Coty released its financial report for the second quarter of the fiscal year 2024, with a year-on-year sales growth of 13% to reach $1.73 billion. Coty stated that Prestige sales continued to show strong growth, reporting a 17% increase in the second quarter and a 20% increase in the first half of the year. Strong momentum was observed particularly with brands such as Kylie, Burberry, and Gucci. Additionally, in the prestige skincare category, Lancaster and Philosophy, the key brands, have sustained their upward trajectory since their reintroduction in the spring of 2023.
The net revenue from Prestige accounts for 65%
In the second quarter of fiscal year 2024, Coty reported a net revenue of $1.73 billion, marking a 13% increase. For the first half of fiscal year 2024, Coty achieved net revenues of $3.369 billion, representing a 16% growth and reaching a five-year high.
In the second quarter of FY 2024, Prestige’s net revenues reached $1,122.6 million, constituting 65% of Coty’s total sales, reflecting a 17% increase compared to the previous year. The growth was particularly strong, with Prestige net revenues increasing by a solid 15% on a like-for-like (LFL) basis, driven by sustained demand for prestige beauty products, resulting in double-digit growth across all regions and notable performance in the Americas, APAC, and Travel Retail segments. Year-to-date, Prestige net revenues saw a robust 18% growth on an LFL basis, with double-digit growth across all regions and Travel Retail. Despite facing challenges such as fragrance service recovery, Coty’s Prestige segment achieved low double-digit revenue and sell-out growth, surpassing the market’s underlying performance.
During the second quarter, Coty’s Prestige fragrance category experienced significant growth in North America and Europe, with notable expansions across major markets such as the U.S., Canada, Germany, Italy, and Spain. Coty’s Prestige fragrance revenue saw a 15% increase on a like-for-like basis in Q2, driven by sustained demand for beauty products, ongoing premiumization efforts, and supported by established iconic products and new launches. Global Travel Retail sales remained robust across all regions, with a growth rate exceeding 20% on a like-for-like basis in Q2, driven by the ongoing recovery of international travel and Coty’s expansion within the travel retail sector. Coty also saw strong revenue growth in the ultra-premium fragrance segment, particularly with the Chloé Atelier des Fleurs fragrance collection, further building momentum in this category.
Furthermore, Coty’s Prestige makeup division experienced double-digit percentage growth on a like-for-like basis during the quarter, driven by its top three brands: Kylie, Burberry, and Gucci. Lastly, Coty’s Prestige skincare segment also saw growth in Q2, primarily spearheaded by Lancaster and Philosophy.
During the second quarter of 2024, Coty’s Consumer Beauty net revenues reached $605.0 million, accounting for 35% of Coty’s total sales. This represented a 7% increase in reported revenue and a 5% increase on a like-for-like basis. The growth was primarily driven by color cosmetics, mass fragrances, and mass skincare. Solid like-for-like growth was observed in the EMEA and Americas regions, with Latin America, Brazil, and the Middle East experiencing double-digit percentage growth on a like-for-like basis.
Throughout the quarter, revenues in color cosmetics, mass fragrances, and mass skincare experienced growth ranging from mid-single-digit to double-digit percentages on a like-for-like basis. Coty witnessed positive momentum in Q2 across several brands, with strong like-for-like revenue growth in Rimmel, Sally Hansen, Bourjois, Risque, Monange, Bozzano, Beckham, and Paixao. Coty’s innovations, such as CoverGirl Clean Fresh Yummy Gloss and Rimmel Thrill Seeker mascara, are leveraging the influence of social media influencers and organic advocacy to drive revenue growth.
From a geographical perspective, Coty reported that net revenues from the Americas amounted to $687.9 million, accounting for 40% of Coty’s total sales, with a reported growth of 10% and a LFL growth of 11%. Net revenues from Europe, the Middle East, and Africa (EMEA) reached $825.7 million, representing 48% of Coty’s sales, with a reported growth of 16% and a LFL growth of 10%. In the Asia-Pacific region, net revenues totaled $214 million, constituting 12% of Coty’s sales, with a reported growth of 15% and a LFL growth of 16%. In China specifically, Coty witnessed double-digit percentage growth in Prestige revenues in mainland China and more than tripled in Hainan, whereas Consumer Beauty revenues saw a decline.
Dual listing in Paris, continuing to expand influence in Europe
On September 8, 2023, Coty successfully listed on the Euronext Paris stock exchange, issuing 33 million ordinary shares for €10.28 per share. The beauty company, founded in Paris in 1904, announced in May of the previous year that it was exploring a dual listing to strengthen its position in Europe and attract investors from the region. Coty stated that the proceeds from this issuance would be used to reduce debt incurred from the acquisition of several beauty brands from Procter & Gamble in 2016.
Sue Nabi, Chief Executive Officer of Coty said, “We are delighted to have completed our listing on Euronext Paris. Being traded in the heart of the luxury and beauty industries provides European investors the opportunity to join our accelerating growth trajectory. On the eve of our 120th Anniversary, this dual listing honors Coty’s unique heritage. We have returned to our Parisian roots to mark the next chapter in Coty’s ambitions of unleashing every vision of beauty.”
