Coty’s premium fragrances, cosmetics launches drive quarterly revenue beat

Coty beat Wall Street estimates for second-quarter revenue on Wednesday, powered by higher pricing and strong demand for its high-end Burberry and Gucci fragrances and fresh launches of cosmetics in the U.S. during the holiday season.

The company’s newer products such as Burberry Goddess and CoverGirl Clean Fresh Yummy Gloss helped pull in customers in the U.S. compared to bigger rival Estee Lauder, which flagged feeble demand in the country and is doubling down on new launches and reinventing existing products.

In the Americas region, Coty’s net revenue rose 10% to $687.9 million, accounting for 40% of its total sales.

Coty invested in social media promotions and collaborated with influencers, which helped its prestige and consumer beauty divisions gain market share in the e-commerce segment.

The CoverGirl parent’s little exposure to the China market also shielded it from the economic uncertainties in the country that hit demand for other luxury companies such as Estee.

“China remains a fantastic opportunity … and there is premiumization and this is where Coty is very well positioned. So, we are growing much faster than the market in the second quarter … and are gaining shares in prestige fragrances,” CFO Laurent Mercier told Reuters.

Coty’s prestige revenue in Mainland China grew in double-digit percentage. Its total net revenue for the second quarter rose 13% to $1.73 billion, beating LSEG estimates of $1.68 billion.

But net income fell 24% to $177.6 million in the quarter, mainly due to higher costs of production. Adjusted gross margin decreased by 40 basis points to 65.1%, largely because of obsolete inventory.

Coty posted adjusted earnings per share of 25 cents, including a non-operating EPS benefit of 6 cents from mark-to-market on the equity swap due to stock price increase. Analysts on average expected 20 cents.

The company maintained annual core sales growth projection of 9% to 11% and its adjusted per-share profit forecast of 44 cents to 47 cents.