Skip to main content

Coty’s Small China Footprint Offers Both Potential and Protection, Says CEO Sue Nabi

Unlike The Estée Lauder Cos., Coty has not been hit hard by ongoing COVID-19 restrictions in China.

COVID-19 lockdowns in China are weighing on the Estée Lauder Cos. earnings, but competitor Coty Inc. believes its small footprint in the country offers both protection and potential.

China makes up just 4 percent of Coty’s net revenues, according to chief executive officer Sue Nabi, and while fragrance is doing well, the beauty company is planning to expand its makeup and skin care presence in the country once the lockdowns have eased. Coty recently told investors that in the skin care arena, its plan is to focus on Asia skin care pure players and also Lancaster, which is already in Asia and is performing well.

“As you can imagine, this in a way is a huge upside potential for us and currently a protection from what’s happening,” Nabi told WWD in an interview to coincide with the release of the company’s first-quarter fiscal 2023 earnings.

Related Galleries

In contrast, Lauder cut its full-year forecast, in part due to ongoing COVID-19 restrictions in China’s Hainan province, which led to prolonged store closures, the curtailment of travel and caused the tightening of inventory by certain retailers that had previously placed orders in anticipation of the return of travel.

Overall, Coty’s net revenues came in at $1.39 billion in the first quarter ended Sept. 30. This was up 1 percent from a year earlier and a touch above analysts’ forecasts of $1.37 billion, according to a Factset poll.

Prestige revenues declined 1 percent to $863.4 million on the back of currency fluctuations, the negative impact from Coty’s exit from Russia and from being constrained by industrywide fragrance component shortages, as well as difficult growth comparisons in the prior year when Coty shipped several blockbuster launches.

Nevertheless, Nabi said Kim Kardashian’s pricey Skkn by Kim launch earlier this year is continuing to perform well, with the full nine-step set still the most popular.

“Remember, this is about $500 retail price. So this says a lot about the fact that consumers are continuing to shop the full routine, which is quite unexpected I would say in the Western world. This is really happening usually in Asia so it’s a great sign of the health of this business,” Nabi said.

At the same time, Kylie Cosmetics is continuing to expand its brick-and-mortar presence, with retailers reporting that the brand is helping to bring younger shoppers through their doors, according to Nabi.

Demand for prestige fragrances remained strong, with Coty citing the recently launched Gucci Flora Gorgeous Jasmine as building on the momentum of last year’s top-selling Gucci Flora Gorgeous Gardenia, while Burberry Hero also performed well.

Consumer beauty revenues grew 5 percent to $526.6 million, boosted by a strong launch pipeline and brand initiatives in its body care business, including Adidas’ Skin & Mind premium and sustainable body care range, Monange’s silicone-free deodorant, and Bozzano’s clinical range.

On a geographical split, EMEA sales declined 3 percent as reported but grew 11 percent on a like-for-like measure, fueled by significant travel retail momentum. The Americas saw strong momentum in Brazil and Latin America, while the continued strength in U.S. demand was counterbalanced by supply constraints, increasing 4 percent as reported and 5 percent like-for-like. Asia Pacific grew 6 percent as reported and 12 percent like-for-like, while China revenues returned to growth year-over-year.

Net income was $125.3 million, up from $103 million in the prior year. Reported earnings per share were $0.15, above last year’s $0.13. Adjusted EPS was $0.11, up from $0.08 in the prior year. Analysts had expected adjusted EPS of $0.12. Coty kept its current full-year guidance in place for sales growth between 6 percent and 8 percent and adjusted earnings per share between $0.32 and $0.33.

“While Coty has certainly benefited from a resilient beauty category, I am particularly pleased that our balanced growth strategy remains in full force. We delivered robust growth across all of our regions, each of our key categories including fragrances, cosmetics, skin care and bodycare, and across both divisions. This has allowed us to again report sales growth well above the underlying beauty market and among the best in our competitive set,” added Nabi.

You May Also Like