Coty (COTY) told investors a comeback was already underway. Growth was coming back. Profits were set to rebound. Everything looked on track. But according to the complaint, underlying business conditions were weakening even as management continued to project improvement.
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Investors who held Coty Inc. stock during a volatile stretch in late 2025 and early 2026 may want to take note of a newly filed federal securities lawsuit that alleges company insiders painted a far rosier picture of the business than internal conditions warranted.
A federal securities complaint filed on March 23, 2026, in the United States District Court for the Southern District of New York alleges that Coty and two of its senior executives made materially false and misleading statements to investors during the period from November 5, 2025, through February 4, 2026. According to the complaint, Coty’s stock dropped from a closing price of $3.43 per share on February 4, 2026, to $2.66 per share on February 6, 2026, a decline of approximately 22%, after the company disclosed disappointing second quarter results and withdrew its full-year guidance. Investors who purchased Coty common stock during the class period and suffered losses may wish to explore their options by visiting the firm’s website or contacting counsel directly.
What Coty Does and Why Its Business Was Under Watch
Coty Inc. is a Delaware-incorporated company headquartered at 350 Fifth Avenue, New York, NY 10118, whose shares traded on the New York Stock Exchange under the ticker symbol COTY during the relevant period. According to the complaint, Coty and its subsidiaries manufacture, market, distribute, and sell branded beauty products worldwide, operating through two primary segments: Prestige and Consumer Beauty. The company distributes fragrances, color cosmetics, and skin and body care products through prestige retailers including perfumeries, department stores, e-retailers, direct-to-consumer websites, and duty-free shops.
The Prestige segment, and in particular its fragrance business, sat at the center of Coty’s growth narrative during the class period. The Consumer Beauty segment, which includes mass-market cosmetics brands, was a focus during the class period, with management describing efforts to improve performance and newly assigned leadership reviewing the division.
What the Lawsuit Claims Went Wrong
The lawsuit alleges that defendants provided investors with overwhelmingly positive statements about Coty’s ability to drive growth and profitability in fiscal year 2026, while at the same time concealing material adverse facts about the company’s actual condition. Specifically, the complaint alleges that the Consumer Beauty segment was underperforming, that margins were being compressed by increased marketing investments, and that growth in the Prestige fragrance segment was slowing. Plaintiff alleges these omissions and misrepresentations caused investors to purchase Coty stock at artificially inflated prices.
The defendants named in the suit are Coty Inc. itself, Sue Nabi, who served as Chief Executive Officer and Director throughout the class period, and Laurent Mercier, the company’s Chief Financial Officer.
Investors who believe they may have been affected by the conduct alleged in this complaint are encouraged to learn more about their potential rights and the status of this case.
What Executives Said to the Market
On November 5, 2025, Coty released first quarter fiscal year 2026 results and accompanying guidance. According to the complaint, CEO Sue Nabi stated that underlying business trends were already improving in line to slightly ahead of expectations, particularly in Prestige, and that the company expected second quarter sales to land at the more favorable end of prior guidance with a return to sales and profit growth in the second half of fiscal year 2026.
During the accompanying earnings call, Nabi highlighted what she described as decisive steps to improve return on investment and operational efficiency, referencing a new performance and operational excellence office, AI implementation across the company including content automation and predictive analytics, and new leadership appointments in the Consumer Beauty segment. CFO Laurent Mercier added that the company continued to target approximately $1 billion in adjusted EBITDA for fiscal year 2026 and expected positive EBITDA in the second half supported by a return to sales growth. During the question-and-answer portion of the same call, Nabi cited continued fragrance market dynamism and noted that Coty was growing at twice the rate of the fragrance market in certain channels.
How the Alleged Truth Emerged
On February 4, 2026, after markets closed, Coty released prepared remarks for its second quarter fiscal 2026 earnings in which newly appointed Interim CEO Markus Strobel acknowledged that Coty’s financial results in the past 18 months had been disappointing and that the stock had been hovering around $3, which he characterized as a signal of investor skepticism about the company’s long-term ability to compete. Strobel disclosed that in the critical fragrance category during the second quarter, Coty’s sell-out was flattish and underperforming the market by several points, a reversal from the progress management had described just months earlier. Coty’s stock declined approximately 8% on February 5, 2026, falling from $3.43 to $3.15 per share.
On February 5, 2026, Coty published its full second quarter results, which were below expectations, and formally withdrew its fiscal year 2026 guidance for adjusted EBITDA and free cash flow. The company disclosed that adjusted EBITDA for the first six months ended December 31, 2025, had declined 17% year over year, with adjusted EBITDA margin declining by 330 basis points. Management further provided guidance for the third quarter that anticipated a mid-single-digit like-for-like revenue decline and projected adjusted EBITDA of only $100 million to $110 million for the period. Following this disclosure, Coty’s stock fell an additional approximately 16%, declining from $3.15 on February 5 to $2.66 on February 6, 2026.
Why Investors in Coty During This Period May Care
The complaint contends that investors who purchased Coty stock between November 5, 2025, and February 4, 2026, did so at prices that were artificially inflated as a result of the alleged misrepresentations and omissions. At the heart of the case is the allegation that defendants knew, or were recklessly unaware, that the Consumer Beauty segment was struggling, fragrance growth was decelerating, and the company lacked the operational discipline to achieve its stated fiscal year 2026 targets, all while making public statements projecting confidence in those very outcomes. The combined stock drop across the two corrective disclosure dates totaled approximately 22% from the February 4 closing price.
Following the disclosures, the complaint notes several Wall Street analysts lowered their price targets, with some citing limited visibility into the scale of required reinvestment and the timing of operational improvements, and others pointing to misjudged innovation timing and strategic execution challenges.
The Legal Framework Behind This Case
The complaint asserts two counts under federal securities law. Count I is brought against all defendants under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, alleging that defendants engaged in a fraudulent scheme by making untrue statements of material fact and omitting facts necessary to render those statements not misleading in connection with the purchase and sale of Coty securities. Count II is brought against the individual defendants, Sue Nabi and Laurent Mercier, under Section 20(a) of the Exchange Act, alleging they are liable as controlling persons who directed and participated in the alleged primary violations.
Investors who purchased Coty common stock during the class period and would like to understand their potential legal rights are encouraged to contact Levi & Korsinsky, LLP for more information.
About Levi & Korsinsky, LLP
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