Coty Inc. is making progress under chief executive officer Sue Nabi and has posted its sixth consecutive quarter “on par or above expectations,” Nabi said.
For the quarter ended Dec. 31, Coty’s net sales increased about 11.5 percent from the prior year, to almost $1.6 billion, with net income of $263.7 million. In the prior-year quarter, the company posted a $41 million loss.
For the six months ended Dec. 31., Coty posted sales of nearly $3 billion, up from $2.5 billion in the prior-year period. Net income for the period was $492.6 million, an improvement from the $27.3 million loss in the prior-year period.
Coty has also reduced its leverage, and is targeting two-times leverage by 2024, Nabi said. On an earnings call Tuesday, Coty’s chief financial officer Laurent Mercier said the company was withdrawing from an IPO process in Brazil for its business there, in order to wait for “a new opportune window.”
The company’s consumer beauty business, home to Cover Girl, Rimmel, Max Factor, Sally Hansen and other brands, gained market share for the first time in five years, Nabi said. Net sales for the segment were $570.2 million for the quarter, up 11 percent year-over-year.
In Europe, sales were propelled by the repositioning of Rimmel and Max Factor, which Coty said is doing well in the U.K., Spain, Czech Republic and Poland.
In the U.S., Cover Girl’s momentum has picked up due to the company’s Clean Fresh line, which debuted skin care in 28,000 doors in January. Nabi said sales for the skin care line are “already above our expectations,” especially online, with Amazon.
In the prestige division, which includes Gucci Beauty, Marc Jacobs fragrances and Kylie Jenner’s Kylie Cosmetics, sales increased 12 percent to more than $1 billion in the quarter, Coty said. A big part of that sales uptick came from fragrance, as well as makeup, fueled by Gucci and Kylie.
Coty also saw gains in China, where it is playing catch up with beauty competitors, and in travel retail, Nabi said. “In the quarter ending in December we accelerated six times faster than the market,” she said, of China.
With China, Coty is leaning into the Gucci, Burberry, Calvin Klein and Chloé brands, Nabi said. Gucci’s makeup collection is outpacing fragrance sales there, Nabi said.
“Those are the brands that are going to be the superstars,” Nabi said.
Lancaster, a skin care brand, is also doing well in China, Nabi said, and is the number-two brand in Sephora China.
In Europe, Coty’s Mexx, a mass market fragrance brand, did well with a draw-on pencil fragrance, Nabi said.
Coty does well with luxury fragrances, and Nabi said the company’s new chief scientific officer Dr. Shimei Fan also has a fragrance background. “She has a very strong knowledge from her Shiseido, but also Unilever years ago around the power of fragrance to be a key driver for well-being and mental health,” Nabi said. “We are working on this area more than ever.”
Nabi said she sees the fragrance market dynamics as a “once-in-a-lifetime” opportunity.
“People are very receptive to fragrances in Europe, in the U.S. and in China, and it’s never before [that] was the case. It’s a great moment to introduce new ways to ask people to use fragrance and scent,” Nabi said.
Coty’s goal is to take fragrance beyond “a commodity category” Nabi said, to “not only a luxury item, but also a better self well-being item in sync with what consumers are looking for.”
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