Company Overview - Coty shares have increased by approximately 9% over the past month, outperforming the S&P 500 [1] - The most recent earnings report is crucial for understanding the catalysts affecting Coty's stock performance [1] Earnings Estimates - Fresh estimates for Coty have trended downward, with the consensus estimate shifting by -65.85% in the past month [2] - The overall direction of estimate revisions indicates a downward shift in expectations for Coty [4] VGM Scores - Coty has a poor Growth Score of F, while its Momentum Score is rated C [3] - The stock received a grade of B on the value side, placing it in the top 40% for this investment strategy [3] - The aggregate VGM Score for Coty is D, which is significant for investors not focused on a single strategy [3] Industry Performance - Coty is part of the Zacks Cosmetics industry, where another player, Helen of Troy, has gained 14% over the past month [5] - Helen of Troy reported revenues of $485.89 million for the last quarter, reflecting a year-over-year decline of -0.7% [5] - For the current quarter, Helen of Troy is expected to post earnings of $0.91 per share, indicating a change of -8.1% from the previous year [6] - The Zacks Consensus Estimate for Helen of Troy has changed by -10.4% over the last 30 days, resulting in a Zacks Rank of 5 (Strong Sell) [6]

Industry Overview - The beauty and cosmetics industry has evolved into a multi-billion-dollar global market, driven by changing consumer preferences, cultural influences, and technological advancements [2] - Skincare has become a significant focus, with increased demand for products featuring natural ingredients and dermatologist-approved solutions, influenced by K-beauty and J-beauty trends [3] - Sustainability is shaping the future of the industry, with consumers prioritizing eco-friendly practices and transparency in ingredient sourcing [4] Technological Innovations - Technology is revolutionizing consumer interactions with beauty products through AI diagnostics, augmented reality try-ons, and biotech formulations [5] - The rise of dermocosmetics combines pharmaceutical-grade research with skincare, offering clinically proven results [5] Company Highlights Coty Inc. - Coty is strategically transforming its operations to enhance innovation and consumer-centric growth, focusing on prestige fragrances and skincare [7] - The company is expanding its fragrance offerings and targeting demographics like Gen Z and multicultural consumers, with a strong pipeline for fiscal 2026 [8] - E-commerce now represents nearly 20% of Coty's total sales, supported by partnerships with Amazon and initiatives on platforms like TikTok Shop [9] Ulta Beauty - Ulta Beauty leads the U.S. market through brand curation, digital innovation, and experiential retail, focusing on enhancing core operations and customer experiences [10] - The company is experiencing strong performance across fragrance, skincare, and wellness categories, with notable product launches and a growing interest in K-beauty [11] - Ulta's loyalty program and digital capabilities drive customer engagement, with over 45 million active loyalty members [12] Sally Beauty - Sally Beauty is adapting to market challenges through innovation and digital expansion, focusing on product innovation and omnichannel retail [13] - The company is enhancing its e-commerce presence through partnerships with major delivery services and offering virtual consultations [14] - Product innovation remains central to Sally Beauty's strategy, with new launches and revamped store formats to meet modern beauty trends [15]

Core Insights - The New York Society of Cosmetic Chemists (NYSCC) will host the 2025 Suppliers' Day on June 3-4 at the Javits Center in New York City, featuring Stacey House from Coty as the keynote speaker [1][4] - Stacey House's presentation titled "Change is Constant – Agility is Key" will focus on the importance of agility in the evolving beauty industry, highlighting Coty's AGILE Beauty approach as a standard for innovation [2][3] - The event will also include discussions on augmented beauty and advanced research by L'Oreal, showcasing how technology is transforming the beauty sector [4] Industry Trends - The beauty industry is experiencing continuous evolution driven by changing consumer needs and expectations, necessitating a nimble and innovative approach [2][3] - Educational programs at Suppliers' Day will cover various topics including dermabeauty, neuroaesthetics, hair care innovations, and sustainability in cosmetics, reflecting current industry trends [5] - The event will also feature a Future Chemists Workshop and a Career Fair aimed at supporting young professionals in the cosmetic science field [6] Organizational Highlights - NYSCC is dedicated to advancing cosmetic science and promoting high ethical and professional standards within the industry [7] - The Suppliers' Day is recognized as a leading North American event for beauty ingredients and formulation innovations, emphasizing the organization's role in the industry [7]

Core Viewpoint - Coty Inc. (COTY) is currently undervalued, trading at a forward P/E ratio of 10.57, significantly below its historical median of 13.30 and the industry average of 23.01, indicating potential for long-term growth and investment opportunity [1]. Financial Performance - Coty's shares have declined by 11.9% over the past three months, underperforming the industry and S&P 500, which saw declines of 8.6% and 0.9% respectively, suggesting challenges in the current market environment [4]. - The company achieved approximately $40 million in cost savings in the third quarter of fiscal 2025, with a target of $120 million in total productivity savings for the full fiscal year [7]. Growth Strategy - Coty is focusing on six strategic pillars for sustainable growth, including stabilizing Consumer Beauty brands, accelerating luxury fragrances, expanding into skincare, enhancing e-commerce capabilities, growing in China, and leading in sustainability [5]. - E-commerce now accounts for about 20% of Coty's total sales, with plans to launch a new brand on Amazon in fiscal 2026 and engage with emerging platforms like TikTok Shop [6]. Challenges - The U.S. operations have been a significant headwind, contributing to a decline in like-for-like sales in the third quarter of fiscal 2025, prompting leadership changes and organizational restructuring [10]. - The Prestige division faced multiple challenges, including a slowdown in the prestige fragrance market, lack of major product launches, and elevated inventory levels at retailers [11]. - Increased advertising and consumer promotions spending has remained high, potentially impacting margins and profitability if not managed effectively [12].

Core Insights - The event "2025 9th China Listed Company Brand Value List Release Conference" was held in Shanghai, focusing on the theme "Digital Intelligence Upgrade, Brand Resonance" [1] - Mathieu Dufresne, General Manager of Coty China, shared insights on localization strategies in the Chinese market, emphasizing the need for deeper connections rather than mere adaptations [2][3] Localization Strategies - Localization should go beyond simple adaptations like translating marketing materials; it should focus on creating connections with local consumers [2][3] - Dufresne highlighted three effective methodologies for localization: finding connections between brand spirit and local culture, establishing emotional resonance, and leveraging local ambassadors to drive consumer engagement [3][4] Emotional Engagement - Coty's approach to localization involves creating spaces that resonate emotionally with consumers, such as the opening of the first limited-time bookstore for the Chloe brand in China [4] - The company emphasizes emotional resonance as a key to building brand value and trust in the local market, rather than relying solely on traditional brand promotion [5][6]

Core Insights - Coty is experiencing a pivotal and transitional year in fiscal 2025, facing challenges in the consumer and retail environment, particularly in the third quarter [4] Group 1: Company Overview - Coty is taking proactive measures to clean up its business baseline in preparation for a healthier fiscal 2026 [4] - The company is focusing on multiple levers to improve trends moving into the next year and beyond [4] Group 2: Financial Communication - The presentation includes forward-looking statements, and stakeholders are advised to refer to Coty's earnings release and SEC filings for factors that could cause actual results to differ [2] - Discussions of Coty's financial results reflect certain adjustments as specified in the non-GAAP financial measures section of the company's release [3]

