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Coty’s Efforts to Grow Its Geographic Footprint

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Geographic concentration

Coty, Inc. (COTY) markets its beauty and cosmetic products in more than 130 countries and territories. The company derives its revenue from three geographic regions:

  1. Europe, the Middle East, and Africa (or EMEA)
  2. The Americas
  3. Asia–Pacific

In fiscal 2015, Coty clocked global sales of $4.4 billion, with the highest geographic exposure coming from the EMEA region. EMEA accounted for 49.3% of total sales in fiscal 2015.

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Overseas exposure

About 69% of Coty’s revenue was generated from outside the US in fiscal 2015[1. Year ended June 30, 2015]. In contrast, Procter & Gamble (PG) and Estée Lauder (EL) derived ~63% and ~63.2% of their respective revenues from markets outside the US in fiscal 2015.

EMEA region

The EMEA region’s revenue decreased 5.9% to $2.2 billion in fiscal 2015 due to adverse foreign currency fluctuations impacting the segment. Excluding the impact of foreign currency of 8% and the impact of Bourjois acquisition of 2%, net revenues for EMEA were consistent. The growth in the region was driven by new subsidiaries in South Africa and the Middle East.

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The Americas and Asia–Pacific region

The Americas region contributed 38.6%, or $1.7 billion, to Coty’s total sales in fiscal 2015. The region’s revenues decreased 0.5% year-over-year due to foreign currency translations. On a constant-currency basis, the revenues increased 1% due to the commercial distributor relationship with Avon (AVP) in Brazil. Also, a decline in sales from existing celebrity fragrance brands was due to reduced shelf space in the US and lower holiday offers in fiscal 2015. The organic sales for this region grew 1% for fiscal 2015.

The Asia–Pacific region contributed $0.5 billion, or 12.1%, of total sales in fiscal 2015. Due to the adverse impact of foreign currencies, net revenue for this region decreased 2%. However, excluding this impact, revenue in Australia increased due to strong growth driven by Rimmel, OPI, and Sally Hansen.

Travel retail

Coty plans to focus on its Asia–Pacific travel retail (XRT) business, as it contributes to strong growth in this region. For example, power brands like Marc Jacobs and OPI generated higher revenue in Coty’s travel retail business.

COTY has exposure in the iShares Russell Mid-Cap Growth ETF (IWP) with 0.1%[1. Updated as of October 5, 2015] of the total weight of the portfolio.

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