Coty’s fragrance-led portfolio and makeup struggles drag shares down

Coty’s shares on the New York Stock Exchange fell almost 22% after the company reported a net loss of US$381 million for fiscal 2025, compared to a net profit of US$76 million the year before. Since the start of 2025, the stock has lost nearly half its value.

Coty says “innovation fatigue” in color cosmetics weighed on results, noting that the pace and complexity of product launches left many consumers confused and disengaged. Fragrance sales also slowed compared to fiscal 2024, when the segment had delivered robust growth.

These pressures, combined with retailer destocking and softer US demand, contributed to the annual loss.

“We realize our results are not satisfying,” CEO Sue Nabi said during an investor call. However, she stated that Coty has taken “all the required action” to return to growth in 2026 and argues the results “do not reflect the potential and value of the business.”

For Q4, Coty posted a net loss attributable to shareholders of US$72.1 million, or an adjusted loss of US$0.05 per share, missing the analyst expectations of a US$0.01 adjusted profit.

Revenue declined 8% year-over-year to US$1.25 billion, with like-for-like sales down 9%. 

Complexity curtails category gains

By division, Prestige revenue was flat year-over-year at US$3.82 billion, while Consumer Beauty revenue fell 5% to US$491.8 million.

Nabi told investors on the company’s earnings call: “A lot of loyal consumers above 30 years old got lost in translation, given the complexity of this category today. A lot of people don’t know the difference between an ink, a butter, a liquid lip color, a bullet lip color — the list goes on. So there is an innovation fatigue.”

She says Coty is responding by simplifying launches and dedicating its most sophisticated products to younger consumers “because they easily get into the complexity.”

By category, fragrance slowed compared to last year’s strong base, while mass cosmetics struggled.

Coty’s shares on the New York Stock Exchange fell almost 22% after the reported net loss.Speaking to investors, Nabi emphasized fragrance resilience, saying: “We see that fragrances from US$5 to US$500 are becoming the go-to destination in the beauty industry. This explains why a lot of consumers today are continuing to buy fragrances at every price level, including in mass fragrances. They are also diversifying the way they wear fragrances, hence our perfume mists.”

Regionally, the Americas’ revenue fell 3% to US$2.37 billion, impacted by reduced US consumer beauty sales. Europe, the Middle East, and Africa grew 1% to US$2.81 billion, while Asia-Pacific declined 7% to US$708.1 million.

CFO Laurent Mercier says: “The Chinese beauty market is gradually improving, thanks to the performance of prestige beauty.”

Mixed sentiments on scent

Investor sentiment was sharply negative following the results as shares fell nearly 22% on the New York Stock Exchange. Analysts at US-based investment bank Jefferies flagged concerns about Coty’s reliance on fragrance and reduced investment in mass cosmetics.

According to the company, fragrance remains Coty’s largest segment, accounting for around 60% of revenue and a bigger portion of profits.

Nabi says, “Coty is very well positioned to succeed. We are the only global fragrance company that addresses both the high-price and low-price segments.”

She adds that the company will continue to “play big” in fragrance, highlighting licensees such as Gucci, Burberry, Hugo Boss, and Marc Jacobs as growth levers. According to Coty, the company also plans several new launches to support the category in 2026.

However, skin care has also been identified as a priority for gradual growth, with the company pledging to “steadily build this business, while remaining vigilant with our investment levels.”

Coty says it will continue to expand its presence in “a limited number of structurally profitable and growing beauty categories and geographic markets at scale.”

Despite this, Jefferies downgraded Coty stock from “Buy” to “Hold,” cutting its price target to US$4 from US$6. The firm cited a “lack of clear fundamental drivers and management credibility.”

Fragrance sales slowed compared to fiscal 2024’s robust growth.Global economic headwinds

Coty says tariffs and macroeconomic uncertainty have contributed to cautious retailer orders and a more competitive promotional environment.

“Amidst the shifting global tariff landscape, we are strengthening our competitive advantages by actively transferring production of our mass fragrances, entry prestige fragrances, and other adjacencies sold in the US to our US manufacturing plant, reinforcing our resiliency and relative cost advantage,” Nabi explains.

The company forecast like-for-like sales declines of 6–8% in Q1 FY2026 and 3–5% in Q2 FY2026, before returning to growth in the second half.

“We [Coty] didn’t give you [investors] more precise numbers on H2 because there is high volatility. There are a lot of micro movements, but I can tell you with a high level of confidence that our H2 will be back to growth,” Mercier assured investors.

Coty continued its restructuring efforts under the All-In To Win program, launched in April 2025, aimed at saving up to US$500 million by 2027. Measures include staff reductions, fewer launches, process acceleration, and investments in US manufacturing.

The company says the program is designed to optimize resources, expand margins, and strengthen financial resilience, even as sales volumes came under pressure.

“This [2026] is the year of increasing the profitability of this business,” Nabi added.