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

Coty, the global beauty and cosmetics company, surprised investors with an unexpected rise in fourth-quarter revenue during the week ending August 19, posted by Reuters. The increase was driven by strong demand for fragrances and cosmetics, despite a generally resilient consumer market. The business giant announced that fiscal year 2027 would be a transition year as it undertakes a strategic review to streamline its operations and refocus on its key brands.

The company is conducting a thorough review of its consumer beauty division amid growing geopolitical conflicts and economic uncertainties that have prompted consumers to tighten their spending. The review, which is expected to conclude by the end of the year, could result in the sale of certain brands, potentially including CoverGirl and Rimmel.

This strategic overhaul, coupled with a cost-reduction program, is anticipated to mitigate potential revenue losses in fiscal year 2028 arising from the early return of the Gucci Beauty license to Kering, while aiding profit growth from fiscal year 2029, according to Coty.

Despite the challenges, Coty notes that consumer demand for beauty products remains robust, with continued growth in the fragrances and cosmetics segments. However, the company acknowledged that consumers are increasingly discerning in their purchasing decisions. The Middle East conflict had a relatively minor impact on Coty's earnings, causing a minor 1% decline in revenue, which was lower than the earlier estimated 2% to 3% hit.

The quarterly adjusted loss per share decreased to 2 cents from 5 cents a year ago, although it fell short of expectations of a 1-cent loss. Coty's peers, Estee Lauder and Elf Beauty, have recently projected a more favorable outlook, driven by steady demand for beauty products.

Although Coty has not provided annual forecasts, the company projects a low- to mid-single-digit decline in like-for-like revenue for the current quarter, as opposed to an 8% drop the previous year. Additionally, Coty expects first-quarter adjusted earnings per share to range between 11 cents and 13 cents, slightly lower than analysts' estimates of 14 cents.

On a separate note, Coty appointed Soraya Benchikh, a former finance chief at British American Tobacco, as its new Chief Financial Officer, replacing Laurent Mercier.