Now that he’s the head of Coty Inc., will Peter Harf finally be the one who can fix the business?
That’s the plan, according to industry insiders, who say that Harf, founding partner of Coty majority owner JAB, assumed the chief executive officer role in order to instill a sense of urgency into the company and cut through red tape to get things done quickly.
The move marks a deviation from Coty’s previous plan, which was to hand the ceo’s position to former Jimmy Choo ceo and Coty board member Pierre Denis following the sale of the beauty company’s professional business. That did not happen and Denis is leaving Coty’s board, though he will stay on as a senior adviser.
“We were planning to spin off the Wella business before he would join on the first of June,” Harf told Wall Street analysts Monday morning. “That didn’t happen. I think he agrees that he is not really the best person in the world to affect such a complicated spin-off…there’s a full agreement with KKR, they’re very happy that I’m doing it.”
Sources indicated the move would reduce operational friction and “ensure alignment between the board and management.”
In addition to the Harf-Denis swap, Coty has created a three-person executive committee consisting of Harf, chief operating officer and chief financial officer Pierre-André Terisse, and Gordon von Bretten, who just joined Coty from KKR as the company’s chief transformation officer.
Harf, in a statement to WWD, said he discussed the change with KKR — which on Monday signed a deal to buy a majority stake in Coty’s Wella, Clairol, OPI and Ghd businesses — and that the firm was on board.
“We are living in a world that is very different today than it was just three months ago. Clearly there was a leadership challenge that urgently needed to be addressed, and when I discussed this with KKR, they felt no one could do the job better,” Harf said. “I founded today’s Coty, and during the 20 years which I had executive responsibility, the business grew 14 times. No one has more passion than me for Coty to succeed.
“Leading Coty is my top priority. Now, more than ever, Coty needs a strong but caring hand. My experience has shown me that leadership and taking accountability, together with a strong sense of urgency and action, is what matters most. It’s going to be hard work, but the task of returning Coty to its previous strength is truly energizing,” Harf continued.
Harf’s appointment comes as Coty navigates through the coronavirus pandemic, which has caused revenues to decline, and as the company works to close the deal with KKR, which is expected to happen in the next six to nine months.
Harf led Coty from 1990 to 2001, and most recently was chairman. While he has prior beauty experience, especially in fragrances, Harf is less familiar with the mass cosmetics businesses of Cover Girl, Rimmel and Max Factor that have caused the company grief since they were onboarded from Procter & Gamble in 2016. Coty is said to be hiring an executive to oversee that business.
Despite what Wells Fargo analyst Joe Lachky termed “yet another ceo change,” Coty’s stock was up nearly 20 percent on Monday. “We don’t expect significant strategic changes as the management team is now clearly aligned with the board…but we can’t help but wonder if the ceo about-face puts additional stress on an organization that is already in the midst of significant change,” Lachky said.
Stifel analyst Mark Astrachan voiced similar sentiments.
“I guess you do it because you hope to get to a different spot than you were at when you started, but you’re just moving pieces around at this point. I do wonder, too, how does everybody view what’s going on? It’s got to weigh on how people focus on their jobs,” he said.
“The problem with this…is that private equity people and smart people who have a financial background seem at times to struggle with beauty because there’s a bit of an art to it that is needed in addition to financial acumen,” said Astrachan.
Coty has been through years of executive shake-ups, which Harf acknowledged Monday. “In the last five years we had five ceo’s. I mean, that shows we lost our way,” Harf told analysts. “Coty, the first 20 years, was very nimble, a can-do culture, non-bureaucratic, fast, a fun place to work. That changed.”
Sources said Coty needs to grow its skin-care portfolio, which only makes up 5 percent of the total business, and business in the Asia Pacific region, which right now only makes up about 13 percent of the business. As China has bounced back after COVID-19, other beauty companies have been able to make up for lagging U.S. and European sales, but Coty has little exposure there.
For now, the plan seems to rely heavily on Kylie Cosmetics, which just rolled out Kylie Skin across Europe. So far, that’s done well, Harf said, bringing in $2 million in sales in its first three days.
But Coty has not yet been able to take digital and direct-to-consumer learnings from the Kylie business and run them through the product portfolio.
“This is a business that has its challenges no matter who is running it,” Astrachan said, speaking about Coty broadly. “There’s no quick fix to this.”
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