Coty fragrances drive double-digit prestige Q1 sales as consumers opt for affordable luxuries
09 Nov 2022 --- Coty has released its financial results for the first quarter (Q1) of the fiscal year 2023, which ended on September 30, 2022. The company continued to make solid financial progress, with Coty’s Prestige business maintaining strong momentum. Coty achieved a total of US$171.9 million within its operating income.
According to the company, its sales growth is “far outpacing the beauty industry,” with a healthy gross margin and rising profits. Strong demand for fragrances continues to drive prestige double-digit sell-out growth.
“Our strong Q1 results, amid a complex external environment including ongoing component shortages, confirm the strength and resilience of Coty’s brands, teams, strategy and operating model,” says Sue Nabi, CEO at Coty.
“This represents the ninth consecutive quarter of Coty reporting results in-line to ahead of expectations. The progress we continue to make should be evident across all key financial KPIs, from sales to gross margins and adjusted EBITDA to our deleveraging progress.”
Prestige fragrance and cosmetics
Coty’s Prestige business maintained strong momentum in the first quarter due to a robust fragrance market and its leading innovation. Q1 Prestige revenues fell 1% as reported but increased 7% LFL, including approximately 300 basis points of negative impact from Coty’s exit from Russia.
“We continue to witness the ‘fragrance index’ at full force, as consumers turn to fragrances as mood-boosting and affordable luxuries in an uncertain environment,” Nabi details about the Prestige fragrance category.
“In Prestige cosmetics, we continued to build our footprint across our three brands Burberry, Gucci and Kylie Cosmetics.”
The Gucci Flora Gorgeous Jasmine recently launched builds on the success of the top-selling Gucci Flora Gorgeous Gardenia from the previous year, elevating the Flora franchise to the top ten in North America and Europe.
According to Coty, its sales growth is “far outpacing the beauty industry,” with a healthy gross margin and rising profits.In Q1, Coty continued its tradition of releasing successful fragrance innovations.
“As we shared in September, growing our skincare business is a key strategic objective for us in the coming years,” says Nabi. “With Lancaster as a critical building block in this targeted growth, it is very encouraging that Lancaster sales grew over 20% in the quarter.”
Growth across all regions
Revenues increased geographically across the board on a constant currency basis. As reported, EMEA sales were down 3%, but they increased 11% LFL thanks to strong travel retail momentum and double-digit growth in most markets.
Nabi adds that the company “delivered robust growth across all of its regions, each of its key categories including fragrances, cosmetics, skincare and body care and both divisions. This has allowed Coty to again report sales growth well above the underlying beauty market and among the best in our competitive set.”
Brazil and Latin America experienced good growth, while supply restrictions offset the sustained strength of US demand. With good momentum in Asia and travel retail, with China sales returning to growth year-over-year, Asia Pacific grew 6% as reported and 12% LFL.
“Our strong topline delivery and gross margin expansion has enabled us to maintain our reinvestment in working media. We remain committed to continuing this trajectory, particularly during the crucial Q2 holiday period,” informs Nabi.
The company’s Prestige fragrance business continued to deliver solid results.In addition, Coty continued executing each of its strategic pillars. In Consumer Beauty, the company continued the momentum, with the 10th consecutive month of share gains, she explains.
“In China, our business returned to LFL growth despite the continued intermittent lockdowns, with no change in our view about the structural attractiveness of the Chinese beauty market in the coming years, led by premium offerings.”
Digital, environmental sustainability
Nabi explains that its multi-pronged strategy continued to push Coty to the forefront within the company’s digital space.
In detailing how the company achieved its growth within the digital space, Nabi adds that it was through Coty’s viral social commerce successes around the Marc Jacobs Daisy Ever So Fresh launch, a digital-first partnership between Max Factor and Chinese fashion brand Labelhood as well as global success during Amazon Prime Week.
Regarding the company’s environmental sustainability, Nabi explains that Coty’s continued improvements in its ESG transformation, disclosures and policy-setting have been recognized by Sustainalytics. “This leading rating agency recently raised our ESG rating, putting Coty in the top quartile of Personal Products companies.”
“Our transformation does not end there, with a milestone in our Social agenda with the recent announcement of Coty’s market-leading gender-neutral global parental leave policy. With more updates soon to come on our Environmental agenda, we are excited by Coty’s progress and the journey ahead.”
Still, within finances, Coty recently declared cash tender offers for about US$200 million in outstanding debt securities. The ‘Offer to Purchase,’ dated today, sets forth the terms and conditions on which the tender offers are being made. Subject to conformity with applicable legislation, the company reserves the right but is not obligated, to raise or lower any or both of the Notes Caps at any time in its sole discretion without prolonging or reinstating withdrawal rights.
Edited by Nicole Kerr
