COTY Exits SKKN by Kim Partnership With Stake Sale to SKIMS

Core Insights - Coty Inc. has sold its 20% stake in SKKN by Kim to SKIMS, ending its partnership with Kim Kardashian's beauty brand, allowing SKIMS to unify its beauty and lifestyle ventures under one brand [1] - The divestment is part of Coty's strategy to streamline its portfolio, invest in innovation, and strengthen its financial position through deleveraging efforts [1][2] Coty's Strategic Rationale - The decision to divest from SKKN reflects Coty's ongoing evaluation and optimization of its diverse brand portfolio, aiming to drive growth in key categories such as prestige and mass beauty, fragrance, and skincare [2] - Proceeds from the sale will support Coty's deleveraging strategy and fuel innovation across its broader brand portfolio [2] Historical Context - Coty initially invested in Kim Kardashian's beauty business in 2020, completing the transaction in 2021, leveraging its R&D capabilities and global distribution network [3] - Despite exiting SKKN, Coty retains a majority stake and perpetual license in Kylie Cosmetics, which has grown 1.5 times in the past two years under Coty's leadership [3] Market Position and Performance - Coty continues to solidify its leadership in the fragrance industry, achieving high-single-digit sell-out growth in its prestige fragrance portfolio during the first half of fiscal 2025, despite challenges in markets like China and travel retail [4] - The company's cosmetics brands are gaining momentum, supported by strong social media advocacy and an agile innovation strategy [5] Transformation and Operational Strategy - Coty is advancing its "All In to Win" transformation program, focusing on cost reduction, margin expansion, and revenue growth, with recent operational streamlining efforts strengthening cash flow for future investments [6] Challenges and Market Headwinds - Coty faces challenges in the Chinese mainland and Asia Travel Retail markets, where weak demand persists, leading retailers to adjust their orders [7] - The company is managing higher advertising and consumer promotions spending, with A&CP expenses remaining in the high 20% range, reflecting a year-over-year increase [8] Future Outlook - With the sale of the SKKN stake, Coty is reinforcing its focus on core brands and long-term strategic vision, committed to driving sustainable growth and expanding its presence in key global markets [10]