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Coty Stock Down 8.8% as Fiscal Q4 2018 Revenue Disappoints

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Revenue miss

On August 21, Coty (COTY) stock was 8.8% lower in pre-market trading as of 7:26 AM EST. It came after the announcement of its fiscal fourth quarter of 2018 results. Its revenue for the quarter was ~$2.3 billion, which missed the analyst estimate of $2.32 billion. On an LFL (like-for-like) basis, its revenue was up 0.3%. On a reported basis, its revenue rose 3%. Adjusted EPS was $0.14, a bit better than the consensus estimate of $0.13.

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The weakness in Coty’s consumer beauty segment was the main factor. On a reported basis, the segment’s revenue declined 5.5% due to a truckers’ strike in Brazil and supply chain troubles stemming from the integration of its P&G beauty business. In contrast, the luxury segment remained strong with revenue increasing 14.6% YOY (year-over-year). The professional segment delivered revenue growth of 5.4%.

On an LFL basis, revenue for the consumer beauty segment was down 3.4%, while the luxury and professional segments were up 5.3% and 2.1%, respectively.

Margin details

Coty’s adjusted gross margin contracted 20 basis points to 61.9% YOY, driven by supply chain troubles.

However, due to cost-cutting efforts, SG&A (selling, general, and administrative) expenses declined 5.3% to $1.25 billion. The SG&A expense rate contracted 450 basis points to 54.2%. The company has an extensive cost-cutting plan in place that aims to achieve $750 million in savings by fiscal 2020. For fiscal 2018, the company achieved 50% of its total targeted $750 million savings.

For the third quarter, Coty’s operating loss was $61.8 million compared to the loss from operations of $279 million.

Coty has announced that its current CFO Patrice de Talhouët will step down from his role in September. While the company looks for a new CFO, Ayesha Zafar, its senior vice president, will serve as interim CFO.

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