Coty raises profit forecast as revenue and earnings estimates eclipsed

Bengaluru — Coty raised its annual profit forecast for the second time and beat quarterly revenue and earnings estimates, buoyed by the CoverGirl parent’s price hikes and steady demand for its high-end and affordable cosmetics and fragrances.

Shares of Coty, which is planning for a dual listing in Paris, climbed about 2% in premarket trading.

The results reflect the recent trend of luxury shoppers indulging in lipsticks and fragrances even as they shun high-end purchases amid rising interest rates and product prices.

Coty signalled that retailers are restocking after keeping a tight leash on inventories in the previous quarters.

“Our retailers are now rebuilding and reordering. At the end of the third quarter, the level of inventory was very healthy,” CFO Laurent Mercier said.

Coty said a postpandemic recovery in travel retail extended into the quarter. The segment is an area of focus for luxury companies in which customers snap up products from duty-free stores at airports and big shopping districts such as Hainan, China.

The company’s prestige division, home to cosmetics and fragrances from the Hugo Boss, Gucci and Burberry brands, reported a jump of more than 30% in global travel retail sales across all regions.

In contrast, peer Estee Lauder forecast weaker sales and profit last week, blaming slow recovery in travel retail, especially in Asia.

Coty is also seeing sturdy demand from Gen Z consumers, who are splurging on luxury brands and more affordable products such as Rimmel cosmetics, Mercier said.

The company has been increasing prices of its products to ease the pressure on margins from sky-high commodity and shipping costs.

Coty raised its 2023 adjusted per-share profit expectations to 38c-39c, from 35c-36c earlier.

Third-quarter revenue rose 9% to $1.29bn, topping Refinitiv estimates of $1.22bn, while adjusted profit of 19c per share crushed expectations of 3c per share.

Reuters