<div class="captioned-image-container"><figure><a class="image-link image2" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F3debc0fe-0d53-4369-ab13-b7e73b1d3a70_528x95.png" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="File:L'Oréal logo.svg - Wikipedia" class="sizing-normal" height="130.9848484848485" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F3debc0fe-0d53-4369-ab13-b7e73b1d3a70_528x95.png" title="File:L'Oréal logo.svg - Wikipedia" width="728" /><div></div></div></a></figure></div><p><strong>1.0 Introduction</strong></p><p>What if I told you that the world’s biggest beauty company started with a <strong>kitchen experiment and a chemist?</strong> That its founder wasn’t just a scientist but also a <strong>marketing genius </strong>and a<strong> political extremist?</strong></p><p>From Nazi ties and secret Resistance support to AI-driven personalized skincare and billion-dollar acquisitions, L’Oréal’s journey is anything but ordinary.</p><p class="button-wrapper"><a class="button primary" href="https://thefinancecorner.substack.com/subscribe"><span>Subscribe now</span></a></p><div><hr /></div><p><strong>2.0 History</strong></p><p><strong>2.1 Early beginnings (1909 - 1950s)</strong></p><p>In the early 1900s, hair dye was a <strong>total mess</strong>. You never really knew what you would get—it could range from a burnt scalp to a color that was not what you wanted. Hairdressers struggled to find a product they could trust, and women who wanted to change their look had to take their chances.</p><p>Then came <strong>Eugène Schueller</strong>, a young French chemist who saw this disaster and thought, <em>"I can fix this.</em>" He worked in his tiny Paris apartment, mixing formulas and testing dyes until he created something revolutionary: a <strong>safe, reliable hair dye</strong> that worked. He called it <strong>Oréale</strong>, and hairdressers loved it.</p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F028bc6a2-1ae7-4dcf-901b-17394f49dd0e_1024x323.jpeg" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="323" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F028bc6a2-1ae7-4dcf-901b-17394f49dd0e_1024x323.jpeg" width="1024" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p>But Schueller wasn’t just a scientist—he was a <strong>hustler</strong>. Instead of waiting for customers to visit him, he hit the streets, personally visiting salons and showing them how his product worked. By <strong>1909</strong>, his little operation had become a full-fledged company named <strong>L’Oréal</strong>.</p><p>Once L’Oréal was up and running, Schueller didn’t stop at hair dye. He expanded into shampoos, styling treatments, and even skincare, always looking for the next big thing. In the 1930s, he launched Ambre Solaire, one of the first commercial sunscreens, just as sunbathing became popular.</p><p>But his real genius was marketing. Before branding was an industry, Schueller crafted eye-catching ads and catchy slogans, making beauty more than just products—it was about confidence and self-expression.</p><div><hr /></div><p><strong>2.x The Dark Side</strong></p><p>However, there’s a dark side as well. Beyond his beauty empire, <strong>Eugène Schueller was deeply involved with La Cagoule</strong>, a violent, far-right, anti-communist group in 1930s France. He even hosted their meetings at L’Oréal’s headquarters. Schueller opposed socialist policies like the five-day workweek and paid vacations. Ironically, those vacations boosted sales of L’Oréal’s sunscreen as more French citizens hit the beaches.</p><p>During <strong>World War II</strong>, his ties to the Nazi-aligned <strong>Vichy government</strong> helped <strong>L’Oréal’s sales quadruple</strong>, and he was linked to <strong>SS officer Helmut Knochen</strong>, responsible for deporting French Jews.</p><p>After the war, he was accused of collaboration but avoided major consequences by claiming to have secretly supported the Resistance. Future <strong>French president François Mitterrand</strong> and Schueller’s son-in-law, <strong>André Bettencourt</strong>, helped clear his name. Still, he controversially hired many former La Cagoule members at L’Oréal, leaving a <strong>troubling legacy</strong> behind his business success.</p><div><hr /></div><p><strong>2.2 Expansion & Globalization (1950s - 1990s)</strong></p><p>After Schueller’s death (1957), François Dalle took over and drove L’Oréal’s global expansion, acquiring brands and pushing into new markets.</p><p>Under his leadership, subsidiaries were established across Europe, the U.S., and Asia. In addition, instead of relying solely on in-house brands, the company started acquiring well-established names to quickly gain market share in new regions.</p><p><strong>Lancôme </strong>was acquired, marking a move into the luxury segment.</p><p>A defining moment came in 1971, when the company launched its iconic slogan: <strong>“Because You’re Worth It.