Coty's Preliminary Q1 Results: Slower Sales Growth, Reaccelerates Cost Savings & More

Coty Inc. COTY shares are trading lower today. On Monday, the company reported preliminary first-quarter results, with sales growing around 4%-5% on a like-for-like basis slightly below earlier estimate of 6%.

The company says Prestige fragrances are thriving due to increased volume and price, while mass beauty faces slower growth driven by declining unit demand.

However, Coty has achieved revenue growth in other key markets and remains relatively unaffected by the challenges in China due to its limited exposure there.

The company expects the first quarter adjusted EBITDA to be flat to moderately lower year-over-year.

Coty reports that lower-than-expected order patterns in the latter half of the first quarter, coupled with investments in high-ROI initiatives, fixed cost timing, and the profit impact from divesting the Lacoste license, are the contributing factors.

Cost Saving Initiatives: Coty plans to re-accelerate its cost reduction initiatives due to uncertain demand and cautious retailer behavior. It aims to achieve savings exceeding the initial FY25 target of $75 million.

Q2 & FY24 Outlook: Given ongoing caution from retailers and a slowing U.S. market, Coty now expects moderate second-quarter LFL sales growth.

The company anticipates growth acceleration in the second half, aided by easier comparisons, improved alignment between sell-in and sell-out, strong product launches, and selective distribution expansion.

Coty reiterated that FY25 adjusted EBITDA will grow 9%-11% year over year, supported by ongoing sales growth, gross margin expansion, and cost savings.

Coty plans to release first quarter results on November 6, 2024.

Price Action: COTY shares are down 10.1% at $8.24 at the last check Tuesday.

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