Coty Reports FY24 Performance

Coty has released results for the full fiscal year 2024 and the fourth quarter ended June 30, 2024.  In FY24, total net revenues grew 10% on a reported and 11% on a LFL basis.

Coty said it continued to deliver balanced reported net revenue growth, including growth in both prestige and consumer beauty, across all regions and in each of its core categories.

For the year, Coty said it delivered a “healthy reported growth mix with a low-single-digit percentage volume growth and a low double-digit percentage contribution from a combination of price, mix and other.” In the second half—which Coty said largely balances out the elevated comparisons in the fourth quarter—net revenues grew 4% on a reported basis and 8% on a LFL basis, with reported results supported by growth across all core categories and regions.

In 4Q24, Coty’s net revenues grew 1% on a reported basis and 5% on a LFL basis, which includes several percentage points of impact from lapping an elevated comparison base in the prior year as retailers restocked following supply chain shortages, according to the company. Q4 reported sales growth was supported by growth in both prestige and mass fragrances, prestige cosmetics and mass skin and body care, partially offset by a 2% FX headwind and a 2% negative impact from the divestiture of the Lacoste license, according to Coty.

LFL revenue growth on company-wide basis and in the Americas region includes a contribution of 1% and 2%, respectively, from Argentina, which experienced hyperinflation.

Prestige

In FY24, prestige net revenues grew 13% reported and 14% LFL. In FY24, reported net revenue growth in prestige was fueled by growth in fragrances, cosmetics and skincare. In the second half of FY24, prestige net revenues grew 4% on a reported basis and 9% on a LFL basis, fueled by growth across fragrances, cosmetics and skincare, partially offset by a headwind from the divestiture of the Lacoste license and a 1% headwind from FX.

In 4Q24, prestige net revenues were flattish on a reported basis and increased 6% on a LFL basis, which included a mid-single-digit headwind from elevated comparisons tied to retailer restocking in the prior year, according to Coty. Prestige reported net revenue growth in Q4 was driven by growth in fragrances and cosmetics and included a 4% negative impact from the divestiture of the Lacoste license and a 2% negative impact from FX.

Consumer Beauty

In FY24, consumer beauty revenues increased 6% on both a reported basis and LFL basis, with growth in color cosmetics, mass fragrances and mass skin and body care. In the second half of FY24, consumer beauty net revenues increased 4% on a reported basis, supported by growth in color cosmetics, mass fragrances and mass skin and body care, and 5% on a LFL basis. In 4Q24, consumer beauty net revenues increased 2% on a reported basis and 4% on a LFL basis, driven by very strong double-digit growth in mass fragrance and mass skincare.

Regional Performance

All regions generated high-single-digit to double-digit percentage reported net revenue growth in FY24, according to Coty. Americas net revenues rose 10% as reported and 12% LFL in FY24 and 3% as reported and 8% LFL in Q4. Americas reported net revenue growth in each of these periods was driven by strong high-single-digit to double-digit percentage growth in Latin America, Canada and the Travel Retail channel. EMEA’s net revenues increased 11% as reported and LFL in FY24 and 1% as reported and 5% LFL in Q4. Reported net revenue growth in EMEA in both periods was supported by growth across many European markets, African markets and the Travel Retail channel. Asia Pacific net revenues grew 9% as reported and 11% LFL in FY24, while in 4Q, net revenues declined 4% as reported and 2% LFL. Asia Pacific reported net revenue growth in FY24 was supported by double-digit percentage growth in Asia excluding China and the regional Travel Retail channel.

Gross Margins

In FY24, reported and adjusted gross margin was 64.4%, with each up 50 basis points year-over-year. 4Q24 reported gross margin of 64.2% increased 130 basis points, while adjusted gross margin of 64.2% increased by 140 basis points year-over-year. Coty’s FY24 and Q4 reported gross margin improvement was fueled by supply chain savings and the benefit from pricing actions and premiumization, more than offsetting inflationary headwinds.

Operating Income

Coty generated reported operating income of $546.7 million in FY24, up 1% year-over-year, with a reported operating margin of 8.9%. Coty’s Q4 reported operating income of $34.7 million, with a reported operating margin of 2.5%, was down 73% year-over-year, reflecting the $104 million cash gain recognized in the prior year in connection with the divestiture of the Lacoste license. Coty’s FY24 adjusted operating income grew 17% to $863.4 million with an adjusted operating margin of 14.1%, reflecting strong margin expansion of 80 basis points, supported by the gross margin expansion and operating leverage on fixed costs. Q4 adjusted operating income of $108.0 million increased 3% year-over-year resulting in 10 basis points of adjusted operating margin expansion to 7.9%.