</strong>” It was one of the first ad campaigns to focus on women’s empowerment rather than just beauty.</p><p>Two notable acquisitions that followed were:</p><ul><li><p>Redken (1993) - for professional haircare</p></li><li><p>Maybelline (1996) - to dominate mass-market cosmetics</p></li></ul><p>In the 1990s, what used to be a <strong>Parisian hair dye company</strong> turned into <strong>the world’s largest beauty company</strong>.</p><p class="button-wrapper"><a class="button primary" href="https://thefinancecorner.substack.com/subscribe"><span>Subscribe now</span></a></p><div><hr /></div><p><strong>2.3 Dominating the Beauty Industry (1990s - Present)</strong></p><p>However, its next challenge was to stay ahead in a digital and tech-driven world. The acquisitions didn’t stop.</p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fc27cc937-3933-41fb-8e3d-35baff78f1a4_984x1180.png" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="1180" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fc27cc937-3933-41fb-8e3d-35baff78f1a4_984x1180.png" width="984" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p>Over the last decades, the company has invested heavily in Artificial Intelligence, Augmented Reality, and Personalized Beauty.</p><div class="youtube-wrap" id="youtube2--irYKSE-omA"><div class="youtube-inner"></div></div><p>The company spends over €1 billion on research and development, more than the annual revenue of most beauty companies. </p><p>This allowed L’Oreal to pioneer customized skincare solutions, launching products like <strong>La Roche-Posay’s AI-powered skin analysis.</strong></p><p>Lastly, the rise of e-commerce and social media has greatly impacted its strategy, and the company has successfully pivoted. It became a leader in direct-to-consumer beauty, leveraging social media platforms such as TikTok, YouTube, and Instagram.</p><p>Because of this, L’Oreal has over 35 brands and operations in over 150 countries.</p><p>Here’s a fun fact: L’Oreal <strong>collaborated with NASA</strong> to study how skin ages in microgravity. </p><div><hr /></div><p><strong>3.0 Ownership</strong></p><p>L’Oreal is considered a family-owned company.</p><p><strong>Liliane Henriette Charlette Bettencourt</strong> was the only child of Eugene Schueller and married Andre Bettencourt. At the time of her death (in 2017), she was the 14th richest person.</p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F66e15481-80f4-4acf-b49b-d375b33a7fe4_625x343.png" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="371.5376" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F66e15481-80f4-4acf-b49b-d375b33a7fe4_625x343.png" title="" width="677" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p>Her fortune was passed down to her daughter <strong>Françoise Bettencourt Meyers</strong>, who is not only the richest woman in the world today but also the first woman with a net worth above $100 billion.</p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F9c275755-d932-4ef9-bf10-f4b232292795_1080x720.jpeg" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="L'Oreal heiress, Francoise Meyers becomes 1st woman to hit $100 bn fortune – Women's Tabloid" class="sizing-normal" height="720" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F9c275755-d932-4ef9-bf10-f4b232292795_1080x720.jpeg" title="L'Oreal heiress, Francoise Meyers becomes 1st woman to hit $100 bn fortune – Women's Tabloid" width="1080" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p>It is worth noting that <strong>Nestle</strong> is a significant shareholder, too.</p><p class="button-wrapper"><a class="button primary" href="https://thefinancecorner.substack.com/subscribe"><span>Subscribe now</span></a></p><div><hr /></div><p><strong>4.0 The L’Oreal of today (and its competition)</strong></p><p>L’Oréal’s strong family ownership has helped ensure stability, but its real power comes from its <strong>broad portfolio and category dominance.</strong></p><p>All the acquisitions combined with high R&D spending allowed the company to create a broad portfolio divided into four categories, with plenty of strong brands.</p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff37fe99d-6834-4536-8385-8e7f49612713_494x487.png" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="487" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff37fe99d-6834-4536-8385-8e7f49612713_494x487.png" width="494" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p>Here’s another fun fact: A L’Oreal product is sold <strong>every second</strong> somewhere in the world.</p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F514719d4-757b-4e86-910f-61983780939e_581x343.png" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="343" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F514719d4-757b-4e86-910f-61983780939e_581x343.png" width="581" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p>The revenue split continues to evolve, and <strong>“Dermatological Beauty” now accounts for 16% of the total revenue.