Coty’s successful listing in Paris also further expanded its influence in Europe. When Coty announced its intention to list in Paris in early May last year, Coty Chairman Peter Harf also remarked, “Paris is the historic home of beauty, and the industry still holds a special attraction for investors there.”
“This is the right moment to do so. Eleven quarters in line or ahead of expectation is a good moment to start this. I would say that on the Paris Stock Exchange half of the market cap is made with beauty and luxury companies, and we are a beauty and luxury company.” Sue Y. Nabi added.
Furthermore, according to the latest financial reports, around 46% of Coty’s yearly net revenue originates from Europe, the Middle East, and Africa. Pursuing a dual listing in Paris would also position them closer to their primary consumer markets.
Coty stated that Paris is a historic hub for the beauty industry, with investors in the beauty sector holding a dominant position there. Major players in the luxury goods and beauty industry, such as LVMH, Kering Group, L’Oréal, and Hermès, are listed in Paris. Additionally, during a previous investor conference call, Sue Y. Nabi mentioned that interest from European investors in Coty stocks is on the rise, with Europeans now constituting 30% of Coty’s investors, marking a 10% year-on-year increase. Coty views listing in Paris as a means to access new capital and enhance liquidity for existing shareholders.
With the company’s improved performance over the past two years, Coty is specifically seeking larger, more proactive, and longer-term-focused investors to capitalize on new expansion opportunities as the economic landscape recovers.
Coty might be seeking investors who are larger, more actively involved and have a long-term perspective. According to Korinne Wolfmeyer, Vice President and Senior Research Analyst at Piper Sandler, the listing could facilitate connections with investors who possess a thorough understanding of the luxury market.
The rapid growth of Coty’s Prestige beauty business has shifted its positioning more towards luxury, aligning well with the market positioning in Paris. Successfully listing in Paris has also expanded Coty’s influence in Europe.
Skincare and color cosmetics have become new growth points
Since Sue Y. Nabi became CEO of Coty in 2020, the revenue of Coty’s high-end beauty business has been increasing annually, and its proportion of the total revenue has been growing year by year.
In the fiscal year 2020, Coty’s high-end beauty division achieved revenue of $2.61 billion, accounting for 55.25% of the total revenue. In the fiscal year 2021, this proportion increased to 58.77%. In the fiscal year 2022, it exceeded 60%, reaching 61.61%. In the fiscal year 2023, the revenue of Coty’s high-end beauty division was $3.421 billion, accounting for 61.58% of the total revenue.
Since Coty began streamlining its business, the high-end beauty business has become the primary growth driver. In the fiscal years 2022 and 2023, the net revenue of Coty’s high-end beauty division has consecutively accounted for over 60% of the total revenue. In the first half of fiscal year 2024, this proportion reached 65%.
Based on the fiscal year 2023 report, Coty has 33 main brands, including 17 high-end beauty brands. Importantly, among these 17 high-end brands, only 4 are owned by Coty. Burberry, Hugo Boss, and Gucci, which significantly contribute to the performance growth of Coty’s high-end beauty business, are all licensed brands.
For Coty, whose high-end perfume brands are mostly licensed brands, Sue Y. Nabi stated that any license owned by Coty would not expire within the next five years. However, recently, some brands have begun considering repurchasing brands sold to Coty.
With the strong growth in high-end perfumes, the owners of these brands may consider reclaiming their operational rights. In recent years, struggling performance led Estée Lauder to invest $2.25 billion to reclaim the cosmetics business rights of Tom Ford to reverse declining performance. As Coty’s high-end beauty business revenue accounts for over 60% of the company’s total revenue, the potential reclamation of these brand rights will inevitably impact Coty’s performance.
Considering the potential adverse effects of future brand rights reclamation on the company, Coty has begun launching its perfume brands and expanding its skincare business to counteract this.
On September 21st last year, Coty comprehensively updated its skincare strategy at an investor day in Monaco, focusing on high-end skincare brands as one of Coty’s six strategic growth areas. Lancaster and Orveda will be the group’s key high-end skincare brands in the Asia-Pacific market. Lancaster is one of the few proprietary skincare brands under Coty that has shown promising growth momentum, especially in China.
In the second quarter, Coty’s makeup and skincare segments also experienced promising growth. Coty stated that its Prestige makeup business achieved double-digit percentage like-for-like (LFL) growth this quarter, while Coty’s Prestige skincare business saw growth in the second quarter, led by Lancaster and Philosophy. In this quarter, revenues from makeup, mass fragrances, and mass skincare increased by mid-to-high single-digit to double-digit percentages on a like-for-like basis. Additionally, products such as CoverGirl Clean Fresh Yummy Gloss and Rimmel Thrill Seeker mascara are harnessing the power of social media influence and natural advocacy to support revenue growth.
