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What Drove Coty’s Fiscal 3Q16 Revenue Rise?

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Coty’s fiscal 3Q16 revenue highlights

As discussed earlier, Coty’s (COTY) reported revenue fell 1.8% to ~$1.0 billion in fiscal 3Q16 compared to $0.9 billion in fiscal 3Q15. Its total adjusted revenue fell 1% year-over-year, with an improvement in its fragment segment’s revenue.

In fiscal 3Q16, Coty missed Wall Street analysts’ consensus expectation for revenue after beating the expectation in the previous quarter.

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Revenue versus peers’

Coty’s rise in revenue was primarily due to moderate year-over-year growth in its color cosmetics segment, driven by power brand Rimmel, while Sally Hansen’s revenue reflected the fall in the US retail (XRT) nail market.

Coty’s acquisition of the Brazilian Beauty Business from Hypermarcas contributed $14.3 million to its revenue. This revenue was negatively impacted by a change in commercial terms to conform with Coty’s standards. We’ll learn about Coty’s three segments in detail in the next part of the series.

Similarly, Estée Lauder’s (EL) revenue rose 2.9% to $2.7 billion in fiscal 3Q16. The increase resulted from EL’s newest brand By Kilian’s acquisition, which contributed approximately 10 basis points of sales growth.

However, Procter & Gamble’s (PG) revenue fell 6.9% to $15.8 billion in fiscal 3Q16. Its reported revenue was negatively impacted by a 5% fall due to foreign exchange. Avon’s (AVP) 1Q16 revenue fell 27.1% to $1.3 billion. Excluding currency impacts, its net sales rose 2%.

Revenue expectations

For the full fiscal year, Coty expects a revenue performance that is consistent with its year-to-date trend. The company plans to focus on investments made in key brands such as Calvin Klein, Rimmel, and Marc Jacobs.

Coty received an unconditional antitrust approval from the European Commission in connection with its P&G Beauty Brands transaction. The merged entity is focusing on consumer-centric and category-focused organizational structure in order to strengthen its brand portfolio. This will help it to drive profitable growth and shareholder value over time.

Coty makes 1.3% of the PowerShares DWA Consumer Staples Momentum ETF (PSL).[1. Updated on June 13, 2016]

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