Segmental revenue performance
Coty (COTY) operates under three reportable segments:
- Color Cosmetics
- Skin & Body Care
Fragrances net revenue rose 1.9% in fiscal 4Q16 and fell 7.6% to $2.0 billion for fiscal 2016 in reported terms. These changes were primarily due to declines in celebrity and mass fragrance brands that could not be offset by growth in Marc Jacobs as well as the strong launch of the Miu Miu fragrance.
Color Cosmetics net revenue fell 3.8% in F4Q16 and increased 7.1% to $1.5 billion for fiscal 2016 in reported terms. This change reflected a 10% contribution from the Bourjois acquisition and 2% growth in the underlying business, driven by the success of new launches and the international roll-out of Sally Hansen’s Miracle Gel.
For Coty’s skin and body care, net revenue fell 9.2% in F4Q16 and 10.2% to $0.7 billion for fiscal 2016. The segment’s like-for-like revenue fell 3%, driven by declines in Playboy and Philosophy, partially offset by growth in Adidas.
Adjusted operating income
Adjusted operating income for Fragrances increased 11.6% for F4Q16 and decreased 5.8% to $0.3 billion for fiscal 2016. For the skin and body care segment, adjusted operating income fell 96.1% in F4Q16 and increased 261.2% for the full fiscal year. However, Coty’s Color Cosmetics adjusted operating income rose 35.5% for F4Q16 and 43.6% to $0.2 billion for the full fiscal year.
Strengthening fragrance position
Continued deterioration of the fragrance market, especially in Europe, and the decline of the US retail (XRT) nail market have led Coty to focus on promotion and discounted pricing activity to keep up with companies like Unilever (UL) and Procter & Gamble (PG). As a result, Coty signed a fragrance license agreement with Tiffany & Co. that should strengthen the company’s fragrance position.
Plus, Coty confirmed the transfer of ten P&G fragrance licenses, including global powerhouses such as Hugo Boss, Gucci, and Lacoste. Peer Estée Lauder’s (EL) fragrances like Michael Kors (KORS) and Coach (COH) are also licensed.