Coty Q4 Results: 16% Revenue Growth, Margin Expansion, FY24 Outlook & More

Coty Inc. COTY reported fourth-quarter FY23 sales growth of 16% year-on-year to $1.35 billion, beating the consensus of $1.31 billion.

Adjusted EPS was $0.01, missing the analyst consensus of 0.02.

Coty's sales were driven by consistent momentum in both divisions, supported by robust global demand across categories, geographies, and channels.

In Q4, Prestige net revenues rose 21% Y/Y to $799.6 million (59% of sales), while Consumer Beauty's net revenues increased by 9% to $552.0 million (41% of sales). 

Also Read: Coty Divests 3.6% Stake In Wella Brand For $150M

LFL revenue increased 17%, driven by a 21% LFL increase in Prestige and a 10% increase in Consumer Beauty.

Revenue in the Americas rose 11% Y/Y, Asia Pacific soared 34%, and EMEA increased 15%.

Adjusted gross margin of 62.8% increased by 70 bps from 62.1% last year. The margin expansion was mainly driven by pricing execution, mix management, and supply chain productivity.

Q4 adjusted EBITDA was $165.4 million, up 25% from the prior year, due to higher sales and gross profit. The adjusted EBITDA margin was 12.2%, up 90 bps Y/Y.

Q4 adjusted operating income was $105.1 million, up 61% Y/Y. The adjusted operating margin was 7.8%, reflecting 220 bps of margin expansion.

COTY exited the quarter with cash and equivalents worth ~$284 million.

Financial net debt was $4.034 billion on June 30, 2023.

"We are actively strengthening our positioning in the smaller but rapidly growing ultra-premium fragrance category. Whether it's through our Chloe Atelier des Fleurs collection whose sales have grown by 5x versus two years ago and are on track to accelerate further as we rapidly expand our global distribution, or through the upcoming launch of our internally developed Infiniment Coty Paris fragrance brand, we are seizing this white space opportunity," said Sue Y. Nabi, Coty's CEO.

Also See: Coty Renews License Agreement With Adidas

Outlook: Coty targets total FY24 adjusted EPS, excluding equity swap, of $0.44-$0.47, which implies 16%-25% Y/Y growth (Street View: $0.48).

The company expects the core business to grow at the top of its medium-term target range of 6-8% LFL.

Coty is targeting FY24 adjusted EBITDA margin expansion of 10-30bps, with similar performance in 1H24 and 2H24. This implies FY24 adjusted EBITDA of $1.065 billion-1.075 billion.

Coty expects modest FY24 gross margin expansion Y/Y. The company continues to target further reduction in leverage toward ~3x exiting CY23, ~2.5x leaving CY24, and ~2x exiting CY25.

Price Action: COTY shares are trading lower by 0.64% at $10.90 in premarket on the last check Tuesday.