quarter with ACD. So...

[Jean-Paul Agon]

So it's -- so the dynamic is very strong. And regarding Luxury, I think that the division is doing what it takes to adapt to the evolution of the market. And as you said, the fact that we announced closing this 1,000 stores is also a testimony of this will to adapt. And I'm pretty confident. I think that we're going to adapt pretty quickly to the evolution because things are pretty clear. And the brands that we have in the U.S. are very strong. A brand like Lancôme will become, I think pretty soon, the #1 luxury brand in the U.S. We have a very, very strong brand there. Kiehl's is very strong. Our Couture brands are strong, too. So we have a great portfolio of luxury brands that will -- that will get even stronger in the quarters to come.

[Jean-Olivier Nicolai]

I imagine a brand like CeraVe as probably a beautiful margin too.

[Jean-Paul Agon]

I cannot disappoint you. It's true. You're right. I think the word beautiful applies to many subjects in this industry and especially at L'Oréal right now.

[Operator]

Our next question is from Richard Taylor from Morgan Stanley.

[Richard Taylor, Equity Analyst]

My first one is a follow-up on Olivier's question on CeraVe. That 82% growth, I think, is an acceleration on an acceleration on an acceleration. And I think we're estimating the brand must be up to around 600 million of revenues by the end of this year, so on track for billionaire status sometime soon. Can you talk about what are the specific drivers behind the growth? Maybe you can give us an indication when you think it's going to be a billionaire brand. But the thing that I'm most interested in is what can you learn from the phenomenal success of this acquisition for future acquisitions? So that's my first question. And then secondly, just on the consumer and professional divisions. It'd be really helpful if you could give us a sense of how much of the growth was from restocking and how much of it was underlying growth. And then lastly, Europe. It's not a question you get that often, but maybe you could talk about the environment in Europe, particularly in terms of the promotional intensity.

[Jean-Paul Agon]

All right. So CeraVe, you're right, it's acceleration on acceleration on acceleration. So it's -- you're right that this really will drive us to make it a billionaire brand. The only question is when, and that is still a secret that we keep for us. But it's going in the right direction, and we are extremely happy with this brand. I think the success of this brand is a combination of several factors. It's the right brand with the right quality, the right formula, with the right mix at the right moment. And so it's probably the brand that has the most potential in the industry right now. So we are really happy. Number one, consumer, professional, honestly, there were no restocking. The business that we did in Q3 was not done at all in restocking. There was -- for example, if you take professional, there was, I would say, the reigniting commercial relationship, for example, with wholesalers, distributors that had no service for several months, so there was a kind of restart of commercial relationship. But there was absolutely no stocking of the channel. Same for consumers -- for the consumer division. And regarding Europe, in fact -- first, your question about promotional intensity. At this stage, I don't see more promotional intensity today than before. Nothing particular to note. And then a few interesting numbers. If you take only the Q3, we had some nice comeback of some countries in Europe in Q3. Of course, it doesn't -- I'm not saying that we're going to have the same type of numbers in Q4, but they are still indicative of also the impact that all our plans had on consumption and sales activity. For example, we had -- Q3, we had plus 8% in France, plus 10% in Germany, plus 7% in U.K. So -- some other countries were more difficult like Italy at 0. But in several countries of Europe, we had a very dynamic period. So -- and again, if you -- I just -- I couldn't resist to do the computation of what would have been Western Europe without travel retail because when -- the travel retail numbers are split when we publish our numbers between Western Europe, North America and Asia Pacific, new markets. And if you take the Western Europe, the numbers without travel retail, we were at plus 3.3%, which is good. So it means that -- of course, we don't want to always compute without this or without that. But it's still indicative, I think, that on the quarter, the growth of the consumption of consumers in the markets of Western Europe was very positive. And I think it's pretty encouraging for the future.

[Richard Taylor, Equity Analyst]

Okay. Just -- if I could just follow up very quickly on CeraVe. Is there anything that you particularly learned from this acquisition for future acquisitions that you can share with us? I'm sure you heard the question, but you maybe sidestepped it neatly.

[Jean-Paul Agon]

Of course, we always learn a few secrets of -- secret recipes when we do acquisition, but we usually try to keep them for us. So I will -- I cannot share everything. No, what I can tell you is that CeraVe, it's very simply -- it's -- first, as usual, success is simple, and number one is about quality. The quality of the formulation is fantastic. I don't know if you have tried it, but it's a -- they are fantastic products, number one. Number two, it's a very good value for money. We said when we acquired CeraVe that it was a kind of affordable La Roche-Posay, and it's exactly what it is. It's an affordable La Roche-Posay. And number three, there are hundreds of millions of consumers in the world that have sensitive skin and that are not able to pay for expensive products. So for them, this is a fantastic solution. Number four, it's recommended by dermatologists, which is very strong because it has the doctors' caution, advice. And four, it's also expanding in terms of distribution, in terms of e-commerce. For example, CeraVe is the #1 skin care brand on Amazon. So it's not always the case, but in the case of CeraVe, it's true that we have really all the aces in our hand, and we're really going to play them full blast.

[Operator]

A last question from Stephanie Wissink from Jefferies.

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

I would like to stay with Active Cosmetics, if we could, just a little bit more information. You mentioned in your comments regarding CeraVe the recommendation by dermatologists. So can you talk a little bit about your strategy in Active Cosmetics? Are you activating a new customer? Are you drawing from some of that share that might have been core dermatology brands? And are you tapping into that dermatologic channel as a referral channel for some of your brands within Active Cosmetics?

[Jean-Paul Agon]

Thank you very much for this question. Honestly, if I explain to you the whole strategy in detail of Active Cosmetics, it's going to take us 1 hour. So what I can promise to you is that we are going to explain that at the next results presentation in February when the new Head of Active Cosmetics, Myriam Cohen-Welgryn, will explain to you exactly what we do. I just want to -- also to remind everybody that what we are doing on CeraVe, on our brand is pretty specific because, again, if you look at the whole market, if you look at the whole -- all the brands that are in this derma cosmetic business, as I said, at the end of September, they are still at minus 1%. So not all brands are equal in their success on the active cosmetics/health/doctor-recommended model. Some are very successful and some others are not. And so it is obviously, clearly, the results of what we are doing specifically. That's why also I'm trying not to elaborate too much in order to keep a little bit our secret sauce for us. All right. So thank you very much. Thank you for participating. And we'll be happy to talk to you again, this time in 2021 probably for the presentation of our results in February. So we wish you the best. Take care, and stay safe. Thank you very much.

[Christophe Babule, Executive VP & CFO]

Thank you.

[Françoise Lauvin, Head of Investor Relations]

Thank you. Bye-Bye.

[Operator]

Thank you very much. Ladies and gentlemen, this concludes this conference call. Thank you all for your participation. You may now disconnect.