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Coty’s Consumer Beauty Business Continued to Disappoint in Q3

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Weakness in revenue

Coty’s (COTY) revenue fell 10.4% year-over-year to $1.99 billion in the third quarter of fiscal 2019 mainly due to the dismal sales of its Consumer Beauty segment. On an organic basis (excluding the impact of brands acquired or divested and currency fluctuations), Coty’s revenue fell 3.7% in the quarter. The company’s organic revenue was adversely affected by changes in its revenue recognition accounting and moderate supply chain headwinds.

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Coty’s Consumer Beauty segment continued to disappoint in the quarter, reporting a 17.8% fall in its net revenue to $840.3 million. The segment’s organic revenue fell 10%. Changes in its revenue recognition policy and supply chain disruptions had a negative impact of 3%. The segment continued to experience weakness in its global mass beauty business, mainly in the United States and Europe. It saw dismal sales in its key brands, but brands that performed well in the quarter included Wella Retail, adidas Bodycare, and local brands in Brazil.

Performance of the Luxury segment

Coty’s Luxury segment’s net revenue fell 3.1% to $729.2 million in the third quarter. The segment’s organic revenue growth was 2.8%. Revenue recognition changes and supply chain issues had a 1% adverse impact on the segment’s performance.

The Luxury segment gained from the continued strength of the Burberry, Gucci, and Calvin Klein brands. The segment also saw Hugo Boss return to robust growth as its supply chain disruptions were resolved and momentum in the newly launched Boss Bottled Infinite picked up. The segment also experienced share gains in the Chloé Nomade and Marc Jacobs Daisy brands.

Professional beauty business

Coty’s Professional Beauty segment’s net revenue fell 6.1% to $421.1 million on a reported basis in the third quarter, while its organic revenue fell 0.6%. The segment faced challenges in North America in the quarter due to supply chain issues and inventory reductions at certain major customers. The segment’s ghd brand continued to perform well.

Analysts expect Coty’s revenue to fall 6.9% to $8.8 billion in fiscal 2019.

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