PARIS (Reuters) - Shares in the world's largest beauty group L'Oreal <OREP.PA> fell to a 21-month low on Wednesday after disappointing sales of skin creams and make-up provided the latest evidence of a sagging U.S. economy.

Shares in the French company fell as much as 7.7 percent, bucking a stronger market, as analysts cut their price forecasts following lower than expected first-quarter sales coupled with fears over the weak dollar.

L'Oreal, maker of Biotherm skin cream and Lancome lipsticks, said on Tuesday its comparable first-quarter sales grew 5.1 percent while analysts had expected growth of about 6 percent.

Like-for-like revenue from North America, which makes up a fifth of L'Oreal's sales, fell 3.9 percent, which the company blamed in part on fewer visitors to U.S. department stores.

By mid-afternoon, L'Oreal shares were down 6.5 percent to 74.45 euros, wiping 3 billion euros off the value of France's eighth largest company on three times the usual trading volume.

L'Oreal was the biggest decliner in the DJ Stoxx European personal and households goods index <.SXQP>, which was up 0.7 percent. L'Oreal has underperformed the index by 9 percent so far this year.

"(While) we agree that one quarter does not make a year ... we have reduced our like-for-like growth forecast by 30 basis points to 6.2 percent," UBS analyst Eva Quiroga said in a note, citing uncertainty about the timing and size of a U.S. recovery.

Quiroga downgraded her recommendation on L'Oreal's stock to "neutral" from "buy" and cut the price target to 89 euros from 96 euros. JP Morgan, Credit Suisse, Societe General, and Oddo Securities also cut their price targets.

L'Oreal Chief Executive Jean-Paul Agon said on Tuesday that L'Oreal had expected a lackluster U.S. first quarter.

"In fact, it turned out to be more difficult because of lower footfall in department stores and larger than expected inventory reductions by our distributors," he said.

U.S. retail sales rose unexpectedly in March but this reflected a surge in gasoline prices, Commerce Department figures showed on Monday.

Excluding gasoline, sales were flat, suggesting the consumer spending that fuels two-thirds of the economy is flagging.

L'Oreal's total first quarter sales rose 2.1 percent to 4.4 billion euros ($6.97 billion), helped by 26 percent growth in eastern and a 2.3 percent uptick in western Europe.

L'Oreal said it expected sales growth to pick up over the next few quarters and confirmed its annual like for like revenue growth target of between 6 percent and 8 percent, but some analysts said the weak dollar might also hurt revenues.

"Our 6.6 percent organic growth rate for 2008 looks achievable but exchange rates may cut our expected 2008 sales growth from 5.6 percent to 3.5 percent," Dresdner Kleinwort analyst Charles Manso de Zuniga said in a note.

The dollar has dropped 9.3 percent against the euro since the start of the year and L'Oreal said currency fluctuations had introduced a negative impact on revenues of 5.0 percent in the first quarter.

By Gilbert Kreijger