Coty has reported a decline in its sales and revenue for the start of 2027 in what it calls a “transitional year” for the business.
The beauty giant’s net revenues decreased 1% to US$1.55bn on a reported basis for the three months ended 30 September 2026.
Prestige net revenue, which represented 68% of the company's total sales, also declined 1% to $1bn on a reported and like-for-like (LFL) basis.
The ongoing conflict in the Middle East impacted reported and adjusted gross margin, which decreased 120 basis points year-over-year to 63.3%.
The decline reflected pressure from higher freight and material costs related to the Middle East war, alongside higher excess and obsolescence reflecting elevated demand forecasts.
In the broader EMEA market, Coty reported net revenues decreased by $44.8m year-over-year primarily driven by lower sales in the Middle East and Europe, and partially offset by higher sales in Africa.
"Our first quarter results were ahead of expectations on sales, adjusted EBITDA and EPS, alongside a significant improvement in free cash flow, supported by the focus of [turnaround strategy] ‘Coty.Curated’,” said Markus Strobel, Executive Chairman and Interim CEO of Coty.
"Our like-for-like sales decline narrowed to 2%, broadly in line with the fourth quarter, and a clear improvement from the declines of 6% and 4% in the first and second halves of fiscal 2026, reflecting improvements in key markets like the US, Asia Pacific and Latin America.
“While our progress in the first quarter is encouraging, we have more work to do to translate green shoots into a broad-based recovery.”
Within Coty’s prestige beauty division, reported net revenues in the first quarter decreased by $11.1m year-over-year, primarily driven by a moderate decline in prestige fragrance and skin care, and partially offset by growth in prestige cosmetics.
Reported operating income increased in the first quarter, however, primarily due to lower advertising and consumer promotional costs, largely offset by lower gross margin.
In terms of Coty’s consumer beauty division, Q1 reported net revenues sank $10.9m compared with the previous quarter due to a decrease in colour cosmetics and mass fragrance sales.
This was partially offset by growth in mass body care.
How the ‘Coty. Curated’ turnaround strategy is fuelling Coty’s transformation year
Coty also provided an update on its ‘Coty. Curated’ turnaround strategy, a new framework that aims to boost the business following its financial performance in 2026.
Strobel said: "Our ‘Coty.Curated’ framework is beginning to deliver results.
“Over the past year, we have increasingly concentrated investment behind our top six core prestige brands, which represented 73% of prestige sales in Q1.
“These brands moved from a 6% like-for-like decline in the first half of fiscal 2026 to 5% like-for-like growth in the first quarter, with five of the six growing and combined sell-out returning to growth.
“Our first half launches, including Boss Bottled Beyond for Her, Burberry Goddess Amber Vanilla, Mood Stones by Kylie Jenner, and Marc Jacobs Beauty make-up, are resonating with consumers and tracking ahead of plan.”
Alongside ‘Coty.Curated’, the French beauty giant has also tried to shore up its business foundations by extending its Marc Jacobs Beauty license for 40 years to secure “one of the core brands” in its prestige portfolio.
The beauty giant said the four-decade-long extension of its Marc Jacobs license with WHP Global and G-III Apparel Group, which co-own the Marc Jacobs brand, will enable it to “accelerate the global growth” of Marc Jacobs Beauty across categories and markets.
It follows the news of L’Oréal taking over the Gucci Beauty licence from Coty one year earlier than expected after a deal was reached with Gucci’s owner Kering.
The termination of Coty’s licence to produce Gucci’s range of fragrance and make-up had been expected in 2028, following L’Oréal’s €4bn acquisition of Kering Beauté last year.
Looking ahead to the remainder of FY27, Coty stated it will build on the fully incremental launch of Boss Bottled Beyond for Her to grow Hugo Boss’ female fragrance business, while focusing investment on the brand’s core franchises.
It also plans to amplify Burberry’s fragrance and make-up momentum with higher marketing investment to deepen consumer engagement.
Coty also expects Q2 2027 LFL revenue to decline by a low-single-digit percentage, broadly consistent with the last two quarters.
Soraya Benchikh, Coty CFO, added: "I joined Coty at a pivotal moment, with clear priorities to deliver quality growth, improve productivity to fund disciplined reinvestment, and strengthen cash generation and conversion.
“The first quarter shows encouraging early progress on each, although sustainable improvement will take time.
“We delivered adjusted EBITDA ahead of our guidance, supported by better-than-expected sales and cost control, while continuing to invest in our brands.
“The year-over-year decline in adjusted EBITDA moderated to 7% from steeper declines in fiscal 2026.”
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