Coty Inc. executive chairman and chief executive officer Peter Harf said “Coty is back,” despite the beauty company’s nearly $800 million loss in the most recent quarter.
Harf, in a statement, said Coty’s latest quarter “was marked by external shocks” — the coronavirus pandemic — which triggered a “crisis in the real economy and supply.” Despite that, Harf said Coty had improved its business in the past two months, and expects to return to profitability in the first quarter of fiscal 2021.
In a statement to WWD, Harf said, “Coty today is a very different Coty than just a few months ago due to the bold and decisive actions we have taken. We can clearly see green shoots emerging despite this challenging environment as we gain market share, build strong e-commerce momentum, successfully launch new products and ensure Kylie Skin is on track to expand. Coty is back.”
For the fiscal year, Coty posted a 25 percent decline in net sales, to $4.7 billion, with a net loss of $1 billion. For the quarter ended June 30, the company posted a net sales decline of 63 percent, to $560.4 million, with a net loss of $778.2 million.
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Harf, who will officially hand over the ceo reins to incoming beauty veteran Sue Nabi on Sept. 1, said that in his few months in the position he’s been working to “re-steer the company back on track” through tackling capital structure, financial under-performance, portfolio and management.
Harf and Coty executives struck a deal to sell a majority stake in some of the professional businesses to KKR and “in the midst of the pandemic, Coty secured a $1.1 billion direct investment from KKR,” Harf said. The professional deal is expected to close by the end of the calendar year, the company said.
Nabi, the first outsider Coty has ever hired to lead the company, has already been assessing its needs behind the scenes, said an industry source close to the business, and is expected to focus on accelerating the company’s skin care, Asia and direct-to-consumer operations.
In skin care, Kylie Jenner’s Kylie Skin and Kim Kardashian West’s KKW Beauty are expected to be rolled out in Asia in the third quarter of fiscal 2021, with new product formulations created to appeal to those markets, the source said. Both Kylie and KKW’s skin lines have manufacturing that is not Seed Beauty, the source said. Seed sued KKW in June to try to block the company from sharing trade secrets with Coty.
Coty is also expected to take an ownership position in Nabi’s own skin-care brand, Orveda, which will be expanded through the Coty platform, the source said.
Nabi is expected to try her hand at revitalizing Coty’s mass color brands, including Cover Girl and Rimmel, including ramping up digital offerings there, the source said.
Coty’s mass beauty business has continued to struggle in the U.S., where it has lost shelf space. Coty said certain declines were due to lockdowns and pandemic-related store closures. While most mass retailers were deemed essential in the U.S. and stayed open, Coty said it saw a significant shift to online sales. The company said Cover Girl’s Clean Fresh line is doing well, and so is Sally Hansen’s Good.Kind.Pure line.
The company’s consumer business, which includes the mass brands, posted a 55 percent net sales decline in the quarter, to $340.7 million. For the year, consumer declined 29 percent, to $2.1 billion in net sales.
For the quarter, the luxury business saw a 71 percent net sales dip, to $219.4 million. For the year, luxury was down 21 percent, to $2.6 billion.
During the COVID-19 pandemic, many of the luxury segment’s distributors were closed, including department stores and the travel retail channel. Things started to look better as stores reopened, Coty said, but e-commerce also saw a big uptick and now accounts for about 30 percent of all luxury sales. Kylie makeup sales in the quarter were “pressured by the closure and ensuing supply constraints of the brand’s third-party partner,” Coty said, but skin care did well as the brand launched with Douglas in Europe.
Coty’s professional business, which includes Wella, posted a 41 percent sales decline for the quarter, to $361.6 million. For the year, sales dropped 14 percent, to slightly more than $2 billion. Declines were attributed to salon closures during the COVID-19 pandemic.
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