</strong> Why is this important? </p><p>Because that growing segment has the highest operating margin (<em><strong>24% vs. 19% for the other categories</strong></em>).</p><p>L’Oreal doesn’t just operate across various product categories but also all geographic and price ranges, resulting in a broad competitive landscape competing against:</p><ul><li><p>P&G</p></li><li><p>Unilever</p></li><li><p>Shiseido</p></li><li><p>LVMH</p></li><li><p>Chanel</p></li><li><p>Estee Lauder</p></li><li><p>Hugo Boss</p></li><li><p>Kering</p></li><li><p>Johnson & Johnson</p></li></ul><p>The list goes on.</p><p>What I find most impressive is the <strong>company’s pricing power.</strong></p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fe7f2d6e5-238c-4fbd-813f-a0404cc00140_626x397.png" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="397" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fe7f2d6e5-238c-4fbd-813f-a0404cc00140_626x397.png" width="626" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p>Regardless of the competition and economic environment, all cost increases have been passed on to the final customers. <strong>Its operating margin stands at an incredible 20%.</strong></p><p>Over 30% of its revenue is spent on advertising and promotion, making L’Oreal <strong>one of the world's five largest advertisers</strong>. The company works with celebrities like Cara Delevingne, Naomi King, Alia Bhatt, and Camila Cabello.</p><div><hr /></div><p><strong>5.0 Capital allocation</strong></p><p>The charts above clearly show that this is a cash-flow machine. So, it is fair to ask: <strong>What does management do with all the excess cash?</strong></p><p><strong>5.1 Dividends</strong></p><p>Between 50% and 60% of the net profit is paid out as dividends. The dividend yield is close to 2% based on today's share price.</p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F068d7ac1-445f-45ff-b60b-1984f77be970_609x306.png" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="348.2068965517241" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F068d7ac1-445f-45ff-b60b-1984f77be970_609x306.png" width="693" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p><strong>5.2 Acquisitions</strong></p><p>Acquisitions are part of L’Oreal’s DNA. One thing is for sure, given its history, one can expect acquisitions moving forward.</p><p><strong>5.3 Share buybacks</strong></p><p>In 2021, the company spent <strong>~€10 billion on share repurchases</strong>, reducing the number of outstanding shares by ~4%. Outside of 2021, the company spends ~€0.5 billion on buying back shares. This is insignificant given its market cap of over €180 billion and is likely to compensate for the impact of share-based compensation.</p><p class="button-wrapper"><a class="button primary" href="https://thefinancecorner.substack.com/subscribe"><span>Subscribe now</span></a></p><div><hr /></div><p><strong>6.0 Valuation</strong></p><p>Now, the fun part - How much is L’Oreal worth?</p><p>Given its pricing power, I assume the following:</p><ul><li><p>The revenue will grow slightly above the inflation rate as it will eventually acquire another company;</p></li><li><p>The operating margin remains stable over time, at <strong>20%</strong>, and</p></li><li><p>Given its pricing power, the company deserves a premium over other companies. I incorporate this by giving it <strong>a lower discount rate of 9%.</strong></p></li></ul><p>Here’s the DCF model:</p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F2faf5bef-0ed2-4346-b6c4-26ed2fc87f1d_1199x607.png" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="607" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F2faf5bef-0ed2-4346-b6c4-26ed2fc87f1d_1199x607.png" width="1199" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p>Based on my input, the company’s fair value is <strong>€144 billion (€269/share)</strong>, slightly above today’s share price of €341.</p><p>This doesn’t surprise me, as some investors (institutional and retail) are willing to pay a higher premium for (relatively) safe and predictable cash flows.</p><p>While L’Oréal’s steady growth may already be priced in, <strong>a bull case</strong> could emerge if AI-driven personalization, luxury beauty, and skincare expansion drive revenue beyond expectations.</p><p>On the other side, <strong>a bear case</strong> would involve:</p><ul><li><p>Further increase in competition, combined with influencer marketing;</p></li><li><p>US-China-Europe trade tensions that could impact the supply chain;</p></li></ul><p>L’Oreal is a giant that may be too big to move fast if needed.</p><p></p><p>If you enjoyed this post, consider sharing it; it helps the newsletter immensely.</p><p class="button-wrapper"><a class="button primary" href="https://thefinancecorner.substack.com/p/deep-dive-into-loreal-epa-or?utm_source=substack&utm_medium=email&utm_content=share&action=share"><span>Share</span></a></p>