Coty(US:COTY)2026-02-05 21:35Financial Performance - Coty Inc. reported financial results for the fiscal year ended June 30, 2025, with a focus on strategic planning and operational efficiency [162]. - The fiscal year 2026 is projected to continue the trend of operational transformation and strategic growth initiatives [171]. - In the first half of fiscal 2026, net revenues from fragrances decreased by a low single-digit percentage compared to the prior-year period, with a focus on leveraging innovations like the Boss Bottled Beyond launch to unlock value in key markets [179]. - Net revenues from color cosmetics declined by a mid single-digit percentage in the first half of fiscal 2026, prompting the implementation of a performance improvement plan to narrow the sell-out gap [180]. - Skin and body care net revenues also declined by a low single-digit percentage in the first half of fiscal 2026, influenced by competitive pricing actions in the Brazil market [182]. - In the Americas, net revenue declined by a mid single-digit percentage, primarily due to weak demand in the U.S. color cosmetics market, while EMEA and Asia Pacific also saw declines [183]. - The third quarter of fiscal 2026 is expected to see a decline in reported net revenue compared to the prior year, with gross margin pressures anticipated due to lower net sales and tariff impacts [184]. - For the three months ended December 31, 2025, Coty Inc. reported a net loss of $116.2 million, a significant decline from a net income of $30.6 million in the same period of 2024, representing a change of less than 100% [210]. - For the six months ended December 31, 2025, net revenues decreased by 3%, or $85.6 million, to $3,255.8 million from $3,341.4 million in the same period of 2024, primarily due to a 4% decrease in unit volume and a negative price and mix impact of 1% [229]. - Net loss attributable to Coty Inc. was $55.7 million for the six months ended December 31, 2025, compared to net income of $106.6 million for the same period in 2024, primarily due to a realized loss on the sale of Wella of $200.9 million [265]. Revenue and Segment Analysis - The overall increase in net revenues reflects sales growth in the Prestige segment, while Consumer Beauty faced declines primarily due to color cosmetics in the U.S. market [194][197]. - Prestige segment net revenues rose by 2%, or $17.5 million, to $1,133.6 million, while Consumer Beauty segment revenues decreased by 2%, or $8.8 million, to $545.0 million [196][198]. - Prestige segment net revenues decreased by 1%, or $27.1 million, to $2,203.1 million, while Consumer Beauty segment revenues fell by 5%, or $58.5 million, to $1,052.7 million [230]. - The operating income for the Consumer Beauty segment dropped to $10.6 million, a decline of 86% from $78.1 million in the prior year [243]. Cost and Expense Management - Coty aims to achieve cost control and gross margin growth as part of its strategic initiatives, with a focus on debt deleveraging [165]. - Cost of sales increased by 9%, or $52.3 million, to $608.0 million, resulting in a gross margin decrease of approximately 290 basis points, with cost of sales as a percentage of net revenues rising to 36.2% [199]. - Selling, general and administrative expenses increased by 6%, or $45.2 million, to $842.5 million, with expenses as a percentage of net revenues rising to 50.2% [202]. - The company is re-accelerating cost reduction efforts to achieve savings of approximately $80.0 million in fiscal 2026 [184]. - The Fixed Cost Reduction Plan is expected to incur cash costs of approximately $80.0 million, split evenly between fiscal 2026 and fiscal 2027, with $15.0 million incurred to date [273]. Strategic Initiatives and Future Outlook - The company is undergoing a strategic review of its consumer beauty business, including its mass color cosmetics and local Brazilian brands [164]. - Coty is evaluating potential strategic transactions, including acquisitions and divestitures, to optimize its portfolio and enhance market position [164]. - The ongoing strategic transformation agenda is under review by the Interim CEO to enhance performance and competitive positioning, with no material changes finalized yet [174]. - Coty is focused on enhancing its e-commerce and digital initiatives to adapt to changing consumer preferences and market trends [165]. - Future launches will be developed with dual production capabilities to mitigate supply chain disruptions and cost increases [177]. Supply Chain and Operational Challenges - Coty is facing risks related to global supply chain challenges and geopolitical uncertainties, which may impact its operations and financial performance [166]. - The company is optimizing its supply chain to enhance resilience and agility in response to changing tariff environments, including transitioning mass fragrance production to U.S. manufacturing sites [176]. - The company estimates an impact of approximately $33.0 million in costs related to tariff increases through the first quarter of fiscal 2027, with about $28.0 million expected in fiscal 2026 [178]. Tax and Financial Adjustments - The effective income tax rate for the three months ended December 31, 2025, was 31.1%, down from 45.9% in the prior year, attributed to the release of uncertain tax positions [220]. - The effective income tax rate decreased to 31.4% for the six months ended December 31, 2025, from 35.9% in 2024, primarily due to the release of uncertain tax positions [259]. Cash Flow and Financing Activities - Net cash provided by operating activities increased to $624.9 million for the six months ended December 31, 2025, up from $531.9 million in 2024, driven by changes in working capital [285]. - Net cash provided by investing activities was $658.7 million, significantly improved from $(108.2) million in 2024, primarily due to proceeds from the sale of the remaining equity investment in Wella [286]. - Net cash used in financing activities increased to $(1,106.5) million from $(461.3) million in 2024, largely due to debt-related activities and higher payments associated with hedge valuation adjustments [287].