Why Coty’s Revenue Rose 5.5% in 4Q16: Acquisitions



Full-year revenue fell 1%

As we discussed earlier in this series, Coty’s (COTY) reported revenue fell 1% to $4.3 billion for fiscal 2016 and increased 5.5% to $1.1 billion in fiscal 4Q16. Total revenue fell 1% like-for-like in 4Q16 and the full fiscal year. However, constant-currency revenues rose 8% for 4Q16 and 5% for the full fiscal year.

After missing estimates last quarter, Coty came in ahead of Wall Street analysts’ estimates for revenue in fiscal 4Q16.

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Revenue analysis versus peers

The 1% decrease in fiscal 2016 revenue was due to a negative foreign exchange impact and the decline in the underlying business. These trends were partially offset by positive contributions from the Brazil acquisition and Bourjois. On a like-for-like basis, the 1% decline in the underlying business was driven by 3% like-for-like declines in both the fragrance and skin and body care segments, which were partially offset by 2% like-for-like growth in color cosmetics. We’ll learn about Coty’s three segments in detail in the next part of this series.

Similarly, Procter & Gamble’s (PG) net revenue decreased 3% to $16.1 billion in fiscal 4Q16 and decreased 8% $65.3 billion for fiscal 2016. For Avon (AVP), calendar 2Q16 revenue fell 21.3% to $1.4 billion. However, excluding currency impacts, net sales rose 5%. Estée Lauder (EL) is about to release its fiscal 4Q16 and full-year results on August 19, 2016.

Disproportionate investment focus

According to Coty’s chairman and CEO (or chief executive officer), reported revenues were positively impacted by company’s completed acquisitions and strategy. The company plans to focus on investments made in Power Brands like Calvin Klein, Davidoff, Rimmel, and Marc Jacobs, which will lead to revenue growth.

Also, an unconditional antitrust approval was received from the European Commission in connection with the P&G Beauty Brands transaction last quarter. Coty has completed the cost and cash synergy analysis for the merger, confirming earlier announced targets of total potential cost savings of $780 million over four years post-transaction close.

Coty is 2.7% of the PowerShares DWA Consumer Staples Momentum Portfolio ETF (PSL).[1. As of August 16, 2016]


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