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Dec 14, 2008

L'Oreal To Cut 500 Jobs, 4.7% Of US Workforce

Adding to the swelling ranks of companies paring down staffing levels to match the lean economic environment, French cosmetics giant L'Oreal SA (12032.FR) is cutting 500 positions in the U.S., or 4.7% of its workforce in the country, between now and mid-2009.

A spokeswoman Friday said the job cuts were part of efforts by the company to streamline its activities.

Analysts said the job cuts weren't surprising given the economic slowdown in that market.

"The company is adjusting to a new reality with sales from specialty stores and beauty salon sales in decline," said Marco Gulpers, analyst with ING.

The company likely originally built its plans around mid-single-digit sales growth from these activities and now it looks as if they aren't breaking even, he added.

Gulpers also cited slowing travel as weighing on perfume sales at duty-free shops and slower traffic in department stores as affecting cosmetic sales. He rates the shares at hold.

L'Oreal said the job cuts won't affect the group's business in other markets.

The company earlier this year announced restructuring plans for two plants in Europe.

In September, L'Oreal said it would close its Sofamo site in Monaco in March 2011, and will transfer activities to northern France. The plant produces Helena Rubinstein and Biotherm cosmetic products.

In October, the company announced the sale of its Llantrisant site in Wales, which produces shampoo products for the U.K. and Western Europe. The company will shift some production to western Europe and purchase products from the new owner, Fareva, for the U.K. market.

L'Oreal in recent months lowered its full-year targets as the consumer slump hit business in its key Western European and North American markets.

Rival consumer products company Procter & Gamble Co. (PG) Thursday reduced its second-quarter sales expectations after being surprised by a swift and dramatic decrease in inventories from retailers and distributors across its markets.

L'Oreal shares have shed almost 40% since the beginning of the year compared with an over 44% decline in the CAC 40 Paris index.

The company, which built up a reputation of outperforming rivals in recent years, has lost some of its favor with investors lately. Third-quarter sales and the lower full-year expectations caught analysts by surprise and prompted a series of analyst downgrades.

At 1410 GMT, shares were down EUR0.39, or 0.7%, at EUR60.50 outperforming a CAC-40 index that was down 3.9%




Source : CNNMoney
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