Coty Inc. reported a surprise increase in fourth-quarter revenue on Wednesday, driven by demand for fragrances and cosmetics. The company announced that fiscal 2027 will serve as a "transition year" as it undergoes a strategic review aimed at simplifying its business and focusing on core brands.
The company is currently advancing a strategy titled "Coty. Curated.," which includes a review of its consumer beauty division. This review, which Coty expects to finish by the end of the year, could result in the sale of brands such as CoverGirl and Rimmel. The company cited geopolitical conflicts and economic uncertainty as factors that have led customers to tighten their spending.
For the quarter ending June 30, Coty's net revenue rose 1.3% to $1.27 billion. This exceeded the 4.6% decline projected by analysts, according to LSEG data. However, the company reported an adjusted loss of 2 cents per share, which was wider than the 1-cent loss analysts had expected. Coty also named Soraya Benchikh, former finance chief at British American Tobacco, as its new CFO to replace Laurent Mercier.
Investors and consumers will see the scale of this transition through the early return of the Gucci Beauty license to Kering, a deal valued at $400 million. This move is expected to cause a sales hit in fiscal 2028, which the company intends to offset through its restructuring efforts to support profit growth by fiscal 2029. On a day-to-day level, consumers may notice a more selective range of products as Coty narrows its focus to key brands, though the company noted that demand for fragrances and cosmetics has remained resilient despite customers becoming more selective in their purchasing.
The company's performance and strategy serve as a bellwether for the broader beauty market, which is currently navigating a roughly 1% impact from Middle East conflicts and general economic headwinds. While peers like Estee Lauder and Elf Beauty have forecast stronger years ahead, Coty’s outlook remains cautious, with the company projecting a low- to mid-single-digit percentage decline in like-for-like revenue for the current quarter. Following the conclusion of the strategic review later this year, the company will enter its "transition year" in fiscal 2027, with the goal of returning to profit growth in fiscal 2029.