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Color Cosmetics Grew despite the Falling US Nail Market

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Fiscal 2Q16 revenue results

Coty (COTY) operates under three reportable segments:

  1. Fragrances
  2. Color Cosmetics
  3. Skin & Body Care

Fragrances’ net revenue fell 9% to $0.6 billion in reported terms in fiscal 2Q16. Continued efforts to improve celebrity and lifestyle fragrances and the slowing fragrance market couldn’t be offset by growth in power brands Calvin Klein, Marc Jacobs, and Miu Miu.

Color Cosmetics’ net revenue rose 10% to $0.3 billion in reported terms. Strong growth in Rimmel and Sally Hansen drove the net revenue despite the decline in the US nail market.

For Coty’s Skin & Body Care segment, the revenue was in line with the previous year. New launches and strength in China supported growth in Adidas. The growth in philosophy was offset by lower net revenue from Playboy.

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Adjusted operating profit

Fragrances’ adjusted operating income fell by 12% to $0.2 billion. For the Color Cosmetics and Skin & Body Care segments, the adjusted operating income rose by 45% and 82%, respectively, in fiscal 2Q16.

Licensed agreement with Tiffany & Co.

Coty signed a new fragrance license agreement with Tiffany & Co.—an international jeweler. It will strengthen the company’s position in fragrances. Also, on Procter & Gamble’s beauty business merger, Coty confirmed the transfer of ten Procter & Gamble fragrance licenses including global powerhouses like Hugo Boss, Gucci, and Lacoste. Estee Lauder’s (EL) fragrances, like Michael Kors (KORS) and Coach (COH), are also licensed fragrances.

Continued deterioration in the fragrance market trends, particularly in Europe, led Coty to focus on an increased level of promotional and discounted pricing activity in order to keep up with companies like Procter & Gamble (PG) and Unilever (UL). We’ll focus on Coty’s geographic presence in detail in the next part of the series.

Coy accounts for 0.2%[2. Updated as of February 4, 2016] of the WisdomTree SmallCap Dividend Fund’s (DES) total weight.

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