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Cover Girl Is Gaining Market Share Again

Coty's luxury division is doing well, and the business is working to reboot drugstore cosmetics.

For the first time in four years, Cover Girl is gaining market share. 

The brand has started gaining share over the last five weeks, according to scanner data, Coty said. The improvement comes as Coty has worked to reposition Cover Girl again, and recently named Niki Taylor the face of Simply Ageless, the antiaging skin care and makeup range.

“Cover Girl was clearly one of the key priorities of the company since Day One, and one of my priorities for personal reasons because I was always a big admirer of Cover Girl when I was on the other side,” Nabi, a former L’Oréal veteran and beauty entrepreneur, said in an interview with WWD. “I had this strong intuition and strong belief that this brand had everything to be back to success, nothing was missing.” 

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As an early mover in clean makeup and the skinification of makeup, “it was not normal that Cover Girl was not leading and benefitting clearly from these trends,” Nabi said. “Sometimes intuition helps you do the right thing without waiting months and months to have studies that explain to you what to do.” 

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Sally Hansen is also benefiting from the rise of clean, with its Good Kind Pure nail polish range, Nabi said. 

In the mass segment, Coty is also working to reposition European makeup brands Rimmel and Max Factor. Rimmel has tapped Adwoa Aboah to a newly created role as global activist, and Max Factor has just appointed  Priyanka Chopra Jonas global ambassador and creative collaborator.

That said, Coty’s mass segment’s net revenues declined 14.3 percent for the third quarter ended March 31, to $427.4 million. Reduced demand for makeup continues due to the coronavirus pandemic, but Coty said it sees sales starting to pick up.

“There is clearly progress versus what we have seen in the past,” Nabi said. “The category that’s clearly trending the strongest in terms of growth is what we call clean beauty…clean beauty is trending 17 points ahead of the market in America [and] is a key driver of the recovery.” 

Total company sales dipped 3.3 percent from the prior-year period, to just more than $1 billion. Coty’s net loss narrowed in the quarter to $1.2 million, from $311 million in the prior year.

The company’s luxury division fared well, with an uptick of 6.5 percent to $600.6 million in sales. Gucci, Burberry and Marc Jacobs all grew double digits in the quarter, the company said. Nabi said more innovations will be coming from Marc Jacobs to sustain the success of the Perfect launch, and that new products are also coming from Calvin Klein. 

Distribution wise, Nabi said Coty plans to taper off sales in “low-quality channels.” 

“We need to sell our brands as the highest price possible to preserve the image of our brands,” Nabi said. That does not include exiting Amazon, which has become a key point of Coty’s distribution, but will include focusing on places where Coty brands “can express 360 degrees,” Nabi said. 

Going forward, Coty expects to have more money to spend on marketing, as the team has improved margins. Coty’s chief financial officer Laurent Mercier called it “fuel for the brands,” in an interview, and noted that Coty will invest in promoting its big brands, including television marketing.

“We see the lean into marketing investment as a clear indication of increased confidence from consumer response to initiatives across a select set of brands including Cover Girl, Gucci, Burberry, Philosophy,” said Jefferies analyst Steph Wissink in a research note.

The Americas sales dropped 6 percent for the quarter, to $409.6 million; Europe, the Middle East and Africa sales fell 7.8 percent to $473 million, and Asia Pacific sales increased 27.7 percent, to $145.2 million.

In China, Coty plans to focus on the luxury portfolio and selected mass brands, including Adidas, which Coty plans to build out into a personal care line. “This brand has a huge, huge popularity in China,” Nabi said. Coty will also focus on artisanal fragrances, and on prestige makeup in the region. 

The company expects to end the fiscal year with net sales between $4.5 billion and $4.6 billion.

Coty’s stock price fell about 10 percent in midday trading. 

Wissink attributed the drop to “no guidance raise,” but said that overall, she is encouraged.

“Given underperformance for several years, staging a comeback requires evidence of momentum building versus stalling,” Wissink said. “We are highly encouraged by the progress on a targeted list of brands.” 

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