Coty Posts Q1 Sales Gains; To Sell Partial Stake to Wella

Coty today said FY 2022 first quarter sales increased 22%, due to strong brick and mortar growth and a 23% gain in online sales. In addition to its Q1 results, Coty said it will sell an additional stake in the company to Wella.

“Q1 marks the fifth consecutive quarter of Coty delivering results inline to ahead of expectations,” said Coty CEO Sue Y. Nabi. “Importantly, our Q1 results exemplify the virtuous cycle that we have been working to create, where our strong topline performance coupled with sustained gross margin expansion and cost initiatives, fuel both profit expansion and targeted re-investments to support future growth.”

Nabi says she feels confident about the company’s prospects for the remainder of the year and is therefore raising the FY22 sales outlook to low-to-mid teens growth from the previous guidance of low teens growth.

For the first quarter of FY22, Prestige fragrance sales increased sharply for most brands. Gucci, Burberry, Hugo Boss, Marc Jacobs, Calvin Klein and Chloe all posted significant gains. Coty credited the increases to a very strong fragrance launch calendar in Q1 with particular standout results from Gucci Flora Gorgeous Gardenia and Burberry Hero. At the same time, Prestige cosmetics sales more than doubled year-on-year, led by Gucci makeup and the relaunch of Kylie Cosmetics.
 
During the quarter, Consumer Beauty revenues increased 4% as reported and 3% LFL, as the global mass beauty category returned to growth and Coty continued to make progress towards share stabilization.

By region, the US and China continued to deliver robust performance, Travel Retail more than doubled led in particular by Asia and Europe, while trends in many Western European markets continued to improve.

In other news, Coty has announced a definitive agreement to sell an approximate 4.7% stake in Wella to KKR in exchange for the redemption of approximately 56% of KKR’s remaining convertible preferred shares in Coty. This latest transaction reduces Coty’s total shareholding in the professional beauty company to approximately 25.9%.
 
As consideration for KKR’s purchase of shares in Wella from Coty, Coty will redeem approximately 56% of KKR’s outstanding convertible preferred shares and accrued dividends, or the equivalent of approximately 25 million shares of the company’s common stock, for approximately 4.7% of Wella held by Coty in a transaction valued at approximately $215.7 million. Upon completion of the transaction, KKR will continue to have a 2.4% ownership stake in Coty on an as-converted basis.
 
The latest transaction will further simplify Coty’s capital structure and result in an additional approximately $14 million in annual dividend cash savings, totaling approximately $65 million in annual cash savings when combined with the two previous transactions with KKR in September and October.
 
“Our strategy for unlocking value expansion in Coty has remained consistent, anchored on three key objectives: accelerating our sales and profit growth, deleveraging our balance sheet, and simplifying our capital structure,” Nabi stated. “This is another milestone in transforming Coty into a beauty powerhouse.”
 
The transaction is expected to close in the coming weeks.