Coty Inc. sees growth ahead, despite challenging market conditions in Europe and North America, where a slowdown in nail-care sales and poor weather conditions put a crimp in retail sales.
“We are committed to comeback to growth in the second part of the year,” Coty chief executive officer Michele Scannavini told investors on Tuesday at the Bank of America Merrill Lynch Consumer & Retail Conference held in New York.
During the firm’s most recently reported second quarter, ended Dec. 31, net income fell 33 percent to $82.5 million, or 21 cents a diluted share, and net revenues declined 4.1 percent to $1.32 billion from the year-ago period.
Scannavini told investors that he expects Coty to grow in line with or better than the beauty market, and outlined four drivers of organic growth, namely expanding its 10 “power brands,” growing its presence in emerging markets, expanding its skin-care and body-care business and leveraging its multichannel distribution. He said Philosophy, a skin-care brand acquired in 2011, was in a “turnaround situation” and had delivered three consecutive quarters of growth.
Coty has worked to decrease its dependence on the fragrance business, particularly through acquisitions. Scannavini said over the last decade, Coty has made seven major acquisitions. Its fragrance business now accounts for 54 percent of sales, as opposed to 70 percent seven years ago. The company will continue to look at potential new prospects. “We are looking for deals that could increase our competitive positions” in segments where it already competes. He noted that because the company is less developed in skin care, that category presents opportunity, but Coty will continue to look at cosmetics and fragrance deals too.
He noted that the abrupt slowdown in nail-care sales prompted inventory de-stocking at retail in late 2013. He added that Coty’s brands, including OPI and Sally Hansen, helped drive the category’s meteoric rise over the last several years by introducing new textures and finishes. But consumers’ buying spree has left them with an abundance of products. Scannavini noted that consumers today have between nine and 18 nail products at home. He anticipates that the nail-care category will ultimately grow more in line with color cosmetics sales, which on average have grown about 4 percent a year over the last decade.