Coty beats quarterly revenue, calls fiscal 2027 ’transition year’ on business overhaul

Coty reported a higher-than-expected fourth-quarter revenue on Wednesday due to strong demand for fragrances and cosmetics. The company also appointed Soraya Benchikh, a former finance chief at British American Tobacco, as its new CFO as part of organizational changes under its "Coty. Curated." strategy. Shares of Coty dropped around 9% in extended trading following the announcement of a wider-than-anticipated quarterly loss.

However, the company stated that fiscal 2027 would be a transitional year. Coty is advancing its Coty. Curated. strategy, aiming to simplify its business and reviewing the consumer beauty division, which could result in the sale of brands like CoverGirl and Rimmel. The CFO change was part of these organizational adjustments. The review, expected to conclude by year-end, may lead to the sale of certain brands.

The cost-reduction program is also expected to help counter potential sales losses in fiscal 2028 from the early return of the Gucci Beauty license to Kering. Coty's net revenue increased by 1.3% to $1.27 billion in the quarter ending June 30, surpassing analysts' average estimate of a 4.6% decline. While consumer demand for beauty remains resilient, particularly in the areas of fragrances and cosmetics, customers are becoming more selective in their purchasing habits.

The company noted a minimal impact of around 1% from the Middle East conflict, which was milder than the 2% to 3% hit initially projected in May. Quarterly adjusted loss per share narrowed to 2 cents from 5 cents a year ago, but exceeded analysts' expectations of a 1-cent loss. Coty's competitors, Estee Lauder and Elf Beauty, recently forecast a brighter outlook for the year ahead on the basis of steady demand for beauty products.

Coty has not provided annual forecasts, but it anticipates a low-to-mid single-digit decline in like-for-like revenue for the current quarter, as opposed to an 8% drop last year.