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Levi & Korsinsky Is Investigating Coty’s Fiduciary Duty

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Price movement of Coty

With a market cap of $9.0 billion, Coty (COTY) fell by 4.9% to close at $26.69 per share on February 8, 2016. The stock’s price movement on a weekly, monthly, and year-to-date (or YTD) basis is 9.8%, 13.7%, and 4.1%, respectively.

At times, the stock has broken the support of all moving day averages. Currently, COTY is trading 12.9% above its 20-day moving average, 4.6% above its 50-day moving average, and 1.3% below its 200-day moving average.

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The AdvisorShares TrimTabs Float Shrink ETF (TTFS) invests 0.93% of its holdings in Coty. This ETF aims to outperform the broad US equities. The actively managed, equal-weighted fund selects stocks based on trends in outstanding shares, firm leverage, and free cash flow. The YTD price movement of TTFS was -7.4% as of February 5, 2016.

The market caps of Coty’s competitors are as follows:

  • The Procter & Gamble Company (PG): $223.5 billion
  • CVS Health Corporation (CVS): $99.3 billion
  • The Estée Lauder Companies (EL): $33.1 billion

Levi & Korsinsky investigation

New York law firm Levi & Korsinsky has commenced an investigation of Coty for possible breaches of fiduciary duty by the board of directors of the company.

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Performance of Coty in fiscal 2Q16

Coty reported 2Q16 net revenues of $1,210.5 million, a fall of 3.9% compared to net revenues of $1,259.6 million in fiscal 2Q15. Revenues of its Fragrances segment fell by 9.4%, and its Skin and Body segment fell by 8.2%. Revenues of its Color Cosmetics segment rose by 10.1% in fiscal 2Q16 compared to fiscal 2Q15. The company’s cost of sales as a percentage of net revenues and operating income fell by 4.5% and 17.0%, respectively, in fiscal 2Q16 compared to fiscal 2Q15.

Coty reported acquisition-related costs of $45.5 million in fiscal 2Q16 compared to $1.6 million in fiscal 2Q15. Its net income and EPS (earnings per share) fell to $89.0 million and $0.25, respectively, in fiscal 2Q16, compared to $125.4 million and $0.35, respectively, in fiscal 2Q15.

Meanwhile, the company’s cash and cash equivalents rose by 41.4%, and its inventories fell by 9.3% in fiscal 2Q16 compared to fiscal 4Q15. Its current ratio fell to 1.1x, and its debt-to-equity ratio rose to 14.3x in fiscal 2Q16 compared to a current ratio and a debt-to-equity ratio of 1.2x and 5.0x, respectively, in fiscal 4Q15.

Coty (COTY) has authorized a $500 million share repurchase authorization of its Class A common stock. This program can be made from time to time, based on the capital needs of the business, the market price of its common stock, and the general market condition.

The PE (price-to-earnings) and PS (price-to-sales) ratios of Coty were 27.8x and 2.1x, respectively, as of February 8, 2016.

Coty focused on growing its power brands around the world through innovation, strong support, and improved in-market execution. It also focused on cost optimization opportunities to improve profitability and to provide for investment in its power brands in fiscal 2016.

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