GDANSK — Spanish beauty company Puig reported slower sales growth for the first quarter on Tuesday, reflecting more moderate demand, particularly in fragrances, which account for the bulk of its revenue, though it kept its full-year outlook unchanged.
The results highlight growing pressure on the global beauty sector as geopolitical tensions in the Middle East disrupt airport shopping and curb international travel, a key sales channel for premium fragrance makers.
The slowdown also follows a loss of momentum in the broader fragrance market as consumers turn more cautious, raising concerns about the sustainability of recent growth trends across the industry.
Puig reported first-quarter net revenue of 1.22 billion euros ($1.43 billion), a 4.7 percent increase on a like-for-like basis and a 0.8 percent rise on a reported basis.
J.P. Morgan analysts had expected Puig's first-quarter like-for-like sales to grow 2.2 percent, supported by growth across all divisions, even though the global fragrance boom is cooling and luxury demand remains uncertain.
The company said the Middle East conflict had about a 1.2 percent estimated negative impact, mainly in March, with further impacts expected, and the company is monitoring the situation.
Travel retail was the most affected part of its Middle East business, and it expects a roughly 1 percent hit in the first half if the conflict continues, the company said on a conference call.
The Barcelona-based group, which derives a tenth of sales from travel retail, is one of the more exposed beauty companies to swings in airport shopping and international travel, according to analysts.
"We are taking good care of the situation," Puig executives said, adding that pressure in the region was heavier in travel retail than in local business and that Saudi Arabia and Dubai were showing different levels of performance.
Fragrances and fashion, which account for about 74 percent of sales, rose 3.9 percent, while makeup and skincare categories increased 9.2 percent and 4.7 percent, respectively. By region, like-for-like sales in EMEA, its largest market, grew 3 percent, compared with 2 percent in the Americas and 26.1 percent in Asia-Pacific.
Puig also said it is closely monitoring cost pressures, including those related to distribution, but confirmed its full-year guidance, expecting Ebitda margins to remain flat.
The results come amid talks regarding a potential merger with US cosmetics giant Estee Lauder, which would create the world's largest premium beauty player with brands including Tom Ford, Carolina Herrera, Rabanne, Jean Paul Gaultier, and Clinique under one roof.
No final decision has been taken as of April 28, and no assurance on the deal or its terms has been made, Puig added.