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Weak Nail Care Sales Clip Coty’s Q1 Results

January 1, 2014

Impacted by lower demand for fine fragrance and nail enamel, Coty Inc.’s first quarter sales fell 2.9% to $1.17 billion.

“In the first quarter we faced a significant market slowdown in the fragrance and nail categories, particularly in the US,” explained Michele Scannavini, CEO of Coty Inc. “This triggered heavy trade destocking and a slower order pace that meaningfully affected our US mass market and overall business. On the other hand, we are very pleased with our growth in the prestige channel and in the emerging markets, areas we had targeted for accelerated development.”

To return to top-line growth in the fiscal second quarter and beyond, Coty is focused on its color cosmetics business as well as expanding in emerging markets. In fiscal Q1, sales in the Americas fell 10% primarily caused by consumption slowdown in the mass nail and fragrance markets, and consequently reduced low orders and trade destocking particularly in the US mass channel.

Excluding the Americas, net revenues in the rest of the world grew, with EMEA up 2% and Asia Pacific up 7%. Emerging markets had strong 8% growth.

By segment, the decline was concentrated in color cosmetics, particularly in Sally Hansen, which was impacted by the sudden and sharp trend inversion in the US nail market as well as increased competitiveness in the category. Fragrances grew 1%, led by power brands Calvin Klein, Chloe and Davidoff. Skin & Body Care had a marginal decline, with Philosophy recording solid growth for the second consecutive quarter, according to Coty.
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