Coty Has Seen Growth Across Categories And Price Tiers, Says Analyst

  • Raymond James analyst Olivia Tong reiterated an Outperform rating on the shares of Coty Inc COTY with a price target of $13.
  • Ahead of its presentation at a competitor conference, COTY issued a press release raising its F3Q LFL sales growth forecast.
  • COTY narrowed its FY23 LFL sales growth forecast to the upper end of its +6-8% outlook range while leaving its FY23 forecasts for margins and EPS unchanged as it plans to continue heavier support into skincare and recent launches, noted the analyst.
  • Last month, COTY had already said that momentum post-holiday had continued, and that F3Q was tracking ahead of the 7% LFL sales growth clip in F2Q.
  • The company attributed the progress to improving service levels, which has been a challenge, particularly in Prestige Fragrances.
  • The analyst raised the F3Q sales forecast by 3pts to +10% y/y on an LFL basis, which results in 8% growth when including the exit of Russia and 5% on a reported basis.
  • For FY23, the analyst maintained sales growth forecast for +8% LFL, +6%, including the Russia exit, and +1% reported. 
  • COTY of today is significantly better positioned than in the past, with more broad-based growth across categories and price tiers, and productivity improvements, said the analyst.
  • The company is still navigating its fair share of headwinds, including softer sentiment and heightened geopolitical risks, particularly in Europe, where it generates nearly 50% of its sales. The analyst noted FCF generation has improved, fragrance continues to be in demand, and there is a meaningful pipeline of innovation in skincare to drive COTY’s steep catchup in skincare.
  • Price Action: COTY shares are trading higher by 2.27% at $11.03 on the last check Thursday.
  • Photo Via Company
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