L'Oreal looks to counter subdued growth at Garnier shampoo unit

By Sarah White and Pascale Denis

PARIS (Reuters) - L'Oreal is still struggling to kickstart sales growth at its mass market unit that makes products like Garnier shampoo, and those challenges hit the company's shares on Friday even as its luxury brands posted strong revenues.

The company has been buoyed in recent quarters by demand for its luxury brands like Lancome or Kiehl's, particularly in China, while its active cosmetics division, which makes treatments for sensitive skins, has also done well.

But the French cosmetics group disappointed after reporting weaker-than-expected sales growth in its mass market division on Thursday.

Like-for-like revenue growth slowed to 2.3 percent in the April to June period from 2.6 percent in the first, below analysts' forecasts for a slight improvement.

L'Oreal shares were down 3 percent in early session trading.

"Clearly we are not happy in growth in the consumer division in the first half," L'Oreal Chairman and Chief Executive Jean-Paul Agon told analysts on a conference call on Friday.

"We think that we have everything it takes to outgrow the market and clearly the ambition is to get back progressively, soon, to a rhythm, of 3 to 4 percent."

Agon added that aside from a weak backdrop in countries like France and the United Kingdom for this cosmetics division, the group had also struggled in Brazil for instance, which it believed should improve in the second half of 2018.

Big mass market products like Maybelline make-up and the company's L'Oreal Paris brands had outperformed others, Agon added.

Overall, the company's operating income grew 1.8 percent from a year ago to 2.58 billion euros ($3 billion) in the first half of the year, in line with forecasts.

Resilient demand from Chinese shoppers in the face of a trade spat with the United States has sustained sales at luxury goods firms in recent months.

The beauty sector is no exception with L'Oreal's premium labels riding high, while rivals like U.S.-based Estee Lauder, more squarely focused on luxury, have also benefited.

(Reporting by Sarah White and Pascale Denis; Editing by Sudip Kar-Gupta)