Coty's Luxury division was driven by Gucci, Miu Miu and Tiffany fragrance sales.

Coty Inc. is working with Calvin Klein chief creative officer Raf Simons on the future of the brand’s fragrance business, Coty chief executive officer Camillo Pane said.

The beauty company is relying on ties with the design community to bump up sales in its Luxury division, which includes the Gucci fragrance license. Pane said Simons’ involvement will mirror that of Gucci creative director Alessandro Michele, who was involved with the brand’s latest fragrance launch, Bloom.

“Raf is…involved in the new programs that will launch,” Pane said. “It will take time to see some of his involvement in creation to come to market, but I can confirm we’re working very well with him. We’re pleased with all the ideas and things we’re preparing…it will just take time for one of his creations to reach the market.”

Pane is expecting Gucci’s Bloom, which was introduced in early May, to do well, he told Wall Street analysts on the company’s earnings call Wednesday. 

Coty reported a $164.2 million loss for the third quarter, pulled down by acquisition and restructuring charges for its third fiscal quarter. The business posted $2 billion in sales, up 5 percent for the combined company year-over-year. Coty has been on an acquisition spree, buying 41 beauty brands from Procter & Gamble as well as Brazil-based Hypermarcas, hair brand Ghd, and a majority stake in social selling business Younique. The beauty player’s third-quarter numbers were hurt by the impact of $213.5 million in restructuring and acquisition charges. The loss per share was 22 cents.

For the first nine months of its fiscal year, Coty posted $5.4 billion in net revenues, with a $117.4 million loss (a 19-cent loss per diluted share). For that period, Coty had $454.1 million in pre-tax restructuring and acquisition-related charges.

“We expect Q4 to be worse than Q3,” Pane told analysts on an earnings call Wednesday morning.

“Overall while one quarter does not make a trend, we anticipate shares outperform given strongly negative sentiment and high relative short interest,” wrote Stifel analyst Mark Astrachan in a note. On Wednesday, Coty shares traded up 14 percent to $20.33 in midmorning trading.

By division, Coty’s Luxury segment, which houses designer fragrances, brought in $634.6 million for the quarter, up from $405.9 million in the prior-year period. Consumer Beauty had $988.6 million in sales, up year-over-year from $488.5 million. The Professional unit brought in $408.9 million, up from $56.3 million in the prior-year period.

The Luxury segment was up 2 percent at constant currency for the combined business, reflecting momentum from Hugo Boss, Calvin Klein and Chloe.

Shelf space reduction is plaguing Coty Inc.’s Consumer Beauty segment — but Pane said the company is working on plans to reinvigorate those brands, to improve productivity of existing shelf space and potentially win some of that space back.

“It’s a mix of both,” the ceo said. “The shelf space loss that has happened in the last couple of years in the key ex-P&G brands, we’re now in the process of preparing to revert some of it and definitely to increase productivity.”

Part of that plan includes making Cover Girl, which Coty bought as part of the P&G deal, “way more modern,” Pane said, declining to provide details. The Cover Girl relaunch is slated for early calendar 2018, he said. Aside from Cover Girl, he said Clairol and Max Factor have also lost shelf space.

Asked if a stockkeeping unit cut was in order as part of the revamp, Pane said the brand consistently looks at “optimizing” its assortment, but that providing a wide shade mix is vital.  “Shades and colors are incredibly important. If the consumer doesn’t find the right shade or color…they will potentially switch brands,” Pane said. “The loss of shelf space has been affecting our results because if you lose shades and colors, you can also lose sales.”

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