NEW YORK - Coty Inc . (NYSE: NYSE:COTY), a global beauty company, reported its third-quarter earnings with net revenues that exceeded expectations, growing 8% to $1.39 billion compared to the same quarter last year and surpassing the analyst consensus estimate of $1.37 billion.
However, the company's earnings per share (EPS) of $0.05 fell short by $0.01 from the analyst estimate of $0.06.
The stock responded positively to the news, inching up by 1%.
Coty's performance this quarter was bolstered by strong demand in its Prestige segment, which saw an 8% reported revenue increase and a 13% lift on a like-for-like (LFL) basis. The Consumer Beauty segment also showed resilience with a 6% increase in both reported and LFL revenues.
Despite the divestiture of the Lacoste license and foreign exchange headwinds, Coty's diverse portfolio delivered robust growth across all regions, with notable gains in market share within the Prestige category.
The company's gross margin improved significantly, with a reported and adjusted gross margin of 64.8%, up 190 basis points from the previous year. Operating income saw a remarkable 79% year-over-year increase, resulting in a 220 basis point expansion in reported operating margin to 5.6%.
Adjusted operating income grew by 17%, leading to a 90 basis point increase in adjusted operating margin to 10.4%. However, reported and adjusted net income saw declines due to mark-to-market losses, partially offset by higher operating income in the current period.
Coty's CEO, Sue Nabi, highlighted the company's success in driving balanced portfolio growth, with strong performance in both Prestige and Consumer Beauty businesses.
Nabi emphasized the company's ability to outperform subdued trends in certain markets, such as U.S. mass cosmetics, through strong momentum in core business areas like global prestige and mass fragrances. She also pointed to successful product launches and advancements in e-commerce as key contributors to Coty's growth.
Looking ahead, Coty raised its FY24 outlook to the high end of its previous guidance range, expecting LFL revenue growth at the high end of the +9-11% range. Adjusted EBITDA margin expansion is anticipated at the upper end of the 10 to 30 basis point guidance range, with adjusted EPS projected at the high end of the $0.44 to $0.47 range, excluding the equity swap.
The company remains on track to reduce its leverage and targets the divestiture of its Wella stake by the end of CY25.
Investors reacted modestly to the earnings release, with Coty's stock price increasing by 1%. The company's strategic focus and upward revision of its FY24 outlook suggest confidence in its ability to continue delivering growth and profitability.
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