Recently, Coty has announced its preliminary Q1 results, showing sales growth of approximately 4-5% like-for-like (LFL). While this growth is slightly below the company’s initial Q1 estimate of 6% LFL, it remains solid given the elevated comparison to the previous year. Coty also reiterated its full-year profit target and expects moderate LFL sales growth for Q2, despite ongoing caution from retailers and a slower U.S. market.
Globally, the beauty market continues to grow, though at a slightly reduced pace. The prestige fragrance category is performing particularly well, driven by growth in both volume and price, while mass beauty experiences slower growth, mainly supported by unit demand. In the U.S., however, market growth slowed during the second half of Q1, with retailers managing their orders and inventories tightly, causing Coty’s sell-in to lag behind sell-out in markets like the U.S., Australia, China, and Travel Retail Asia.
Despite this, Coty’s revenue growth in other key markets remains strong, with increases ranging from mid-single-digit to double-digit percentages. The company is responding to an uncertain demand outlook and cautious retailer behavior by accelerating its cost-reduction efforts. These savings are expected to exceed the initial FY25 target of $75 million.
Looking ahead, Coty maintains its FY25 guidance for adjusted EBITDA growth of 9-11% year-over-year, driven by continued sales growth, gross margin expansion, and cost savings. This growth is expected to contribute to an even stronger EBITDA margin expansion in FY25, following a 30-basis-point margin increase in FY24. Additionally, Coty is targeting a leverage ratio close to 2.5x by the end of calendar year 2024, though variability in cash inflows due to retailer inventory management could impact timing.
