For the first six month of fiscal 2017, net revenues of $3.37 billion increased 45% as reported compared to Legacy-Coty net revenues in the prior-year period and decreased 4% at constant currency compared to combined Legacy-Coty and P&G Beauty Business net revenues in the prior-year period. Excluding the positive contribution from the acquisitions of ghd and the Brazil Acquisition, and the short-term negative transitional impacts especially including significant trade inventory build in the first quarter of fiscal 2017 in parts of the P&G business, the combined company net revenues declined in the high single digits on a constant currency basis
“It is clear to me that Coty has great future potential; the combination of our iconic and emerging brands, energized employees, and the comprehensive strategy we are laying out for the new organization will position us well to become a challenger and leader in beauty and drive sustained profitable growth over time,” said Camillo Pane, CEO. “This is a long term journey and will require time and effort, as we will need to tackle short term challenges like the ones we faced in the first semester, complete the P&G Beauty Business integration and most importantly implement new programs to drive growth and further strengthen our brand portfolio and management capabilities.
Pane reviewed what he called “the key building blocks to realize Coty`s potential.”
He said, “Consistent with our comments on the last earnings call, Q2 was a challenging quarter. The business was impacted by significantly higher-than-anticipated inventory levels in the market on the acquired P&G Beauty Business, competitive pressure in the Consumer Beauty division and the distraction associated with the merger integration efforts. Fiscal 2017 is a transitional year as previously discussed, and it is Year One in my five-year strategic framework. We believe the combined company net revenue decline in constant currency will slow down for the second half of fiscal 2017, excluding Younique and ghd.”
Pane noted that while Coty is in the midst of the P&G business integration, “we have already started to tackle the growth challenges of our business. Specifically, my strategic vision includes strengthening our global brands, shifting more resources to fuel the growth of the brands with higher growth potential, stabilizing the remaining brands, and continuing to expand the geographic reach of our strong brand portfolio.”
Pane said that Coty is planning to achieve those objectives through four key pillars.
“First, we are repositioning some of the brands, in order to reconnect these brands with consumers, building on their already-strong brand equity. Second, we are making significant changes to our innovation and product development process in parts of the organization. Third, we are accelerating our end-to-end digital transformation including e-commerce. And fourth, we are working to significantly revamp our in-store execution. I am convinced these efforts should gradually improve the revenue trends of our business,” he said.
Pane called the acquisitions of Younique and ghd “highly strategic and expected to be accretive Year One to both revenue growth and adjusted earnings.”
He added that Coty has identified the non-core portfolio of brands and are now exploring potential alternatives for these brands including divestitures.
“In sum, fiscal 2017 remains a transitional year, and, after the first four months as CEO, I remain even more confident that we are setting the stage to realize the enormous potential of Coty as a global leader and challenger in beauty,” Pane concluded.