On Thursday, investment bank Jefferies downgraded Coty’s stock to “hold”, citing its deteriorating sales growth, weakness in its mass cosmetics business, and fears that its perfume division, which comprises around 60 percent of sales, would not be resilient enough to bolster overall revenues. Coty’s stock dropped 20 percent on Thursday after reporting like-for-like revenue declines for 9 percent in its fourth quarter and 2 percent for the full year.
In its full-year earnings, Coty’s mass cosmetics division, which houses the drugstore brand Covergirl and comprises around 35 percent of its sales, declined 8 percent, despite the overall market growing 2 percent. Its prestige business, which includes fragrances from fashion house names like Gucci, Burberry and Chloé, declined 1 percent, though the company reiterated its focus on owning the fragrance category with both more affordable body sprays and more high-end premium fragrances.
In a note, Jefferies analyst Ashley Helgans noted that much of Coty’s sales rely on fragrance, a now-moderating category where Jefferies says Coty has lost market share since 2017. Coty forecasts its sales to decline around 6 to 8 percent in the next quarter, and around 3 to 5 percent in the next quarter, with a return to growth in the second half of the fiscal year. However, Jefferies noted that the company has adjusted its guidance three times for revenue since the end of the 2024 year, further denting its stock price.
On a call with analysts on Thursday, Coty’s chief executive Sue Nabi addressed the lacklustre results, saying she acknowledges that they are “not satisfying”.
“Please know that we are acting with urgency, especially in the US… we have a clear plan with first and early very, very promising green shoots,” she said.
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Rumours have swirled in recent weeks that the American cosmetics company is looking to offload its consumer and prestige brands. In a cooling market and with a mixed portfolio, finding buyers is a hard sell.