Coty misses sales forecasts due to subdued retail orders and Lacoste license sale

Coty, the parent company of CoverGirl, missed fourth-quarter sales expectations on Tuesday. The group was hit by the sale of the Lacoste perfume license and controlled orders from cautious retailers, which slowed growth in the prestige and mass fragrance segment.

The decision to sell the Lacoste license back to Lacoste had a 2% impact on net sales, while uncertainty in consumer spending forced retailers to limit their inventory levels compared to the strong build-up of their inventories in the previous year.

“We are seeing increasing tension in the US color cosmetics market and some retailers are now managing their inventory very carefully,” Chief Financial Officer Laurent Mercier told Reuters.

“There is no significant movement, but it is definitely something that deserves attention… it is more related to the US and brick-and-mortar retail, which is only a small part of our overall business.”

Larger competitors Estée Lauder and L’Oréal had signaled that consumers, especially in China, were spending less on beauty and cosmetic products, which are generally seen as recession-proof and affordable luxuries.

Coty’s net sales rose nearly 1 percent to $1.36 billion in the fourth quarter, below LSEG estimates of $1.38 billion.
Comparable sales in the prestige segment, which includes brands such as Burberry and Gucci, rose 6 percent. The consumer beauty segment, which includes Rimmel and CoverGirl, grew 4 percent.

The company expects like-for-like sales growth of 6 to 8 percent for fiscal 2025, compared to the 11 percent increase reported in fiscal 2024. However, to attract customers, it is pushing ahead with the launch of new products such as the Burberry Goddess Intense and Gucci Flora Gorgeous Orchid fragrances.

The company expects adjusted annual earnings per share of between 54 and 57 cents. Analysts on average expect 57 cents.

Coty reported an adjusted net loss of $23.9 million, or 3 cents per share, for the quarter, compared with a profit of $5.2 million, or 1 cent per share, a year earlier. The increase in profit was more than offset by an $88 million effect from the mark-to-market valuation of the equity swap.