NEW YORK — Coty Inc.’s Michele Scannavini kicked off the beauty firm’s first earnings call as a public company with a plan for the future.
Coty, which narrowed net losses in the fourth quarter, has a six-pronged plan intended to drive profitable growth, Coty chief executive officer Scannavini told analysts Tuesday.
The plan includes maximizing the growth potential of Coty’s 10 power brands with “superior innovation;” strengthening the company’s position in fragrance and color cosmetics, while expanding its skin- and body-care business; growing its emerging-markets business to account for one-third of Coty’s revenues within five years, up from one-fourth currently; leveraging its multidistribution strategy to cover all price points; continuing to grow margin through supply-chain productivity, and generating sustainable and profitable growth through improved earnings and capital reduction.
He referred to fiscal 2013 as “another positive year for Coty,” and reminded analysts of the company’s past track record. “We have delivered sustained revenue growth and margin expansion over the last 10 years,” he said.
For the fourth quarter ended June 30, net losses attributable to Coty narrowed to $62.3 million, or 16 cents a diluted share, compared with a net loss of $357.3 million, or a 95 cents a share, in the same quarter a year ago. Adjusted net income, which excludes nonrecurring items, including Coty’s share-based compensation expenses when it was a private company, was $9.9 million, or 3 cents a share.
Net revenues for the three-month period gained 3.9 percent to $1.06 billion, compared with $1.02 billion.
By category, during the quarter fragrances gained 6 percent to $490.4 million, color cosmetics was flat at $385.1 million, and skin and body care increased 6 percent to $183.3 million.
Coty said its color business was impacted by an abrupt slowdown in nail-care sales — which had been humming along at a robust double-digit clip for the past several years — in June and July. In the mass market, nail polish sales rose 19 percent for the 52-week period ended May 19, compared with gains of 24.8 percent for full-year 2012, according to SymphonyIRI Group. The company said the mass-market nail-care category declined 2.5 percent in July, prompting retailers to quickly cut inventory prior to the back-to-school selling season.
Scannavini said, “I was not expecting nail to grow at 20 percent for years to come.…It was bound to slow down, but nobody expected such a drastic drop.” Scannavini, noting that its Sally Hansen brand was hit hardest by the about-face by retailers, said, “When you are the leader in the category, you are the one who pays the most in terms of de-stocking.” He forecasted that over time the nail-care category — where two of Coty’s 10 “power brands” play, namely Sally Hansen and OPI — may grow more in line with the total color cosmetics category at a rate of 3 to 4 percent.
Citing the entrance of a host of new brands and heightened investment in the category, he said, “We are focused on innovation that can put us one step ahead,” and named the upcoming Sally Hansen launch Triple Shine in particular. Following the call, Scannavini said Sally Hansen has no plans to “downsize” the launch of Triple Shine based on retailers’ recent spate of de-stocking. He emphasized that nail care is still a “hot category” and that he hopes the recent falloff was “more of a blip than a trend.”
The company said that de-stocking by U.S. mass retailers, as well as macroeconomic conditions in Europe, could somewhat hamper net revenue in the first quarter of fiscal 2014.
Turning to the year ended June 30, net income attributable to Coty was $168 million, or 42 cents a diluted share, compared with a loss of $324.4 million, or 87 cents a share, in the prior year. Adjusted net income for the year was $323.2 million, or 82 cents a share.
Net revenue was $4.65 billion, up 0.9 percent from $4.61 billion.
By category, fragrances gained 2 percent to $2.49 billion, and color cosmetics increased 3 percent to $1.47 billion, while skin and body care declined 5 percent to $689.9 million. Scannavini said that for the year, fragrances accounted for 54 percent of the business, driven by brands such as Marc Jacobs, which grew at a double-digit rate for the fourth year in a row; color cosmetics accounted for 31 percent, boosted by Rimmel’s double-digit growth, and the skin- and body-care category accounted for the remaining 15 percent.
Scannavini said the company is making progress on putting Philosophy back on the growth track. In fiscal 2013, the brand expanded to several Anglo-Saxon countries, including the U.K. and the Netherlands, Belgium and Luxembourg. It’s also rolled out to Singapore, South Korea and Hong Kong to test how the whimsical skin-care brands plays in Asia. He noted that the brand’s new leadership team — which includes Marc Rey, president of Coty Prestige U.S. and regional vice president of Coty Prestige North America, and Jill Scalamandre, senior vice president of Philosophy and Coty Prestige Skin Care — brings a strong understanding of the global skin-care market. The company is relocating Philosophy’s commercial and marketing teams and research and development functions from Phoenix, where they are currently based, to New York and Morris Plains, N.J., where Coty operates an R&D facility.
Scannavini said Philosophy began introducing the first products for its new innovation program in the second half.
During the call he told analysts, “Innovation is the engine that will continue to differentiate us and drive our growth.”
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty