Story Stocks^®

Coty (COTY -19%) is under heavy pressure today after reporting its Q4 (Jun) results last night, trading to a new 3-year low. This cosmetics and fragrance company, with prestige and consumer brands in its portfolio such as Gucci, Calvin Klein, CoverGirl, and Rimmel, reported an EPS loss when analysts had expected a profit. Revenue came in above expectations at $1.25 bln, but declined 8.1% yr/yr, the company's third consecutive quarter of a decline and its steepest drop in 17 quarters. The company also announced several updates for its Prestige and Consumer Beauty lines and offered a cautious tone for the 1HFY26 with an improving 2HFY26.

• Its largest segment, Prestige, struggled in the quarter, particularly in the US, reflecting the ongoing challenges high price brands face in the current macro environment. Prestige revenue decreased 5% yr/yr on a reported basis and 7% on a LFL basis to $760.6 mln. Revenue was pressured by underperformance in the US relative to the broader Prestige beauty category, as well as by COTY intervening to right size retailer inventory levels to current demand trends. It was also impacted by declines in prestige makeup and skincare sales.
• Its Consumer Beauty segment did not fare much better, with revenue declining 12% on a reported and LFL basis to $491.8 mln. The decline was primarily driven by lower sales in color cosmetics and body care, with management noting ongoing weakness in the global mass color cosmetics market, particularly in the US.
• In terms of 1H26, management noted that the market backdrop remains complex, with macroeconomic and tariff uncertainty fueling cautious retailer ordering and a more promotional competitive environment. As a result, COTY is launching several innovations, with a multi-brand push into fragrance mists and expanding distribution across fragrances. COTY expects a gradual improvement in sales trends over the course of FY26 from Q4 levels and anticipates a LFL decline of 6% to 8% in 1Q26 and a LFL decline of 3% to 5% in 2Q26, with a return to LFL growth in 2H26.
• For Prestige, COTY is currently launching its new blockbuster Boss Bottled Beyond globally, coupled with a broader extension of the Hugo Boss brand into the US market. Notably, early sell-in and sell-out trends are tracking ahead of its FY24 blockbuster of Burberry Goddess. For Consumer Beauty, COTY is launching new innovations under key mass fragrance brands like Adidas, Nautica, Vera Wang and Bruno Banani. It is also rolling out new in-house developed fragrance lines, including its Origen collection, launched exclusively at Walmart, with additional launches across key retailers planned.

Overall, this was a difficult quarter for COTY. The unexpected EPS loss and another top-line decline are weighing heavily on shares. A challenged US consumer and cautious retailer behavior have added further pressure. While management remains optimistic about a rebound in 2HFY26, investors are stepping back for now, awaiting clearer signs of a turnaround.