Updated: Coty exceeds expectations as luxury brand business boosts performance during business transformation

Rewrote the first paragraph to include stronger-than-expected quarterly results, and added stock price information in the third paragraph.

Sanskriti Shekhar/Alexander Marrow

Reuters, November 4 - Coty (COTY.N) reported quarterly results on Wednesday that exceeded market expectations, with both sales and profits surpassing analyst forecasts. This was mainly driven by strong performances from core high-end brands such as Marc Jacobs, Hugo Boss, and Burberry. The company, which owns the CoverGirl brand, is vigorously advancing its business revitalization plan.

Under the leadership of interim CEO Markus Strobel, the company has launched the “Coty.Curated (link)” strategy, aiming to revive growth and profitability by focusing on core brands, cutting costs, and generating cash flow.

The company's share price rose by about 3% in after-hours trading.

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"We have not fully achieved our goals and there is still a lot of work to be done," CFO Soraya Benchikh, who took office in September, told Reuters regarding the company's transformation progress.

However, the cosmetics maker forecast that second-quarter profits would generally fall short of expectations, reflecting continued pressure from rising raw material and transportation costs due to prolonged conflict in the Middle East.

According to data compiled by London Stock Exchange Group (LSEG), Coty said it expects adjusted earnings per share for the current quarter to be between 16 and 18 cents, with the market expecting 16 cents.

The ongoing conflict in the Middle East has forced companies to contend with higher costs for raw materials such as plastics, metals, and packaging, as well as shipping delays.

"We have factored in the ongoing effects of the Middle East situation. We believe this pressure will not ease in the short term," Benchikh said. She added that, as the company did not provide an annual forecast last quarter (link), the impact of the region's conflict has been included in the current outlook.

Coty reported that one of its key brands, Marc Jacobs, achieved double-digit growth, thanks to the continued strength of its Daisy fragrance line and the successful launch of its cosmetics collection at Sephora stores.

Demand for premium fragrances and skincare products remains robust, driven by affluent consumers and younger shoppers (link) willing to spend on high-end beauty products—a trend that has also benefited rival Estée Lauder (link) EL.N.

Coty reported first-quarter sales of $1.56 billion, higher than the $1.52 billion expected. Adjusted earnings per share for the quarter were 16 cents, beating the 12 cents forecast.

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