NEW YORK – Coty Inc . (NYSE:), a leading global beauty company, has announced preliminary results for the first quarter, revealing a growth of approximately 4-5% in like-for-like sales (LFL), which, while robust, is moderately below the company’s earlier estimate of 6% LFL growth. Despite this, Coty reaffirmed its full-year profit target, signaling confidence in its financial outlook.
The company’s performance comes against the backdrop of a global beauty market experiencing solid but slightly reduced growth. Notably, the prestige fragrance category, one of Coty’s domains, continues to outpace the overall market, driven by increased volumes and favorable pricing trends. In contrast, the mass beauty segment shows slower growth, propelled solely by unit demand.
Coty’s sales gains were tempered by cautious order and inventory management from retailers, particularly in the U.S., Australia, China, and Travel Retail Asia. However, these regions represent a small fraction of Coty’s business, and growth in other key markets has been strong, ranging from mid-single to double-digit percentage increases.
The company anticipates moderate sales growth in the second quarter, with expectations of acceleration in the latter half of the year. This outlook is supported by easier year-over-year comparisons, alignment between sell-in and sell-out, promising new product launches, and expanded distribution.
Despite the lower than expected order patterns in the latter part of the first quarter, Coty has managed to maintain a strong gross margin expansion. However, this was offset by investments in high ROI sell-out initiatives, timing of certain fixed costs, and the impact of divesting the Lacoste license, leading to an anticipated flat to moderately lower year-over-year adjusted EBITDA for Q1.
In response to the uncertain demand environment and cautious retailer behavior, Coty is accelerating cost reduction efforts, aiming to exceed its initial fiscal year 2025 savings target of approximately $75 million. These measures, along with continuous sales growth and gross margin expansion, underpin Coty’s expectation to achieve a 9-11% increase in adjusted EBITDA for fiscal year 2025, in line with previous guidance.
The beauty giant is set to release its full Q1 results on November 6, 2024, followed by a live Q&A session with financial analysts and investors on November 7, 2024. Coty’s preliminary estimates are based on currently available information and are subject to change upon finalization of the quarter’s financial review. The company advises caution in relying on these preliminary figures.
This report is based on a press release statement from Coty Inc. and contains forward-looking statements that are subject to risks and uncertainties.
In other recent news, Coty Inc. reported mixed fourth-quarter results, with a modest revenue increase of 0.9%, slightly missing the anticipated 1.8% growth. However, like-for-like sales grew by 5%, and adjusted EBITDA reached $164.5 million, slightly surpassing their guidance. Adjusted earnings per share came in at a loss of $0.03, missing estimates. Amid these developments, Coty has forecasted a 6-8% growth in like-for-like sales for the first half of fiscal year 2025. The company also formed its first Scientific Advisory Board to guide their skincare research and development. Analyst firms, including Jefferies, TD Cowen, Canaccord Genuity, and DA Davidson, have expressed positive outlooks for Coty, with Jefferies upgrading the stock from Hold to Buy, citing its strong position in the premium fragrance market. These are the recent developments in the company’s operations and market performance.
InvestingPro Insights
To complement Coty’s preliminary Q1 results and full-year outlook, InvestingPro data offers additional context for investors. Despite the company’s moderate sales growth and reaffirmed profit targets, Coty’s financials present a mixed picture.
InvestingPro data shows that Coty’s revenue for the last twelve months as of Q4 2024 stood at $6.118 billion, with a notable revenue growth of 10.15% over the same period. This aligns with the company’s reported sales growth and its position in the expanding beauty market.
An InvestingPro Tip highlights Coty’s impressive gross profit margins, which is reflected in the data showing a gross profit margin of 64.39% for the last twelve months as of Q4 2024. This robust margin supports the company’s statement about maintaining strong gross margin expansion despite lower order patterns.
However, investors should note that Coty is trading at a high earnings multiple, with a P/E ratio of 105.29. This valuation metric suggests that the market has high growth expectations for the company, which may be challenging to meet given the current cautious retail environment described in the article.
Another InvestingPro Tip indicates that Coty’s stock price movements are quite volatile. This volatility could be attributed to the uncertain demand environment and the company’s efforts to accelerate cost reduction, as mentioned in the article.
For those interested in a deeper analysis, InvestingPro offers 7 additional tips for Coty, providing a more comprehensive view of the company’s financial health and market position.
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