Sales: $4.6 billion. Net loss: $324 million for the year ended June 30, 2012.
Key Personnel: Michele Scannavini, chief executive officer; Jean Mortier, president, Coty Prestige; Renato Semerari, president, Coty Beauty.
Major Products: Fragrances, skin care, color cosmetics. Brands include Calvin Klein, OPI and Philosophy.
New Products: Marc Jacobs’ Honey, Forever Glowing Jennifer Lopez, Closer by Halle Berry, Roberto Cavalli fragrances; OPI Bond Girls, Minnie Mouse and Liquid Sand nail lacquers. To be launched: Katy Perry signature scents.
Comments: It’s been a month since Coty went public with its $1 billion initial public offering, but the company’s timing was a little off. Less than a week after the Coty IPO, the Fed signaled that it would begin reducing its monetary stimulus program. That announcement sent most stocks down, Coty included. At press time, Coty’s share price was trading at $17.27, slightly below its $17.50 IPO price.
Stifel Nicolaus initiated coverage of the stock with a Hold rating. Analyst Mark Astrachan notes that the company should benefit from a strong cash flow and good management team, but that’s not enough to overcome Coty’s modest sales growth relative to its peers. He sees low single-digit organic sales growth, modestly below the global beauty market, with strength in fragrances and cosmetics offset by weakness in its skin care products.
“We believe Coty will increasingly be viewed as a cash generation and allocation story, estimating $429 million and $524 million in free cash flow generation in FY14 and FY15, respectively,” he told investores. “We believe that barring a large acquisition, which is unlikely, Coty is likely to make smaller, bolt-on acquisitions and/or increasingly return cash to shareholders, including by increasing its expected $0.15 per share dividend, current yield of 0.9%.”
Despite the disappointing Wall Street debut, Coty leadership remains positive. In an interview with CNBC’s “Squawk on the Street,” company CEO Michele Scannavini noted that Coty’s single-minded objective is to “keep growing in line or faster than the market where we compete, in terms of revenues and in terms of bottom line as well. I’m very optimistic about the future.”
For the year ended June 30, 2012, Coty’s sales rose 13%, but reported a net loss of $324 million, after posting net income of nearly $62 million in fiscal 2011. Coty’s color cosmetics business recorded an operating loss of more than $577 million and its skin and body care unit’s operating loss exceeded $172 million.
Fragrance represented more than 50% of Coty’s turnover in 2012, and sales rose 5% a year ago. Color cosmetics sales improved less than 3% to more than $1.4 billion, but skin care sales jumped more than 17% to nearly $728 million.
By region, sales in the Americas rose about 2% to nearly $1.9 billion. Sales in Europe, Middle East and Africa rose 4% to more than $2.2 billion and Asia Pacific sales surged 19% to nearly $519 million.
At the 2013 Fragrance Foundation Awards, Coty took home three awards, including: Fragrance of the Year: Luxury Women’s—Florabotanica Balenciaga Paris; Fragrance of the Year: Prestige Women’s—DOT Marc Jacobs and Best Packaging of the Year Women’s—Florabotanica Balenciaga Paris.
Last month, Coty announced two promotions. Stephen Mormoris is SVP, global marketing American fragrances, Coty Prestige and Johanna Businelli has been promoted to the newly created role of SVP, Color Cosmetics, Coty Beauty.
In his new position Mormoris will build on brands such as Calvin Klein, Marc Jacobs and Balenciaga, as well as develop new luxury fashion/lifestyle brands that consolidate Coty’s fragrance leadership in the world. He will also retain responsibility for scouting new partnerships in the fragrance arena as well as overviewing some strategic relationships with existing partners.s will report to Jean Mortier, president, Coty Prestige.
Businelli’s role marks the first time Coty has had a senior marketing position fully dedicated to color cosmetics, which has become the second-largest and fastest-growing segment in Coty. Businelli has developed an extensive expertise in color focusing on the category throughout her career.