* L'Oreal H1 op. margin 15.7 pct vs 17.3 pct in 2008
* Says sees gradual improvement in sales
* Luxury products op. margin 11.9 pct vs 19.6 pct in 2008 (Adds details)
PARIS, Aug 27 (Reuters) - L'Oreal on Thursday posted a smaller-than-expected drop in first-half profit, as consumers tightened their belts and became more reluctant to spend money on high-end lipsticks and creams.
The French beauty products giant repeated that it expected revenue to gradually improve throughout the rest of the year.
The maker of Biotherm and Lancome creams made an operating profit of 1.37 billion euros in the six months to June 30, down 8.3 percent against last year and compared with an average forecast of 1.29 billion euros in a Reuters poll of nine analysts.
The group saw its operating margin slip to 15.7 percent from 17.3 percent by the end of June 2008.
The operating margin of luxury products fell to 11.9 percent from 19.6 percent, a drop L'Oreal partly blamed on "contracting markets and substantial inventory reductions by distributor customers".
"L'Oreal sees a gradual improvement in sales over the rest of the year," Thierry Prevot, head of the group's financial communications told reporters during a conference call.
L'Oreal will hold a news conference in Paris on Friday morning at which investors are hoping to get more details on its cost-cutting efforts.
In February, the Paris-based group introduced its first hiring freeze since 1974 and said it had cut 500 jobs in the United States. At the time, it also said it would try to keep margins stable this year.
Earlier this month, U.S. rivals Estee Lauder and Elizabeth Arden forecast weaker-than-expected 2010 profits as they expect women to keep their purse strings tight until they see tangible signs of economic recovery. . (Reporting by Astrid Wendlandt; editing by Karen Foster)