Coty Inc ((COTY)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Coty Inc’s recent earnings call painted a mixed picture for investors, with notable achievements in certain areas being tempered by challenges in others. The company celebrated significant growth in its prestige fragrance segment and EBITDA expansion, alongside a strong performance in digital commerce. However, these positives were overshadowed by difficulties in the U.S. market, revenue declines, and cost pressures, leading to a cautious immediate outlook.
Prestige Fragrance Growth
Coty’s prestige fragrance business has become a cornerstone of its success, now valued at $3.5 billion. The segment has delivered an impressive compound annual growth rate (CAGR) of 10% from fiscal 2021 to 2025, underscoring its robust performance and strategic importance to the company’s portfolio.
EBITDA Growth and Margin Expansion
The company reported a strong CAGR of 9% in EBITDA, rising from $760 million in fiscal 2021 to $1.08 billion in fiscal 2025. This growth was accompanied by an expansion in EBITDA margin by 190 basis points, reaching 18.4%, highlighting Coty’s operational efficiency and profitability improvements.
Debt Rating Improvements
Coty has achieved 12 consecutive debt rating upgrades since fiscal 2020, positioning the company just one notch below investment grade across all major rating agencies. This reflects the company’s strengthened financial position and improved creditworthiness.
Digital and E-Commerce Growth
Digital commerce has been a bright spot for Coty, with e-commerce revenues reaching $1 billion in fiscal 2025. The Consumer Beauty segment outpaced the market with an 18% sellout growth, showcasing the company’s successful digital transformation efforts.
Fragrance Market Leadership
Coty has solidified its position as a leading player in the fragrance market, holding a top 3 spot in the $50 billion prestige segment and the #1 position in the $7 billion mass market. This leadership is a testament to the company’s strong brand portfolio and market strategy.
U.S. Market Challenges
Despite global successes, Coty faced significant challenges in the U.S. market, losing market share in both the prestige and mass segments. Like-for-like sales declined by mid-single-digit and mid-teen percentages, respectively, indicating a need for strategic adjustments in this critical market.
Q4 Revenue Decline
Coty reported a 2% decline in net revenues for fiscal year 2025 on a like-for-like basis, with a sharper 9% decline in Q4. These figures highlight the revenue pressures the company is facing, particularly in the latter part of the fiscal year.
Inventory and Innovation Challenges
The company encountered significant pressures from retailer inventory buildup and challenges from lapping fiscal year 2024 innovations. These factors have impacted fiscal year 2025, necessitating a focus on inventory management and innovation strategies.
Tariff and Cost Pressures
Looking ahead, Coty anticipates a gross tariff headwind of approximately $70 million in fiscal year 2026. Additionally, a more promotional environment is expected to impact gross margins, posing further challenges to the company’s cost structure.
Forward-Looking Guidance
Coty’s leadership provided guidance for fiscal year 2026, indicating expectations for sequential improvements in sales and profit trends. The company anticipates a return to growth in the second half of the year, driven by new fragrance launches and strategic investments in high-return areas. Despite a 2% like-for-like decline in net revenues for fiscal year 2025, Coty remains optimistic about its future prospects.
In conclusion, Coty Inc’s earnings call highlighted a blend of achievements and challenges. While the company has made significant strides in prestige fragrance growth and digital commerce, it faces hurdles in the U.S. market and revenue declines. The forward-looking guidance suggests a cautious optimism, with expectations for a turnaround in the latter part of fiscal year 2026. Investors will be keenly watching how Coty navigates these dynamics in the coming months.