Financial Performance

Coty Misses Estimates as Sales Plunge 62%

“The coronavirus-induced closure of stores and parlors hammered demand for [Coty’s] beauty products” in the fourth quarter.
Matthew HellerAugust 27, 2020
Coty Misses Estimates as Sales Plunge 62%

Coty shares fell sharply on Thursday after the cosmetics maker reported a larger than-expected quarterly loss, citing the “external shocks” of the coronavirus pandemic.

For the fourth quarter, Coty’s net revenue plunged 62.8% to $560.4 million while its net loss narrowed to $722.8 million, or $1.01 a share, from $2.799 billion, or $3.72 a share, a year earlier. The company posted an adjusted loss excluding special items of 46 cents a share.

Analysts had expected an adjusted loss of 12 cents per share on revenue of $1.320 billion.

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“Coty’s fourth quarter was marked by external shocks, as the COVID-19 pandemic triggered a crisis in the real economy and supply,” Chairman and CEO Peter Harf said in a news release. The “severe sales contraction,” he added, led to “significant operating deleverage in the quarter.”

On news of the earnings, Coty shares dropped 8.8% to $3.50 in trading Thursday.

As Reuters reports, “the coronavirus-induced closure of stores and parlors hammered demand for [Coty’s] beauty products” in the fourth quarter. Sales at its consumer beauty segment, which houses brands such as Cover Girl, fell about 55%, while its luxury unit sales plummeted 71%.

The company said its Americas segment was boosted by the contribution from its partnership with Kylie Jenner but the Kylie Beauty brand “was pressured due to the lockdown of its cosmetics third party manufacturer’s fulfillment center during the majority of the quarter.”

Coty, which has recruited former L’Oreal executive Sue Nabi to take over from Harf as CEO, is expecting to return to profitability in the current quarter.

“Coty is back,” Harf said. In the last two months, we have seen a significant improvement in the business and we expect the positive momentum to continue, with a return to profit in Q1.”

According to the Financial Times, Coty is now planning to sell or shutter most of its factories and outsource more operations to deal with the fallout from the COVID-19 crisis.

But Barclays analyst Lauren Lieberman was skeptical. “We think it will be difficult to convince investors that Coty is on a better trajectory,” she said.

David Dee Delgado/Getty Images