Financial Performance - Coty Inc. reported financial results for the fiscal year ended June 30, 2024, with a focus on strategic planning and operational performance [176]. - The company expects reported net revenue for fiscal 2025 to decline in the mid-single digit percentage compared to the prior year, including an estimated low-single digit percentage negative impact from foreign exchange [194]. - In the three months ended March 31, 2025, net revenues decreased by 6%, or $86.5 million, to $1,299.1 million from $1,385.6 million in the same period of 2024, primarily due to negative price and mix impacts and foreign currency exchange translation [208]. - The overall decline in net revenues was influenced by negative market trends in the United States, China, and several European markets, particularly affecting color cosmetics and Prestige fragrance categories [208][213]. - For the three months ended March 31, 2025, adjusted operating income increased by 3% to $147.9 million from $143.9 million in the same period of 2024 [226]. - The net loss for the three months ended March 31, 2025, was $402.2 million, compared to a net income of $8.8 million in the same period of 2024, representing a change of less than 100% [226]. - Net revenues for the nine months ended March 31, 2025, decreased by 2% or $114.1 million to $4,640.5 million from $4,754.6 million in the prior year, impacted by negative foreign currency exchange translation and a decrease in unit volume [246]. - The Prestige segment's net revenues remained relatively flat at $3,059.6 million for the nine months ended March 31, 2025, while the Consumer Beauty segment saw a decline of 7% or $119.2 million to $1,580.9 million [248][250]. Cost Management and Restructuring - The company emphasized ongoing cost efficiency and restructuring initiatives to enhance profitability and cash flow management [178]. - Coty is implementing a Fixed Cost Reduction Plan to streamline operations and reduce expenses [179]. - The company plans to implement a Fixed Cost Reduction Plan with expected cash costs of approximately $80 million, split between fiscal 2026 and fiscal 2027 [189]. - The company incurred restructuring and other business structure realignment costs of $90.6 million, compared to $29.6 million in the same period of 2024, indicating a significant increase [266]. - Corporate operating loss increased to $169.6 million from a loss of $17.6 million, primarily due to increased restructuring costs and the loss on the termination of the KKW Collaboration Agreement [224]. Market Trends and Consumer Behavior - Coty aims to stabilize its consumer beauty brands through innovation and improved execution, targeting revenue growth and gross margin expansion [178]. - The company is expanding its presence in growth engine markets, particularly in China, to capitalize on emerging consumer trends [178]. - Coty is focused on enhancing its digital and e-commerce capabilities to meet changing consumer preferences and market dynamics [179]. - The company faces weakening demand in the color cosmetics market, particularly in the United States and Europe, due to broader macroeconomic disruptions [325]. - Digital and e-commerce channel sales declines also contributed to the overall decrease in net revenues [247]. Financial Adjustments and Impairments - Total adjustments to reported operating income for the three months ended March 31, 2025, amounted to $428.3 million, significantly higher than $66.1 million in the same period of 2024 [226]. - Asset impairment charges for the three months ended March 31, 2025, totaled $212.8 million, with $169.9 million related to the Consumer Beauty segment [232]. - The company recorded an impairment charge of $212.8 million for certain trademarks due to lower revenue projections, impacting brands such as Max Factor, CoverGirl, and Philosophy [322]. - The carrying value of indefinite-lived other intangible assets was $736.5 million as of March 31, 2025, with significant trademarks including CoverGirl at $266.4 million and Sally Hansen at $159.2 million [318]. Future Outlook and Strategic Initiatives - Coty is exploring strategic transactions, including joint ventures and acquisitions, to strengthen its market position [178]. - The company anticipates additional costs related to tariff increases to be in the range of approximately $90 million to $130 million, primarily expected in fiscal 2026 [191]. - The company expects cash costs associated with the Fixed Cost Reduction Plan to be approximately $80 million, split between fiscal 2026 and fiscal 2027 [265]. - The company expects to consider resuming dividend payments once it approaches a net debt to adjusted EBITDA target of 2x [308]. - The company is actively working on deleveraging and improving the maturity mix of its debt through refinancing and repayment strategies [294]. Risks and Challenges - The company faces various risks, including geopolitical uncertainties and supply chain disruptions, which could affect its financial performance [180]. - The company anticipates potential impacts from inflationary pressures and plans to adjust pricing strategies accordingly [178]. - Significant assumptions for indefinite-lived intangible assets include revenue growth rate and discount rate, with potential future impairments if these rates decline or increase [325]. - Future impairment charges may be required if consumer confidence and spending decline significantly [325]. - There have been no material changes in market risk related to foreign currency and interest rate management since the last fiscal report [326].

Core Insights - Coty Inc. reported third-quarter fiscal 2025 results with both net sales and earnings missing Zacks Consensus Estimates, reflecting year-over-year declines [1][4][21] - The company's performance was affected by foreign exchange headwinds and broader market challenges, but it remains strategically positioned for fiscal 2026 with plans for innovation and operational efficiency [2][19] Financial Performance - Adjusted earnings were 1 cent per share, missing the estimate of 5 cents, and down from 5 cents in the prior year [4] - Net revenues were $1,299.1 million, a 6% decline year-over-year, with a 3% adverse impact from foreign exchange [4][21] - On a like-for-like basis, net revenues decreased by 3%, with a 3% decline in Prestige and a 5% decline in Consumer Beauty [5] Segment Analysis - **Prestige Segment**: Net revenues were $829.4 million, a 4% drop, with a 1% foreign exchange headwind. Adjusted operating income increased to $158.8 million, with a margin of 19.1% [8][9] - **Consumer Beauty Segment**: Net revenues were $469.7 million, a 9% decline, primarily due to weaker color cosmetics and body care performance. The segment reported an adjusted operating loss of $10.9 million [11][12] Regional Performance - **Americas**: Net revenues of $529.7 million, a 10% decline, impacted by lower Prestige revenues and market softness [15] - **EMEA**: Generated $610 million in net revenues, a 3% decline, with lower revenues in both segments [16] - **Asia Pacific**: Reported $159.4 million in net revenues, a 5% decline, primarily due to lower Prestige revenues in mainland China [17] Future Outlook - Coty is focusing on resetting its baseline in fiscal 2025, with plans to align retailer inventories and prioritize high-margin categories [19][20] - The company anticipates a high single-digit like-for-like sales decline in the fiscal fourth quarter, projecting a 2% decline for fiscal 2025 [21] - Coty expects gross margin expansion to approximately 65% and EBITDA margin growth of about 70 basis points for fiscal 2025 [22]

Financial Data and Key Metrics Changes - The company anticipates a sharp sales deceleration in Q4, primarily due to a strategic cleanup in the Prestige division rather than worsening market conditions [6][7] - The Consumer Beauty division is expected to continue experiencing a mid-single-digit decline in the cosmetics category globally [8][7] - The company is focused on maintaining gross margin despite the challenges in the Consumer Beauty segment [24][39] Business Line Data and Key Metrics Changes - The Prestige fragrance category continues to grow at a mid-single-digit rate, particularly strong in the U.S. and most European markets, while facing challenges in China [12][14] - The Consumer Beauty division shows diverging trends, with color cosmetics under pressure while mass fragrances are growing at high single digits [18][19] - The company is reallocating resources to support mass fragrances, which are more profitable compared to color cosmetics [21][22] Market Data and Key Metrics Changes - Retailers are tightening inventory management, leading to a disconnect between sell-in and sell-out trends, particularly in the U.S. [46][70] - The mass market is experiencing a low single-digit decline, with color cosmetics negatively impacted while mass fragrances are performing well [94][96] Company Strategy and Development Direction - The company is implementing a "glocalization" strategy, empowering regional teams to make decisions that cater to local market dynamics [49][50] - A focus on innovation and strategic revenue management is being emphasized to navigate the current market challenges [39][56] - The company is committed to improving EBITDA margins through structural changes and ongoing productivity initiatives [86][84] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current macroeconomic uncertainties but remains optimistic about gradual improvement in sales trends throughout fiscal 2026 [27][28] - The company is confident in the resilience of the beauty market and its ability to adapt to changing consumer preferences and competitive pressures [100][101] Other Important Information - The company is facing tariff impacts, particularly in Prestige Fragrance, but has taken proactive measures to mitigate these effects [34][35] - A mid-single-digit price increase is planned for the Prestige portfolio, with expectations of inelastic demand [38][74] Q&A Session Summary Question: Q4 sales outlook and consumer demand - Management clarified that the anticipated sales deceleration is due to strategic actions in the Prestige division rather than a decline in market conditions [6][7] Question: Growth sustainability in the prestige fragrance category - Management believes mid-single-digit growth in the U.S. and Europe is sustainable, driven by increased penetration among younger consumers [12][14] Question: Consumer Beauty business and profitability - The company is focusing on increasing profitability in the Consumer Beauty division by reallocating resources and emphasizing mass fragrances [18][21] Question: FY '26 phasing and sales trends - Management expects continued declines in H1 but anticipates gradual improvement throughout the year [27][28] Question: Tariff impact and pricing strategy - The company is implementing pricing strategies to offset tariff impacts, with a focus on maintaining gross margins [34][38] Question: Retailer replenishment and inventory management - Retailers are tightening inventory, leading to a new pattern of low inventory levels, which the company is actively managing [46][70] Question: Organizational changes in the U.S. - The company is empowering regional teams to enhance agility and responsiveness to local market conditions [49][50] Question: Cost savings initiatives and structural changes - Management emphasized that the cost-saving measures are structural and aimed at optimizing the organization for current market volatility [55][86] Question: Current market conditions for prestige vs. consumer beauty - The prestige division is seeing stable growth, while the consumer beauty segment is facing challenges, particularly in color cosmetics [90][94]

