Coty(US:COTY)2025-11-05 21:37Financial Performance - Coty Inc. reported financial results for the fiscal year ended June 30, 2025, with a focus on strategic planning and future revenue trends [158]. - The company reported a mid-single digit percentage net revenue decline in the fragrance category during the first three months of fiscal 2026, despite overall market growth [177]. - The company expects its reported net revenue for the second quarter of fiscal 2026 to be roughly flat compared to the prior year, with an estimated low to mid-single digit percentage benefit from foreign exchange [179]. - Net revenues for the three months ended September 30, 2025, decreased by 6%, or $94.3 million, to $1,577.2 million from $1,671.5 million in the same period of 2024, primarily due to a 10% decline in unit volume [190]. - Prestige segment net revenues decreased by 4%, or $44.6 million, to $1,069.5 million, while Consumer Beauty segment revenues decreased by 9%, or $49.7 million, to $507.7 million [191][193]. - Adjusted operating income for the total company was $240.5 million for the three months ended September 30, 2025, compared to $303.6 million in the same period of 2024 [205]. - Net income for Coty Inc. decreased to $74.0 million in Q3 2025 from $90.7 million in Q3 2024, representing an 18% decline [206]. - Adjusted net income attributable to Coty Inc. was $106.0 million, down 17% from $128.1 million in the same period last year [224]. Cost Management and Efficiency - The company anticipates ongoing cost efficiency and restructuring initiatives to enhance profitability and cash flow management [160]. - The company plans to implement a Fixed Cost Reduction Plan with expected cash costs of approximately $80.0 million, evenly split between fiscal 2026 and fiscal 2027 [171]. - The company is re-accelerating cost reduction efforts to deliver savings of approximately $80.0 million in fiscal 2026 [179]. - The company expects to incur approximately $35.0 million in costs related to tariff increases through the first quarter of fiscal 2027, with $30.0 million impacting fiscal 2026 results [232]. - Cash costs associated with the Fixed Cost Reduction Plan are expected to be approximately $80.0 million, split between fiscal 2026 and fiscal 2027, with $10.0 million incurred to date [233]. Strategic Initiatives - Coty is exploring strategic transactions, including a review of its consumer beauty business and potential divestitures related to its mass color cosmetics segment [160]. - The company is conducting a strategic review of its Consumer Beauty business, assessing alternatives such as partnerships and divestitures to maximize long-term value [170]. - Coty is focused on enhancing its digital and e-commerce capabilities to adapt to changing consumer preferences and market dynamics [161]. - The company aims to leverage its leadership in global fragrances to expand its market presence in profitable beauty categories [161]. - The company is strategically positioned to achieve sustained growth in prestige fragrances with new launches planned for fiscal 2026 and beyond [177]. Market Challenges - Coty is facing inflationary pressures and plans to implement pricing actions to mitigate increased costs [160]. - The company is navigating geopolitical risks, including the impact of the war in Ukraine and conflicts in the Middle East, on its operations and sales outlook [162]. - The Americas region experienced a mid-single digit percentage decline in net revenue during the first three months of fiscal 2026, driven by negative market trends in Brazil [181]. - The decrease in net revenues was attributed to declines in fragrances and color cosmetics across both Prestige and Consumer Beauty segments, with significant impacts from European markets [190][192]. Operational Performance - Operating income for the three months ended September 30, 2025, was $185.0 million, a decrease of 22% from $237.8 million in the same period of 2024, with an operating income margin of 11.7% compared to 14.2% [196]. - The cost of sales decreased by 3%, or $16.5 million, to $560.4 million, but the cost of sales as a percentage of net revenues increased to 35.5% from 34.5%, resulting in a gross margin decrease of approximately 100 basis points [194]. - Selling, general and administrative expenses decreased by 2%, or $14.5 million, to $793.5 million, but as a percentage of net revenues, these expenses increased to 50.3% from 48.3% [195]. - The Prestige segment's operating income decreased by 13% to $208.9 million, with an operating margin of 19.5%, down from 21.7% [200]. - The Consumer Beauty segment reported an operating loss of $7.7 million, compared to an income of $14.0 million in the prior year, with an operating loss margin of 1.5% [201]. Cash Flow and Financing - Net cash provided by operating activities was $65.2 million for the three months ended September 30, 2025, compared to $67.4 million in 2024, reflecting a decrease of $2.2 million [244]. - Net cash used in investing activities decreased by $23.5 million to $53.8 million in 2025 from $77.3 million in 2024, primarily due to lower capital expenditures [245]. - The company issued $900.0 million of 5.600% senior notes due 2031, receiving net proceeds of $888.0 million, which were used to redeem existing debt [235]. - The net amount factored under factoring facilities was $223.8 million as of September 30, 2025, compared to $211.8 million as of June 30, 2025 [242]. - The company has suspended the payment of dividends on common stock until it approaches a net debt to adjusted EBITDA target of 2x [247]. Sustainability and Social Responsibility - Coty is committed to sustainability initiatives, including progress towards achieving sustainability targets and addressing climate change concerns [162]. - The company has substantially completed the exit of its commercial activities in Russia, anticipating future net cash costs of $1.0 to $1.5 million funded by its Russian subsidiary [231].