FY24 reported net income of $76.2 million decreased from $495.0 million in the prior year and reported net income margin was 1.2%, with the decline in the reported net income driven by over $300 million of gains recognized in the prior year related to the change in book value of the Wella stake and the divestiture of Lacoste. FY24 adjusted net income of $323.1 million decreased from $457.9 million in the prior year, and the adjusted net income margin was 5.3%. Q4 reported net loss of $100.2 million decreased from net income of $29.6 million in the prior year. In 4Q24, reported net loss margin of negative 7.3% decreased from 2.2% reported net income margin the prior year. The Q4 adjusted net loss of $23.9 million decreased from $5.2 million. The decline in reported and adjusted net income in FY24 and Q4 was fully driven by the negative impact of $103.8 million in FY24 and $87.8 million in Q4 from the mark-to-market on the equity swap due to the stock price decline in FY24 and Q4, the firm reported,

FY24 adjusted EBITDA grew 12% , exceeding the company’s adjusted EBITDA guidance. This drove a full fiscal year adjusted EBITDA margin of 17.8%, up 30 basis points year-over-year, at the high end of its guidance range, according to the company.

E-Commerce

The beauty giant said its e-commerce channel reported net revenues grew by over 20% in FY24 and by a double-digit percentage in Q4. In Prestige, double-digit percentage e-commerce channel growth in FY24 was driven by Coty’s recent innovations, strong social media activations and collaboration with e-retail partners. In consumer beauty, e-commerce reported net revenue growth of over 30% in both FY24 and Q4 was supported by successful activations and growth in nearly all regions led by the U.S., LATAM and Europe. Coty said it gained e-commerce market share in both segments.

Nabi’s Take

“Our FY24 results set a new milestone in Coty’s sustained track record of top-notch execution and market outperformance. In a dynamic macroeconomic backdrop, beauty maintains its privileged position, being neither a consumer goods industry nor a luxury goods industry. Instead, beauty is at the sweet-spot of desire, well-being, self-confidence, affordability, ritual, indulgence, and many new things that we and our consumers will invent. This is what fuels the strong global beauty growth that we continue to see to this day and which we expect to continue for the quarters and years to come,” said Sue Nabi, Coty’s CEO, upon release of the data.

“At Coty, having transformed our organization and strategic path several years ago, we are now performing as a beauty leader and more and more as a beauty trendsetter, which we believe is an opening for a new era for Coty as a beauty powerhouse. Importantly, a key element of this outperformance has been our unwavering strong investment into our marketing, regardless of the macroeconomic volatility, because we believe that this is what will create value for our brands for the long term.”

Nabi pointed to four key achievements during the fiscal year:

“First, we once again grew ahead of the underlying beauty market with 11% LFL growth compared to the beauty market growth of approximately 9%, fueled by our leadership in fragrances, strengthened performance in our core cosmetics business, and over-driving our growth channels, markets, and categories,” Nabi said.

Nabi said Coty’s “consistent outperformance” confirms that its top-notch growth is a result of its strategic vision, strong execution and ability to not only seize but create big and fundamental beauty trends that are here to stay.”

“Second, we are building unique and hopefully best-in-class expertise in each of our core categories,” Nabi added.

Nabi cited Coty’s  “unrivaled expertise in fragrances,” exemplified by Burberry Goddess.

“Third, we are becoming an advocacy-led company, reaching our consumers through the platforms where they discover newness and build connections with brands. With the earned media value for both Rimmel and CoverGirl over 400% higher than a year ago and closing the gap with leading peers, we are seeing the strong results from this transformation. The next step is co-creating the trends that will shape the global beauty industry in the coming quarters and years,” Nabi continued.

“And fourth, we have once again delivered double digit growth in our LFL sales and adjusted EPS, excluding the swap impact. This marks the third consecutive year of double digit growth in both metrics,” Nabi said. “Our margins continued to expand supported by premiumization and the strengthening of our business. We reached our mid 60s gross margin percentage target a year ahead of plan, and our FY24 adjusted EBITDA margin expansion of 30 basis points was at the top end of our guidance range. After raising our FY24 guidance 3 times over the past year, we have ended FY24 with results sightly above our raised outlook, reaffirming the steadiness of Coty’s execution. The power of our financial algorithm has been on full display in recent years and reflected in our outlook, anchored on 6-8% LFL revenue growth, 9-11% adjusted EBITDA growth, and close to 20% adjusted EPS growth. And, this is building on the exceptional delivery in FY24 of 11% LFL revenue growth, 12% adjusted EBITDA growth, and 26% adjusted EPS growth excluding the equity swap.”