UPDATE (November 6, 2024): Coty Inc. has announced its results for the first quarter of fiscal year 2025, ended September 30, 2024, which showed that net revenues grew 2% on a reported basis. However, like-for-like revenues grew 18%.
Category Sales Trends
Results were boosted by growth in fragrances across the pricing spectrum (prestige scents up 9% like-for-like) and offset by slowing mass cosmetic sales. Prestige cosmetics were also hit by cautious orders from retailers.
Prestige beauty Q1 net revenues increased 5% on a reported basis, impacted by the divestiture of the Lacoste license; like-for-like net revenues, however, grew by 7%.
Consumer beauty Q1 like-for-like net revenues were flat compared to a 10% gain in the same period the year prior.
Highlights included mass fragrance and skin care, offset by the previously mentioned decline in mass cosmetics (primarily in the United States), as well as a drop in body care results.
Brand and product highlights included Kylie Cosmetics, Marc Jacobs Daisy Wild and Cosmic Kylie Jenner, Adidas, Nautica, Beckham and Mexx, and Lancaster.
Regional Results
EMEA like-for-like sales were up 8%, compared to a 4% rise in the Americas. Mexico and South America, alongside travel retail, drove growth in the retion, though U.S. consumer beauty sales weere down.
Asia Pacific net revenues declined 5%, like-for-like, with the primary culprit again being China's weak market.
Meanwhile, Coty's e-commerce net revenues grew in the mid-single-digits in the period, with penetration reaching 20%.
Beauty Entering an Era of Normalization
Of the results, CEO Sue Nabi said:
As we enter FY25, the macroeconomic environment remains as complex as ever and the outsized growth of the last few years is now entering the normalization phase. Nevertheless, one thing is very clear: consumers continue to prioritize beauty in their spending routines, even as they pull back on many other consumer segments. And within the broader beauty backdrop, fragrances remain a top performing category. As a beauty leader, and increasingly as a beauty trendsetter, Coty remains at the forefront of fueling consumer desire and driving category growth through disruptive launches, new and improved formulations, and engaging activations and campaigns.
First, we continue to deliver sustained LFL sales growth. In fact, we are further building on our multi-year track record of outperformance. We have delivered LFL growth which is ahead of the leading global beauty players in 9 out of the last 13 quarters. This confirms that our growth is a result of our clear strategic vision, strong execution and our ability to seize on and develop beauty trends in each of our core categories. This strong operational and financial execution has been recognized by stakeholders, as we have achieved 11 consecutive financial upgrades from rating agencies since 2021.
Second, the fragrance market remains robust and remains a top performing category in beauty, with more consumers entering the category, using fragrances more often, and exploring with a variety of concentrations and formats. This reinforces our view that the structural drivers for the category will allow it to continue to grow inline to ahead of the underlying beauty market in the coming quarters and years. At Coty, as we continue to leverage our best-in-class end-to-end fragrance expertise and to set the trends in the industry, we are reinforcing our leadership in prestige fragrances while simultaneously unlocking more opportunities across the full price spectrum ranging from mass and masstige fragrances, all the way up to ultra premium and niche fragrances. In Q1, we delivered robust sales growth in each of these fragrance price tiers.
Third, we are step-changing our efforts to adapt Coty for future success in the ever more dynamic market environment. We are accelerating existing plans and adding new initiatives across all parts of the organization, whether its establishing centers of excellence for various operations, accelerating our speed to market, adapting our organizations for the increasingly omnichannel world, and maximizing the benefits of emerging technologies and artificial intelligence. Not only will these efforts enable Coty to lead in the beauty market of tomorrow, but they are also bringing additional savings in FY25 and beyond, supporting our ability to deliver our FY25 adjusted EBITDA target of close to double-digit growth.
Fourth, we will continue to play the full range of our brands and categories to capture growth opportunities and support sustained outperformance. We continue to grow our footprint across growth engine markets, expand our product range and distribution across skincare, prestige cosmetics, mass fragrances and ultra premium fragrances, and capture share in growth channels like e-commerce and travel retail.
And finally, as we continue to deliver strong profitability and free cash flow in FY25 and beyond, we will deploy this cash toward shareholder returns, further deleveraging, and amplifying Coty’s growth trajectory.
As we strengthen our position as a global beauty powerhouse, acting with the agility of smaller brands but also creating the beauty trends of today and tomorrow, Coty remains one of the most compelling investment opportunity in our industry.
Previously (October 15, 2024): Coty's preliminary Q1 sales results increased 4-5% (all figures like-for-like), missing the previous estimate of of 6%; full results will be released November 6, 2024. Q1 adjusted EBITDA is expected to be "roughly flat to moderately lower" year-over-year, though the company is expecting a significant gross margin expansion.
The company has cited "retailer caution" and a slowing U.S. market in anticipating moderate Q2 growth. Global growth, meanwhile, has been "solid," per the company, but slower overall compared to recent quarters, per Coty.
Other challenged markets include Australia, China and Asian travel retail. China, in particular, represents a relatively low exposure compared to other giants such as The Estee Lauder Companies.
That said, second-half fiscal 2025 sales are expected to pick up the pace, in part driven by "strong launch initiatives" and expanded distribution.
Coty is now forecasting a full-year fiscal 2025 EBITDA increase of 9-11%.
Top performers in Q1 fiscal 2025 included prestige fragrance, led by volume and price gains. Mass beauty, on the other hand, is experiencing a drop in unit demand and, therefore, slower growth.
In response to challenged results, Coty is enacting "cost reduction efforts" to boost its expected savings above original forecasts in the hopes of offsetting any misses in sales.
