COTY's Q2 Earnings Miss, Lower Revenues Across Segments Hurt

Core Insights - Coty Inc. reported weak second-quarter fiscal 2025 results, with both revenue and earnings declining year over year and missing consensus estimates [1][4][3] - Despite challenges in certain markets, consumer spending on beauty remains strong, particularly in fragrances, which is a key growth area for Coty [2][5] Financial Performance - Adjusted earnings were 11 cents per share, missing the Zacks Consensus Estimate of 22 cents, and down from 25 cents per share in the prior year [3] - Net revenues totaled $1,669.9 million, a 3$1,715 million [4] - Adjusted operating income increased to $333.7 million, an 8$1,116.1 million, a 1% drop, impacted by foreign exchange and divestiture challenges, but adjusted operating income rose to $260 million [10][11] - Consumer Beauty segment revenues fell to$553.8 million, an 8% decline, with lower sales in color cosmetics and body care, though mass fragrance showed growth [15] - The global mass beauty market growth slowed to low-single-digit levels, with Coty's mass color cosmetics business underperforming [16] Regional Insights - Americas segment revenues were $638.6 million, a 7$839.8 million, driven by growth in several European markets [19] - Asia Pacific segment revenues declined by 11% to $191.5 million, affected by market pressures in China and inventory reductions [20] Future Outlook - Management expects LFL sales trends for the second half of fiscal 2025 to remain consistent with the reported quarter, projecting a decline of 1% to 2% [24] - Coty anticipates adjusted EBITDA margin expansion of 70-90 basis points in the second half of fiscal 2025, with adjusted EBITDA expected to increase in the low single digits [27] - The company projects fiscal 2025 adjusted EPS growth of mid- to high single digits, despite a nearly 4% negative impact from prior year tax benefits [28]