Time for a Tuneup at L’Oréal?

Just about every beauty company on the planet got waylaid by the recession. Sales in nearly all sectors took a hit during the prolonged contraction of the economy, but some companies are returning to growth faster than others.

L’Oréal isn’t one of them. The biggest pure-play beauty company in the world has been caught in an organic sales growth slump for the past couple of years. In 2009 things got even worse and now, some analysts are suggesting that the company should start taking a hard look at M&A opportunities. At the same time, according to The Wall Street Journal, L’Oréal brass should consider an initial public offering of The Body Shop unit, as well as a partial disposal of its 9% stake in listed drug group Sanofi Aventis, currently worth €6.3 billion.

And like Estée Lauder, Procter & Gamble and Unilever before it, L’Oréal should seriously consider axing some of its under-performing prestige brands. Potential candidates include Giorgio Armani and Ralph Lauren. As WSJ notes, both make minimal contributions to the group’s sales and have limited penetration in skin care and makeup products.

Elsewhere, L’Oréal must make a move to boost its presence in emerging markets, since 70% of the group’s sales come from established markets. Top targets include Brazil and India.

Last year, L’Oréal posted an 8.2% decline in profits to €1.79 billion ($2.45 billion) from €1.95 billion in 2008. Sales edged down 0.4% in the year to €17.47 billion, in part due to an unexpected slowdown in the fourth quarter as other consumer products companies begin to recover from the economic crisis. For the fourth quarter alone sales fell 3.5%.