Financial Data and Key Metrics Changes - The company anticipates a sharp sales deceleration in Q4, primarily due to a strategic cleanup in the Prestige division rather than worsening market conditions [5][6] - The Consumer Beauty division is expected to continue experiencing a mid-single-digit decline in the cosmetics category globally [6][7] - The company reported a high single-digit decline in sales, which could have been a low single-digit decline without the cleanup efforts [7] Business Line Data and Key Metrics Changes - The Prestige fragrance category continues to grow at a mid-single-digit rate, particularly strong in the U.S. and most European markets [10][12] - The Consumer Beauty division shows diverging trends, with color cosmetics under pressure while mass fragrances are growing at high single digits [16][19] - The company is reallocating resources to focus on more profitable mass fragrances while still supporting color cosmetics [19][20] Market Data and Key Metrics Changes - The U.S. market is experiencing significant pressure in color cosmetics, while mass fragrances are performing well [19][92] - Retailers are tightening inventory management, impacting both the Consumer Beauty and Prestige divisions [42][70] - The company sees a normalization in the Prestige division, with growth in fragrances but continued pressure in color cosmetics [88][90] Company Strategy and Development Direction - The company is focusing on cleaning up the baseline in the Prestige division to stimulate demand and prepare for a strong pipeline of innovation in fiscal 2026 [6][7] - There is a strategic shift towards prioritizing mass fragrances due to their higher profitability compared to color cosmetics [19][20] - The company is implementing organizational changes to enhance agility and responsiveness to local market conditions [45][46] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the operating environment, expecting some sales decline in the first half of fiscal 2026 but gradual improvement later in the year [25][26] - The company is confident in its ability to manage tariff impacts and is taking proactive measures to mitigate risks [34][36] - Management emphasizes the resilience of the beauty industry and the company's strong fundamentals despite current challenges [98] Other Important Information - The company is implementing mid-single-digit price increases in the Prestige category to offset costs, with expectations of inelastic demand [36][72] - The company is actively evaluating its brand portfolio and may exit underperforming brands [63][64] Q&A Session Summary Question: Q4 sales outlook and consumer demand - Management clarified that the anticipated sales deceleration is not due to worsening market conditions but rather a strategic cleanup in the Prestige division [5][6] Question: Growth sustainability in the prestige fragrance category - Management believes mid-single-digit growth in the U.S. is sustainable, driven by increased penetration among new consumer segments [10][12] Question: Consumer Beauty business profitability and potential brand exits - Management is focused on increasing profitability in the Consumer Beauty division and is evaluating the future of brands like CoverGirl [15][19] Question: Impact of tariffs and pricing strategies - Management indicated that tariff impacts are expected to be more significant in fiscal 2026, with proactive measures already in place [34][36] Question: Retailer inventory management trends - Management noted that retailers are tightening inventory, which is affecting both divisions, and they are working to reconcile sell-in and sell-out trends [42][70] Question: Organizational changes and agility - Management discussed the restructuring aimed at enhancing local decision-making and agility in response to market dynamics [45][46] Question: Cost savings initiatives and their impact on the bottom line - Management confirmed that the cost savings initiatives are structural and aimed at creating headroom for investment in brand growth [81][84] Question: Current market conditions for prestige versus consumer beauty - Management observed that the prestige fragrance market continues to grow, while the Consumer Beauty segment is facing challenges, particularly in color cosmetics [88][92]