Nov 9, 2016
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Coty's revenue misses on weak demand for perfumes, cosmetics

Nov 9, 2016

Beauty products maker Coty Inc reported reported lower-than-expected quarterly revenue, due to a slump in demand for its fragrances and color cosmetics, and said the slowdown in revenue would continue in the current quarter.

The company's stock fell as much as 15.6 percent to $18.48 on Wednesday, a day after the U.S election, its lowest level since January last year.


On a call with analysts, executives attributed the continuing sales weakness to distractions caused by the integration of Procter & Gamble Co's specialty beauty business, which Coty acquired for $12.5 billion.

"People are not necessarily fully focused on the business ... they are in transition ... helping out on the integration of the business so those have caused distractions and caused us to lose momentum in the business," Coty Chairman Bart Becht said on the call.

The company also said that challenges in the consumer beauty business and the previously-announced sale of 6-8 percent of its product portfolio would hurt second-quarter sales.

Becht said the results of the recently concluded U.S. presidential election do not affect the company's plans.


Fragrance sales fell 9 percent on a like-for-like basis, while color cosmetics fell 6 percent in the first quarter ended Sept. 30. These two segments are its biggest contributors to revenue.

"This period of integration for Coty has been met with less than stellar underlying performance and lack of clarity has created anxiety in the stock," Piper Jaffray analyst Stephanie Wissink said in a note.

Coty has inked multiple deals to transform itself into a global beauty products giant, as it reduces its dependence on its struggling fragrance business.

After buying P&G's specialty beauty business, the company acquired ghd, a high-end hairstyling appliance brand, from private equity firm Lion Capital LLP for about $522 million.

Coty posted no profit during the first quarter ended Sept. 30. In the year-earlier quarter, the company reported a net income of $125.7 million, or 34 cents per share.

Net revenue fell to $1.08 billion from $1.11 billion.

Analysts on average had expected revenue of $1.14 billion, according to Thomson Reuters I/B/E/S.

Shares of Coty, which owns cosmetics brands like COVERGIRL and Rimmel, were down 13.2 percent in early trading. The stock has fallen as much as 23 percent in the last 12 months.

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