COTY Reports Double-Digit Growth in Beauty Market

Coty Inc. (NYSE: COTY) shared its performance highlights for the third quarter of fiscal year 2024, concluding on March 31, 2024. The Company showcased robust sales growth surpassing market expectations, along with notable expansions in operating income and gross margins, reinforcing its consistent track record of meeting or exceeding projections over the past four years.

During Q3 2024, Coty experienced an 8% increase in net revenues on a reported basis and a 10% growth on a like-for-like (LFL) basis. This growth was underpinned by strong performances across fragrances, color cosmetics, skin care, and body care categories. Notably, these results exceeded the Company’s guidance range of +6-8% LFL for the latter half of FY24. Year-to-date, net revenues saw a 13% uptick on both reported and LFL bases. Coty sustained balanced growth in reported net revenues across its Prestige and Consumer Beauty segments, spanning all regions and core categories, although Q3 faced a 2% headwind due to the Lacoste license divestiture.

In Q3 2024, Prestige net revenues surged by 8% on a reported basis and 13% on a LFL basis, while year-to-date figures exhibited a robust 17% growth on both reported and LFL bases. Despite challenges such as the Lacoste license divestiture and currency fluctuations, Prestige segment’s growth remained strong, especially in fragrances, cosmetics, and skin care.

Meanwhile, Consumer Beauty net revenues witnessed a 6% increase both on a reported and LFL basis in Q3 2024, with year-to-date revenues growing by 8% on a reported basis and 7% on a LFL basis. This growth was primarily driven by color cosmetics, mass fragrances, and mass skin & body care, offsetting market weaknesses observed in U.S. mass cosmetics.

Coty’s reported net sales momentum in Q3 2024 was buoyed by robust growth across all regions, with double-digit percentage increases in reported net revenues observed year-to-date. In the Prestige segment, Coty gained market share across all three regions during Q3. Specifically, the Americas saw an 8% reported net revenue rise (11% LFL) in Q3, driven by strong growth in Latin America, Canada, and the Travel Retail channel. EMEA reported a 7% increase (9% LFL) in net revenues, while Asia Pacific witnessed a 7% rise (11% LFL), driven by growth in various Asian markets and the Travel Retail channel.

Coty achieved significant gross margin expansion in Q3 2024, with reported and adjusted gross margins reaching 64.8%, marking a 190 basis points increase year-over-year. This improvement was attributed to factors such as premiumization, pricing strategies, supply chain efficiencies, and easing inflation. The Company’s reported operating income soared by 79% to $77.8 million, with a reported operating margin expansion of 220 basis points to 5.6%. Adjusted operating income grew by 17% to $143.9 million, resulting in a 90 basis points expansion in adjusted operating margin to 10.4%. However, reported and adjusted net incomes experienced declines, primarily due to mark-to-market losses in the current period compared to gains in the previous period, offset by higher operating income.

In terms of cash flow, Q3 2024 witnessed operating activities yielding $(170.0) million and free cash flow standing at $(234.3) million, consistent with seasonal trends. On a year-to-date basis, operating activities generated $438.1 million, with free cash flow at $252.7 million. Total debt by the end of Q3 stood at $3,972.3 million, while financial net debt amounted to $3,712.1 million, resulting in respective total debt to net income and financial leverage ratios of 16.5x and 3.4x. Coty’s retained 25.8% Wella stake was valued at $1,080.0 million, supporting an economic net debt of $2,632.1 million at quarter-end.

Source Link