UBS expects L'Oréal to still deliver peer-leading same-store sales growth in Q1

Overview

This is a UBS company research report on L'Oréal, focused on the company's Q1 2026 sales preview and using LVMH Perfumes & Cosmetics, Sephora, recent Nielsen data, and the regional consumption environment to judge L'Oréal's near-term operating trend. The report argues that, despite temporary pressure from IT transformation, North Asia travel retail, and Middle East conflict, the quality of growth excluding one-off effects remains strong.

Core views

UBS remains constructive on L'Oréal, expecting Q1 adjusted same-store sales growth of +5.3%, slightly above the prior quarter's +5.0%. The Luxe division is expected to post adjusted same-store sales growth of about +2%, broadly in line with LVMH Perfumes & Cosmetics. North America and Europe are expected to be the main growth supports, while North Asia and SAPMENA-SSA are weighed by travel retail, regional conflict, and weaker demand in the Middle East. The report also expects FX to have a -5.7% impact on Q1 sales, M&A to contribute +0.8%, and reported sales to be €11,542m, down -1.6% year over year.

Analysis framework

The report adopts a peer read-through and segment decomposition approach: on one hand, it uses Q1 performance from LVMH Perfumes & Cosmetics, Selective Retailing, and Sephora as external indicators for L'Oréal's Luxe business; on the other hand, it decomposes IT transformation, regional sales, foreign exchange, and M&A factors to forecast L'Oréal's Q1 same-store sales and reported sales. For valuation, it uses a DCF model to derive the 12-month target price.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  UBS uses a DCF to derive the target price, with key assumptions including a 7.4% WACC, a 3.5% perpetual growth rate, 7% mid-term organic sales growth, and annual EBIT margin expansion of about 30 basis points.

• industry_read_acrossPeer read-through

  Use LVMH P&C, Sephora and other peer data to validate L'Oréal's Luxe trend

  The report uses Q1 performance at LVMH Perfumes & Cosmetics, Selective Retailing, and Sephora as reference points for L'Oréal's premium beauty business to assess whether industry premiumization and channel demand are continuing.

• sales_bridgeSame-store sales bridge

  Assess sales growth after stripping out IT transformation, FX, and M&A effects

  The report separates adjusted LFL, the drag from IT transformation, FX impact, M&A contribution, and reported sales to avoid one-off factors obscuring operating momentum.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• L'Oréal / OREP.PA

  research target

  Strengths

  The world's largest beauty company, with diversified businesses including Consumer Products, Luxe, Professional Hair Care, and Active Cosmetics; strong momentum in mature markets; and a brand portfolio that includes L'Oréal Paris, Lancôme, Garnier, Yves Saint Laurent, and Maybelline.

  Weaknesses

  Q1 was affected by IT transformation, FX, weak North Asia travel retail, and Middle East conflict; reported sales are expected to decline year over year.

  Comparison

  LVMH Perfumes & Cosmetics had flat Q1 organic sales, while Selective Retailing grew +4%, providing a relative benchmark for L'Oréal's Luxe business and channel trends.

  Risks

  Further deterioration in the China beauty market, weaker consumer conditions in North America, sudden macro deterioration in Latin America or South Asia, weak travel retail, and the impact of Middle East conflict.

• LVMH Perfumes & Cosmetics / Selective Retailing

  peer and channel read-through

  Strengths

  The best-performing luxury brands show that the premiumization trend in beauty remains healthy; Sephora posted steady revenue growth across regions.

  Weaknesses

  P&C organic sales were only flat, slightly below consensus; Selective Retailing growth slowed versus the previous quarter.

  Comparison

  Used to validate short-term trends in L'Oréal's Luxe business; UBS believes L'Oréal's adjusted LFL of about +2% for Luxe is broadly in line with LVMH P&C.

  Risks

  Middle East conflict, weaker European travel spending, and regional demand volatility may affect comparability.

Key data

• 12-month target price€430.00The 12-month target price given in UBS's report.
• Current price€356.80Price date is 2026-04-13.
• Implied upsideabout 20.5%Calculated approximately from the €430.00 target price and the €356.80 current price.
• Q1 adjusted LFL forecast+5.3%Forecast for L'Oréal Group's same-store sales growth excluding the impact of IT transformation.
• IT transformation drag on Q1 LFL210 basis points, about €230mThe Luxe division and North Asia are expected to face drags of 300 basis points and 850 basis points, respectively.
• Luxe division Q1 adjusted LFL forecast+2%Broadly in line with the previous quarter and consistent with LVMH Perfumes & Cosmetics performance.
• North America Q1 growth forecast+6.5%UBS expects North America to be one of the main regional growth contributors.
• Europe Q1 growth forecast+4.5%UBS expects Europe to remain a growth-contributing region.
• Reported sales forecast€11,542m, -1.6% year over yearIncludes a -5.7% FX impact and a +0.8% M&A contribution.
• DCF core assumptionsWACC 7.4%; perpetual growth rate 3.5%The WACC is based on a 3.0% risk-free rate and a 6% equity risk premium.

Impact & implications

If UBS's forecast is realized, L'Oréal would maintain strong underlying growth despite IT transformation and regional disruptions, reinforcing its pricing power, brand strength, and channel resilience in the global beauty industry. For investment implications, the Buy rating primarily rests on mature-market momentum, stable Luxe business performance, the continuation of the premiumization trend, and DCF valuation support; near term, investors should watch whether Q1 sales confirm the +5.3% adjusted LFL forecast and whether pressure in North Asia and the Middle East exceeds assumptions.

Risks

• Further deterioration in the China beauty market could lead to weak LFL growth in North Asia.
• A further weakening of the North American consumer environment could reduce salon visit frequency and weaken acceptance of premium innovation products.
• A sudden deterioration in macro conditions in Latin America or South Asia could affect L'Oréal's ability to expand quickly in local divisions and brands.
• Middle East conflict could have a material impact on demand; the report already assumes around a 40% decline in March Middle East revenue.
• FX is expected to have a -5.7% impact on Q1 sales, which could weigh on reported growth.

What to watch

• L'Oréal's Q1 sales release on April 22, with focus on whether adjusted LFL is close to +5.3%.
• Whether the Luxe division achieves around +2% adjusted LFL growth and whether that is consistent with the LVMH P&C read-through.
• The recovery pace of North Asia travel retail and the China beauty market.
• Whether mature-market momentum in North America and Europe continues, especially whether recent Nielsen data can keep supporting the growth view.
• Whether the actual drag from the Middle East conflict on SAPMENA-SSA and group sales is larger than assumed in the report.
• The final impact of FX and M&A on reported sales.