Coty Benefits From Strong Demand In Beauty Market; Q1 Revenue Grows 18%

Coty Inc COTY reported first-quarter FY24 sales growth of 18% year-on-year to $1.64 billion, beating the analyst consensus estimate of $1.58 billion.

The sales increase was fueled by double-digit percentage LFL growth in both Prestige and Consumer Beauty.

LFL revenue increased 18%, driven by a 22% LFL increase in Prestige and a 10% LFL increase in Consumer Beauty.

Revenue in the Americas rose 17% Y/Y, and EMEA increased 20%. Gross margin contracted 40 basis points Y/Y to 63.5%, and the gross profit increased 17.2% to $1.04 billion.

Adjusted operating margin was 18.4%, and the adjusted operating income increased 21% to $302.2 million.

Adjusted EBITDA of $360.3 million climbed 17% Y/Y, resulting in an adjusted EBITDA margin of 22%.

Adjusted EPS was $0.09, missing the analyst consensus estimate of $0.17.

Operating cash flow for Q1 totaled $186.2 million, with a free cash flow of $124 million. The company held $317.7 million in cash and equivalents as of September 30, 2023.

The company's financial net debt as of September 30, 2023, totaled $3.93 billion compared to $4.03 billion on June 30, 2023.

Coty also announced its offers to purchase for cash up to $150 million of its 6.500% Senior Notes due 2026 and up to $250 million of 5.000% Senior Notes due 2026.

Outlook: Coty expects FY24 LFL revenue growth of +9-11%, ahead of its recently raised guidance of +8-10%.

For the first half FY24, Coty now expects LFL revenue growth of +11-13%, an increase from its previous outlook of +10-12%.

The company sees FY24 adjusted EBITDA of $1.08 billion - $1.09 billion, above its recently raised EBITDA outlook of $1.075 billion - $1.085 billion.

Coty continues to target FY24 adjusted EPS, excluding the equity swap, of $0.44-0.47, with an estimate of $0.47.

In light of Coty's strong free cash flow trajectory in the first half FY24, its successful Paris dual listing, and given misalignment on final deal terms, Coty and its counterparties have decided to end the partial sale of its Wella stake. 

Also Read: Coty Would Gain Restoration Of Supply Levels, Encouraging Competitor Signals - Analyst Ahead Of Q1

Price Action: COTY shares closed higher by 0.61% at $9.91 on Tuesday.