Coty boosts annual core sales outlook fueled by rising demand for fragrances and cosmetics

Coty, the parent firm of CoverGirl, upgraded its yearly core sales prediction on Tuesday encouraged by increased pricing and robust customer demand for its new fragrance and makeup products. The post-pandemic surge in the beauty market can be attributed to consumers choosing to spend on 'affordable luxuries', as inflation has affected consumer behaviors, prompting many individuals in the United States and Europe to delay large-scale purchases. A significant boost in both 'prestige' category, following the launch of products such as Burberry Goddess, and consumer beauty category, due to CoverGirl's Yummy Gloss, bolstered Coty's sales.

"There's no slump in any category; prestige fragrance in the U.S. continues to grow rapidly", stated Laurent Mercier, Coty’s CFO, to Reuters. He further stated that Gen Z has been active and instrumental in driving growth in the consumer beauty segment.

The company now projects a core like-for-like sales growth of 9% to 11% for the fiscal year 2024, which is an increase from the previous forecast of an 8% to 10% rise. Coty’s first-quarter net revenue increased by 18% to $1.64 billion compared to the estimated $1.58 billion as per LSEG data.

"Even budget-conscious consumers are hanging in there. These are affordable luxuries now being prioritised and the fact that they wield pricing power and unit growth presents a positive outlook", commented Thomas Hayes, leadership at the hedge fund firm Great Hill Capital.

While Coty's shares witnessed an initial increase of up to 3% following the announcement, they saw a slight downtick in extended trading. Due to the effects of an equity swap, higher costs, and a change in the Swiss statutory tax rate, the company reported a net loss for the first quarter. However, on an adjusted scale, Coty yielded 12 cents per share, compared to the anticipated 17 cents by analysts. The firm also stood its ground regarding its full-year adjusted per-share income forecast of between 44 cents and 47 cents.