Coty Grows Revenues for Its Q3 2014 Financial Results

Coty Inc. announced financial results for the fiscal third quarter ended March 31, 2014. Net revenues were $1.008 billion, increased 2% like-for-like and 1% as reported relative to the prior-year period, and adjusted operating income was $81.4 million, decreased from $103.7 million in the prior-year period.

For its first nine months of fiscal 2014, Coty reported net revenues of $3.51 billion, decreased 2% like-for-like and as reported relative to the prior-year period, and adjusted operating income of $450.8 million, decreased from $527.4 million in the prior-year period.

Commenting on the company's performance, Michele Scannavini, CEO of Coty Inc., said, 
"Coty returned to revenues growth in the third quarter. The majority of our power brands showed positive development thanks to a competitive innovation program, and growth in the emerging markets accelerated to 15%. Both prove our strategic focus on these brands and geographies is starting to bear fruit. While market conditions remain challenging in some product segments in parts of the world, we are sticking to our current strategy and targeting for continued growth for the remainder of the calendar year while working to significantly improve the cost profile of the business."

In revenue by segment for the third fiscal quarter 2014, fragrances grew 6% like-for-like to $508.1 million, supported by growth in four out of Coty's five fragrances power brands: Calvin Klein, Davidoff, Marc Jacobs and Playboy.

Skin and body care revenue increased 8% like-for-like to $155.7 million, as Philosophy continued its growth momentum, Adidas benefitted from its traction in the emerging markets, and Lancaster saw strong growth particularly in the sun category. Philosophy experienced growth across its three key distribution channels, including retail, QVC, and e-commerce supported by higher demand for new launches and existing core franchises, and positive progress in international expansion also fueled the brand strength. Adidas was fueled by momentum in the emerging markets, including China, Brazil, the Middle East, South Africa, and Southeast Asia, but TJoy continued to struggle during the quarter, in spite of the launch of a new ginseng product line, Hydractive, in December 2013, and the reorganization of the management team and distribution network.

Coty determined that the actions taken by the company to revamp the TJoy business in the China mass channel have not improved the actual and projected cash flows in the business. As such, the company has recorded a non-cash asset impairment charge of $316.9 million in the skin and body care segment. On a prospective basis, this action will result in approximately $8.3 million of annual amortization savings, which should benefit the ongoing profitability of the skin and body care segment. The company is actively evaluating a number of options for its mass channel business in China, with the objective of further improving profitability in the region and in the skin and body care segment.

,p>Color cosmetics' 6% decline (net revenue for the quarter of $344.9 million) reflected continued pressure on the nail category in the U.S., partially offset by strong Rimmel performance. Rimmel continued to grow at a fast pace, gaining market share in Europe and the U.S. supported by a strong innovation pipeline, and gaining traction in the emerging markets.

By geographic region, the growth was driven by EMEA and Asia Pacific, partially offset by continued challenges in the overall U.S. market. EMEA net revenues increased 8% in the quarter to $499.9 million, supported by strong results in the U.K., Southern Europe, Eastern Europe, South Africa, and the Middle East. Asia Pacific revenues grew 19% to $126.6 million, with strong momentum in Australia and Southeast Asia. For the Americas, net revenue decreased 9% ($382.2 million for the quarter.) Emerging markets had very strong 15% growth, aided by the company's new joint ventures and subsidiaries in Southeast Asia, South Africa, and the Middle East. Net revenue growth was helped by favorable comparison due to cancelled and unshipped orders in the prestige distribution channel in the prior-year period, following the transition to a new third-party logistics provider in Europe.

And in its outlook for the fiscal 2014 fourth quarter and fiscal 2015, Coty noted that while market conditions remain challenging, particularly in the mass channel in North America, the company is targeting to keep growth momentum for the remainder of the calendar year. While it expects the fiscal 2014 fourth quarter to be overall flat due to comparison with a strong quarter in the prior-year period, Coty is  targeting growth acceleration in the first half of fiscal year 2015 supported by a powerful innovation plan on its power brands  and further development in the emerging markets.

Find additional details from this Coty financial report here.

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