A GHD flatiron.

Coty Inc.’s numbers took a hit from its acquisition spree, but things are looking up for its Luxury and Professional divisions.

“We are very pleased with the positive momentum in luxury and professional beauty,” said Coty chief executive officer Camillo Pane. “The luxury market is slightly growing at best, and then the professional beauty market, to grow at 5 or 3 percent organically in these two [categories] shows that we have strong momentum and strong performance. This is driven by the brands, the strength of our portfolio.…This gives us confidence for consumer beauty.”

Coty posted a $437.8 million loss for the fiscal year ended June 30. That number includes a net increase of $466.7 million in restructuring and acquisition costs, and a $195.6 million net increase in amortization expense due to acquisitions, the company said.

For the year, net sales were almost $7.7 billion, up 76 percent. That figure includes the acquisitions Coty has made over the past year, including 41 beauty brands from Procter & Gamble, Ghd and Younique. Combined company net revenues declined 1 percent. Adjusted diluted earnings per share were 63 cents.

The company’s professional segment, introduced after Coty’s purchase of the beauty brands from P&G, is up 8 percent in combined-company year-over-year sales, with $1.4 billion in revenues for the fiscal year. The segment had 3 percent organic sales growth, bolstered by strong sales at Wella and improvements at OPI, particularly in North America, according to Pane.

OPI is growing again in North America after a period of sluggishness, due in part to the company’s reorganization and the brand’s placement within the professional division, Pane said. “OPI is managed by a group of leaders, which are completely focused and have the expertise of dealing with salon owners — they’ve done it for years,” he said. The brand is doing well with salons, as well as travel retail and premium outlets, he noted.

As of Aug. 1, OPI started rolling out a new innovation called the ProHealth System, which aims to provide less-damaging gel manicures. It comes with new packaging for the gel colors, Pane noted, which will now be in colored bottles that match the lacquer, instead of black bottles.

Coty’s Luxury division posted 5 percent organic sales growth, but was down 3 percent in combined-company year-over-year net sales with $2.57 billion in revenues. Pane called out several brands — including Hugo Boss, Gucci, Philosophy and Chloé — for strong sales. Gucci’s newest fragrance, Bloom, is “performing above our expectations,” he said.

The consumer division posted a 10 percent organic sales decline for the year and a 3 percent combined-company year-over-year decline. Figures were hurt by sales falls at Cover Girl, Clairol and Wella Retail, as well as Sally Hansen, which was brought down by a slow U.S. nail market.

Coty is in the midst of restaging Cover Girl, Pane said, noting the project includes new packaging, new positioning, new creative and a new in-store appearance. While he would not disclose further details on the project, which is expected to hit shelves early in calendar 2018, Pane noted the company’s recent Project PDA, or public display of application, campaign fits into the updated brand.

The campaign focused on New York subway advertisements that suggested people not put their makeup on on the train — something that didn’t sit well with the Coty team. “It’s not correct to ask women not to put makeup on in public but to use the restroom to do it….We believe in freedom of expression and applying makeup in public is part of that,” Pane said.

At Sally Hansen, trend collections are in the works. “The brand has been treated quite functionally in the past few years and we believe we need a much stronger emotional connection with consumers,” Pane said. “That doesn’t mean the functional innovation like Miracle Gel will not work in the market — we will keep working on new technology to improve consumer experience,” he said. Trend collections like the brand’s Crayola partnership or potentially a chrome grouping, could add to the offering.

“The consumer segment remains the company’s main focus, with a slowing U.S. mass beauty category, heightened competitive dynamics, and loss of shelf space for key brands headwinds that are likely to result in continued weakness for at least the next six to 12 months,” wrote Stifel analyst Mark Astrachan in a note.

Coty chief financial officer Patrice De Talhouët gave an update on the company’s plan to divest 6 to 8 percent of its portfolio, saying the process should be complete by the end of fiscal year 2018.

load comments
blog comments powered by Disqus