The latter was founded by Estée Lauder in New York in 1946.
Both companies are doing well, because looking and smelling good never go out of fashion. Of course, the businesses are not identical. Estée Lauder is more focused on skincare, makeup and cosmetics. L’Oréal offers those too, but adds a big haircare-product business and has a more diverse set of sales outlets.
Both companies have a large share of the rather saturated markets of Western Europe and North America. The differences are more notable in the higher-growth regions. The Asia-Pacific region is fast becoming the most important for both companies, due to large populations and a growing middle class. In both India and China, L’Oréal has a significant edge.
L’Oréal is also two-and-a-half times bigger by market capitalisation. Its stock is also a bit cheaper (as measured by its price-to-earnings ratio), perhaps reflecting its heavier tax burden. Estée Lauder has more debt on its balance sheet, which is typical of American corporates. On balance, L’Oréal is probably the better option, despite our more general preference for US companies.
• Theron is CEO of asset manager Vestact
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Beauty brand face off: Who should you invest in?
L’Oréal and Estée Lauder are similar global businesses in the beauty-products industry, but which is the safer bet?
Image: 123RF / Daria Minaeva
If you had a direct investment choice between similar multinational businesses in the luxury-goods sector, but one was US-based and the other one was from Europe, which would you choose?
Europeans invented the luxury-goods business, but their large companies are more heavily regulated and pay higher taxes. The US is freer and more dynamic, and its firms have easier access to capital and labour.
With the help of a visiting researcher, Vestact recently took a closer look at L’Oréal and Estée Lauder, which are similar global businesses in the beauty-products industry. The former is French, with its headquarters in the Parisian suburb of Clichy.
The global beauty market is growing at a tremendous clip – who should you invest in?
The latter was founded by Estée Lauder in New York in 1946.
Both companies are doing well, because looking and smelling good never go out of fashion. Of course, the businesses are not identical. Estée Lauder is more focused on skincare, makeup and cosmetics. L’Oréal offers those too, but adds a big haircare-product business and has a more diverse set of sales outlets.
Both companies have a large share of the rather saturated markets of Western Europe and North America. The differences are more notable in the higher-growth regions. The Asia-Pacific region is fast becoming the most important for both companies, due to large populations and a growing middle class. In both India and China, L’Oréal has a significant edge.
L’Oréal is also two-and-a-half times bigger by market capitalisation. Its stock is also a bit cheaper (as measured by its price-to-earnings ratio), perhaps reflecting its heavier tax burden. Estée Lauder has more debt on its balance sheet, which is typical of American corporates. On balance, L’Oréal is probably the better option, despite our more general preference for US companies.
• Theron is CEO of asset manager Vestact
More investment news from Paul Theron:
Want to invest in property? Consider areas known for luxury-goods retail stores
Betting on booze: Investing in big-brand liquor companies
Hermés' rising market capitalisation creates an interesting investment opportunity
• From the October edition of Wanted 2019.