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Coty’s Revenue Disappoints on Covid Hit

Coty website.
Coty Inc posted quarterly revenue below estimates on Tuesday. (Shutterstock)

CoverGirl parent Coty Inc posted quarterly revenue below estimates on Tuesday, as stringent Covid-19 curbs in some markets hurt demand for its high-end cosmetics and perfumes.

Sales in Coty’s prestige division increased just 12 percent in the second quarter, compared with a 34 percent jump in the first, following stop-start lockdowns in Australia and New Zealand, along with a zero-Covid policy in China, a high-growth market for many US brands.

Still, sales rebounded in the United States and many other crucial markets as reopening offices and the return of social gatherings pushed up demand for makeup. Coty also benefited from its new line of products including the Flora Gorgeous Gardenia fragrance by Gucci and Rimmel’s Kind & Free collection.

Revenue from continuing operations increased 12 percent to $1.58 billion in the second quarter ended Dec. 31, while analysts polled by Refinitiv were expecting $1.60 billion. In November, the company forecast sales growth in the low teens.

“[Omicron] had a limited impact clearly. But... the sell-out of both divisions [prestige and consumer beauty] came around the mid-teens,” chief executive officer Sue Nabi said in an interview.

The Hugo Boss fragrance maker, however, forecast fiscal 2022 sales growth towards the higher end of its prior low-to-mid teens range, after seeing growth improve to 13 percent last month.

Helped by its move to double down on high-margin categories, including skincare, and markets where customers have more spending power, it raised its adjusted per-share profit forecast to between 22 cents and 26 cents from 20 cents to 24 cents.

Coty rival Estée Lauder Cos Inc also raised its expectations for full-year profit last week, benefiting from price hikes and consumers venturing out more.

In the reported quarter, Coty’s adjusted gross margin was 64.6 percent, up from 58.7 percent a year earlier. Adjusted per-share earnings rose by 4 cents to 17 cents.

By Praveen Paramasivam and Ananya Mariam Rajesh; Editor: Devika Syamnath

Learn more:

Coty Is Banking Its Future on Prestige and Celebrity

As sales recover, the cosmetics company is investing in brands like Kylie Cosmetics and Gucci Beauty to keep momentum going.

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