05.09.23
Coty Inc. reported strong results for the third quarter of fiscal year 2023, ended March 31, 2023 while consistently executing across its strategic growth pillars.
Coty's strong Q3 sales performance came in ahead of expectations, the company said, and recently raised guidance, fueled by accelerating demand for prestige fragrances, retailer restocking and Coty initiatives.
Q3 sales increased 9%, which includes approximately 3% of negative impact from the Russia business exit, with core LFL sales up 15%. Fiscal YTD sales increased 2%, while core LFL sales grew 10%, tracking well ahead of the company's initial FY23 guidance of +6-8% LFL growth, adjusting for the impact of the Russia exit.
"We are once again proud to report strong operational and financial performance, with today’s Q3 results marking the eleventh consecutive quarter of results in-line to ahead of expectations,” said Coty CEO Sue Y. Nabi. “We are delivering on our balanced growth agenda, with strong LFL growth across both divisions and all regions, with growth contribution from volume, price and mix, and from our key categories including fragrances, cosmetics and bodycare.
Coty's Q3 Prestige revenues grew at a strong 10% rate and grew 16%, like for like (LFL). During the quarter, consumer demand for prestige fragrances accelerated to mid-teens growth, from the already-strong high-single-digit growth of the previous quarter, highlighting the structural changes in consumer behavior which are fueling growth in category penetration, increasing consumer usage and overall premiumization.
Coty's Prestige growth also benefited from the significant improvement in its Prestige service levels, allowing retailers to restock following the trade inventory depletion during Q2. Coty also ignited its comprehensive skincare strategy, with activities across its leading brands including the launch of its breakthrough Lancaster Ligne Princière skincare line in China and Travel Retail, setting the stage for its targeted multi-year skincare revenue acceleration.
Geographically, revenues grew in all regions on a constant currency basis. EMEA sales expanded 7% as reported and grew significantly at 18% LFL in Q3, driven by double-digit growth across most markets. Americas sales rose 13% as reported and 15% LFL driven by strong momentum in North America, Brazil and Latin America. Asia Pacific sales were stable as reported but grew 4% LFL in Q3, with strength in broader Asia and Travel Retail, and gradual improvement in China trends.
Coty also reported strong EPS performance, fueled by operational improvement and the benefit from the equity swap. 3Q23 reported EPS was $0.12 and adjusted EPS totaled $0.19, up from $0.03 adjusted EPS in the prior year, driven by a non-operating EPS benefit of $0.13 from the mark-to-market on the equity swap and a $0.03 operational improvement.
Consistent with management's strategy, the company reinvested the incremental profit from the stronger sales delivery into its critical skincare organization and initiatives, which fully kicked off in Q3. While the revenue benefits of these investment will take time to build, the company continues to actively monitor the ROI, encouraged by initial positive results across consumer feedback, product ratings, brand buzz and sales conversion. Coty's Q3 reported operating income of $43.5 million was lower than 3Q22 primarily due to a real estate gain recognized last year. Meanwhile, adjusted operating income of $122.7 million grew solidly by 8% year over year (YoY), aided by a decline in depreciation, while adjusted EBITDA of $181.9 million was stable YoY.
The value of Coty's retained 26% Wella stake was stable at $1.04 billion at quarter-end, supporting Coty's economic net debt at approximately $3.1 billion.
Coty's strong Q3 sales performance came in ahead of expectations, the company said, and recently raised guidance, fueled by accelerating demand for prestige fragrances, retailer restocking and Coty initiatives.
Q3 sales increased 9%, which includes approximately 3% of negative impact from the Russia business exit, with core LFL sales up 15%. Fiscal YTD sales increased 2%, while core LFL sales grew 10%, tracking well ahead of the company's initial FY23 guidance of +6-8% LFL growth, adjusting for the impact of the Russia exit.
"We are once again proud to report strong operational and financial performance, with today’s Q3 results marking the eleventh consecutive quarter of results in-line to ahead of expectations,” said Coty CEO Sue Y. Nabi. “We are delivering on our balanced growth agenda, with strong LFL growth across both divisions and all regions, with growth contribution from volume, price and mix, and from our key categories including fragrances, cosmetics and bodycare.
Coty's Q3 Prestige revenues grew at a strong 10% rate and grew 16%, like for like (LFL). During the quarter, consumer demand for prestige fragrances accelerated to mid-teens growth, from the already-strong high-single-digit growth of the previous quarter, highlighting the structural changes in consumer behavior which are fueling growth in category penetration, increasing consumer usage and overall premiumization.
Coty's Prestige growth also benefited from the significant improvement in its Prestige service levels, allowing retailers to restock following the trade inventory depletion during Q2. Coty also ignited its comprehensive skincare strategy, with activities across its leading brands including the launch of its breakthrough Lancaster Ligne Princière skincare line in China and Travel Retail, setting the stage for its targeted multi-year skincare revenue acceleration.
Solid Growth for Consumer Beauty
Coty's Consumer Beauty Q3 revenues grew solidly at 6% and grew 12%, LFL. During the quarter, the global mass beauty category grew at a high-single-digit pace year-on-year, while Coty continued to outperform the market with double-digit sales growth. Many of the company's leading consumer beauty brands delivered double-digit sales growth, including CoverGirl, Max Factor, Rimmel and Monange.Geographically, revenues grew in all regions on a constant currency basis. EMEA sales expanded 7% as reported and grew significantly at 18% LFL in Q3, driven by double-digit growth across most markets. Americas sales rose 13% as reported and 15% LFL driven by strong momentum in North America, Brazil and Latin America. Asia Pacific sales were stable as reported but grew 4% LFL in Q3, with strength in broader Asia and Travel Retail, and gradual improvement in China trends.
Coty also reported strong EPS performance, fueled by operational improvement and the benefit from the equity swap. 3Q23 reported EPS was $0.12 and adjusted EPS totaled $0.19, up from $0.03 adjusted EPS in the prior year, driven by a non-operating EPS benefit of $0.13 from the mark-to-market on the equity swap and a $0.03 operational improvement.
Consistent with management's strategy, the company reinvested the incremental profit from the stronger sales delivery into its critical skincare organization and initiatives, which fully kicked off in Q3. While the revenue benefits of these investment will take time to build, the company continues to actively monitor the ROI, encouraged by initial positive results across consumer feedback, product ratings, brand buzz and sales conversion. Coty's Q3 reported operating income of $43.5 million was lower than 3Q22 primarily due to a real estate gain recognized last year. Meanwhile, adjusted operating income of $122.7 million grew solidly by 8% year over year (YoY), aided by a decline in depreciation, while adjusted EBITDA of $181.9 million was stable YoY.
The value of Coty's retained 26% Wella stake was stable at $1.04 billion at quarter-end, supporting Coty's economic net debt at approximately $3.1 billion.