- Coty Inc COTY reported third-quarter FY23 sales growth of 9% year-on-year to $1.29 billion, beating the consensus of $1.22 billion.
- The sales increase was fueled by accelerating demand for prestige fragrances, retailer restocking and Coty initiatives.
- LFL revenue increased 15%, driven by a 16% LFL increase in Prestige and a 12% LFL increase in Consumer Beauty.
- Revenue in the Americas rose 13% Y/Y and EMEA increased 7%.
- Gross margin contracted 140 basis points Y/Y to 62.9%, and the gross profit increased 6.3% to $810.8 million.
- Adjusted operating margin was 9.5%, and the adjusted operating income increased 8% to $122.7 million.
- Adjusted EBITDA of $181.9 million remained flat Y/Y, resulting in an adjusted EBITDA margin of 14.1%.
- Adjusted EPS was $0.19, beating the analyst consensus of $0.03.
- Cash from operating activities for Q3 totaled $(124.6) million, with a free cash outflow of $(178.5) million. The company held $277 million in cash and equivalents as of March 31, 2023.
- The company's financial net debt as of March 31, 2023, totaled $4.1 billion.
- Outlook: Excluding any mark-to-market adjustments on the equity swap, Coty raised FY23 adjusted EPS outlook from $0.35 - $0.36 to $0.38 - $0.39.
- Including the benefit from the equity swap and assuming the current share price holds, Coty now expects an overall FY23 adjusted EPS of $0.52-0.53, reflecting over 85% growth.
- The company continues to target a mid-20s percent adjusted EPS CAGR through FY26. It continues to target FY23 adjusted EBITDA of $955 million - $965 million.
- Coty raised FY23 revenue outlook for the core business, adjusting for the impact of the Russia exit, to grow 9%-10% LFL (previously 6-8% LFL).
- Coty continues to expect modest gross margin expansion in Q4 and FY23, despite the elevated inflationary environment.
- Price Action: COTY shares are trading higher by 1.82% at $12.33 in premarket on the last check Tuesday.
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