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Coty Revenue Falls in Q1 Fiscal 2014

Posted: November 7, 2013

Coty Inc. announced financial results for the first quarter of fiscal 2014, ended September 30, 2013. Net revenues of $1.178 billion for the quarter, a decrease of 2.6% like-for-like and 2.9% as reported relative to the prior-year period. Adjusted net income of $108.3 million for the period decreased from $117.8 million in the prior-year period.

Commenting on the company's performance, Michele Scannavini, CEO of Coty Inc., said, "In the first quarter we faced a significant market slowdown in the fragrance and nail categories, particularly in the U.S. This triggered heavy trade destocking and a slower order pace that meaningfully affected our U.S. mass market and overall business. On the other hand, we are very pleased with our growth in the prestige channel and in the emerging markets, areas we had targeted for accelerated development. While our business is facing challenges in the first half of the fiscal year, we are targeting the return to sustained top-line growth in the second half, fueled by strong initiative plans on our power brands, particularly in the color cosmetics segment, and further acceleration of our business in the emerging markets. During this time, we will continue with our successful efforts to further optimize our cost structure and increase the cash generation from our business."

The like-for-like decline was driven by the Americas, which saw a 10% decline primarily caused by consumption slowdown in the mass nail and fragrance markets, and consequently reduced low orders and trade destocking particularly in the U.S. mass channel. Excluding the Americas, net revenues in the rest of the world grew, with EMEA up 2% and Asia Pacific up 7%. Emerging markets had strong 8% growth. By segment, the decline was concentrated in color cosmetics, particularly in Sally Hansen, which was impacted by the sudden and sharp trend inversion in the U.S. nail market as well as increased competitiveness in the category. Fragrances grew 1%, led by power brands Calvin Klein, Chloe and Davidoff. Skin and body care had a marginal decline, with philosophy recording solid growth for the second consecutive quarter.

In its outlook, Coty expects to see the challenges coming from the market slowdown and trade destocking in the U.S. and from the highly promotional environment in Europe to continue in the next quarter. In the second half, Coty targets returning to top-line growth in line with or better than the markets where the company competes, fueled by further acceleration of its growth in emerging markets, competitive innovation, and investment plans supporting its power brands.

More details on this report from Coty are available here.