02.08.22
Coty Inc.’s fiscal 2022 second quarter represented another quarter of solid financial improvement and continued strong delivery across its strategic growth pillars, the beauty giant announced today.
In 2Q22, prestige net revenues of $1.008 billion or 64% of Coty sales, increased by 12% versus the prior year. On a LFL basis, Prestige net revenues delivered robust growth of 12%, driven by strength across all regions including continued rebound of market growth in most EMEA markets, The prestige segment generated a reported operating income of $141.6 million in 2Q22, compared to $110.8 million in the prior year.
In 2Q22, consumer beauty net revenues of $570.2 million, or 36% of Coty sales, increased by 11% versus the prior year. On a LFL basis, consumer beauty net revenue growth accelerated to 12%. Encouragingly, all regions generated double-digit LFL growth in the quarter. From a category perspective, color cosmetics led, with LFL growth in the mid-teens. Consumer beauty’s operating income was $43.3 million in 2Q22, an increase from $30.4 million in the prior year.
In Q2, Coty's sales increased 12% as reported and LFL, in-line with its prior guidance of low-teens LFL growth year-on-year, following the strong sales growth during Q1 as the company shipped key launches including Gucci Flora Gorgeous Gardenia, Burberry Hero and the relaunch of the full Kylie Cosmetics range. With each of these launches strongly resonating in-market and the consumer beauty business gaining sales growth momentum and market share, the total Coty sell-out improved in Q2. As a result, both sales and sell-out in 1H22 saw mid-teens growth, with January LFL sales accelerating from Q2 levels to +13%, noted Coty.
Coty's prestige segment generated solid 12% reported and LFL growth in Q2, and 21% in 1H22. Prestige fragrance sales continued to grow at a double-digit pace in Q2, with nearly all brands contributing, particularly Gucci, Burberry, Chloe, and Hugo Boss. Encouragingly, Coty's key launches saw strong in-market success, with Gucci Flora Gorgeous Gardenia and Burberry Hero among the top launches in the US market and in China, including on Tmall. Simultaneously, Coty’s prestige cosmetics sales nearly doubled in 1H22, led by global momentum in Gucci makeup and the continued expansion of Kylie Cosmetics following the relaunch over the summer. Regionally, the 1H22 performance was largely broad based as the U.S. and China delivered double digit growth, travel retail more than doubled, and many European markets continued to recover, said Coty.
Consumer beauty revenues increased 11% as reported and 12% LFL in Q2, and grew by 8% as reported and LFL in 1H22.
Coty said the early success of its strategy to stabilize and grow its consumer beauty business is evident in the latest measured market share data, in which Coty grew its market share on a global basis for the first time in 5 years. This was underpinned by market share gains across all four key color cosmetics brands—CoverGirl, Rimmel, Sally Hansen and Max Factor - as the new brand equities, communications, and product launches resonated with consumers.
Financial net debt improved by approximately $500 million to just under $4.5 billion at the end of Q2, fueled by strong free cash flow generation and real estate divestitures.
"With our 1H22 now complete, I am very pleased to say that the year is shaping up as we had hoped, and in many respects even better,” said Sue Y. Nabi, Coty's CEO.
“During the quarter, we continued to execute on our strategic growth pillars, allowing us to deliver sales, profit, and leverage results inline or ahead of guidance for the sixth consecutive quarter. The second quarter, and even more so the first half, further illustrates the virtuous cycle we have created. Strong topline growth combined with gross margin expansion and strong cost execution are generating both profit growth and re-investment in the business in the most promising opportunities. This combination has contributed to sequentially improving sell-out trends in Q2, which sets the stage for accelerating sales growth in the second half.”
Nabi also highlighted that Coty delivered on its leverage target goals, ending CY21 with financial net debt to adjusted EBITDA leverage ratio of below 5x.
“Q2 marked another quarter of progress across each of our six strategic pillars. I am extremely proud to say that the repositioning of consumer beauty brands is generating success. For the first time in five years, all four of our top cosmetics brands —CoverGirl, Rimmel, Sally Hansen, and Max Factor —are gaining market share on a global basis, fueling market share gains for the overall Consumer Beauty business. While the path to sustained consumer beauty expansion may not be linear, these strong results confirm that our Consumer Beauty brands are as relevant as ever and with the right products, communication strategy, in-store execution and teams, we can truly excel,” Nabi said.
Nabi noted that Q2 was a busy quarter in relation to its skin care ambitions, pointing to the license of the Orveda brand and the launch of CoverGirl skincare as well the hiring of Dr. Shimei Fan as its chief scientific officer.
In 2Q22, prestige net revenues of $1.008 billion or 64% of Coty sales, increased by 12% versus the prior year. On a LFL basis, Prestige net revenues delivered robust growth of 12%, driven by strength across all regions including continued rebound of market growth in most EMEA markets, The prestige segment generated a reported operating income of $141.6 million in 2Q22, compared to $110.8 million in the prior year.
In 2Q22, consumer beauty net revenues of $570.2 million, or 36% of Coty sales, increased by 11% versus the prior year. On a LFL basis, consumer beauty net revenue growth accelerated to 12%. Encouragingly, all regions generated double-digit LFL growth in the quarter. From a category perspective, color cosmetics led, with LFL growth in the mid-teens. Consumer beauty’s operating income was $43.3 million in 2Q22, an increase from $30.4 million in the prior year.
In Q2, Coty's sales increased 12% as reported and LFL, in-line with its prior guidance of low-teens LFL growth year-on-year, following the strong sales growth during Q1 as the company shipped key launches including Gucci Flora Gorgeous Gardenia, Burberry Hero and the relaunch of the full Kylie Cosmetics range. With each of these launches strongly resonating in-market and the consumer beauty business gaining sales growth momentum and market share, the total Coty sell-out improved in Q2. As a result, both sales and sell-out in 1H22 saw mid-teens growth, with January LFL sales accelerating from Q2 levels to +13%, noted Coty.
Coty's prestige segment generated solid 12% reported and LFL growth in Q2, and 21% in 1H22. Prestige fragrance sales continued to grow at a double-digit pace in Q2, with nearly all brands contributing, particularly Gucci, Burberry, Chloe, and Hugo Boss. Encouragingly, Coty's key launches saw strong in-market success, with Gucci Flora Gorgeous Gardenia and Burberry Hero among the top launches in the US market and in China, including on Tmall. Simultaneously, Coty’s prestige cosmetics sales nearly doubled in 1H22, led by global momentum in Gucci makeup and the continued expansion of Kylie Cosmetics following the relaunch over the summer. Regionally, the 1H22 performance was largely broad based as the U.S. and China delivered double digit growth, travel retail more than doubled, and many European markets continued to recover, said Coty.
Consumer beauty revenues increased 11% as reported and 12% LFL in Q2, and grew by 8% as reported and LFL in 1H22.
Coty said the early success of its strategy to stabilize and grow its consumer beauty business is evident in the latest measured market share data, in which Coty grew its market share on a global basis for the first time in 5 years. This was underpinned by market share gains across all four key color cosmetics brands—CoverGirl, Rimmel, Sally Hansen and Max Factor - as the new brand equities, communications, and product launches resonated with consumers.
Financial net debt improved by approximately $500 million to just under $4.5 billion at the end of Q2, fueled by strong free cash flow generation and real estate divestitures.
"With our 1H22 now complete, I am very pleased to say that the year is shaping up as we had hoped, and in many respects even better,” said Sue Y. Nabi, Coty's CEO.
“During the quarter, we continued to execute on our strategic growth pillars, allowing us to deliver sales, profit, and leverage results inline or ahead of guidance for the sixth consecutive quarter. The second quarter, and even more so the first half, further illustrates the virtuous cycle we have created. Strong topline growth combined with gross margin expansion and strong cost execution are generating both profit growth and re-investment in the business in the most promising opportunities. This combination has contributed to sequentially improving sell-out trends in Q2, which sets the stage for accelerating sales growth in the second half.”
Nabi also highlighted that Coty delivered on its leverage target goals, ending CY21 with financial net debt to adjusted EBITDA leverage ratio of below 5x.
“Q2 marked another quarter of progress across each of our six strategic pillars. I am extremely proud to say that the repositioning of consumer beauty brands is generating success. For the first time in five years, all four of our top cosmetics brands —CoverGirl, Rimmel, Sally Hansen, and Max Factor —are gaining market share on a global basis, fueling market share gains for the overall Consumer Beauty business. While the path to sustained consumer beauty expansion may not be linear, these strong results confirm that our Consumer Beauty brands are as relevant as ever and with the right products, communication strategy, in-store execution and teams, we can truly excel,” Nabi said.
Nabi noted that Q2 was a busy quarter in relation to its skin care ambitions, pointing to the license of the Orveda brand and the launch of CoverGirl skincare as well the hiring of Dr. Shimei Fan as its chief scientific officer.