Coty shares fell by 3% in early trading after the brand owner posted FY2023 results below market expectations.
Despite sales increasing by 5% for the period ended 30 June 2023, the business posted profits of $849.5m which missed Wall Street analyst’s predictions.
Like-for-like sales grew by 12%, however, and exceeded the Kylie Cosmetics and Hugo Boss owner’s previous expectation range of 9% to 10%.
Laurent Mercier, CFO for Coty, said the business benefited from a “resilient” beauty category during the year in spite of the current global economic challenges.
This was reflective across both its prestige and consumer divisions.
“It is the darling category of our retailers, and we want to keep this great momentum for fiscal 2024 [through] a strong initiative that Coty is putting on both divisions,” added Mercier.
This was supported by a series of price hikes made across the brand owner’s portfolio, which has also continued during the first quarter of its 2024 financial year.
“We are doing this [because] inflation is here to stay in fiscal year 2024, so this is part of our plan,” he added.
Coty acquired a majority share in Kylie Cosmetics in 2019
“We have a lot of data from the last two years, so we know where we can increase prices without having any elasticity,” Mercier continued.
“These price increases are combined with value creation for retailers and also consumers, and we are investing money in our sustainability agenda.”
The combined result of price hikes and consumer demand contributed to a 5% increase in revenues to $5.5bn, with prestige and consumer beauty up by 13% and 11% respectively.
Higher sales during the year also led operating income to increase to $543.7m, up from $240.9m in 2022.
"Today's FY23 results mark the third consecutive year that Coty has delivered strong financial, operational and strategic performance, and the twelfth consecutive quarter of results inline to ahead of expectations,” said Sue Y. Nabi, Coty's CEO.
“We are incredibly proud of the focus and agility that we see across the whole Coty organization as we continue to amplify our strengths, adjust to evolving market conditions, and capture new opportunities, all of which has enabled us to deliver results which are again amongst the best in our competitive set.”
Despite the shares dip, Coty experienced a robust final quarter for FY23, with reported sales up 16% and 17% on a like-for-like basis.
Coty has held the licence for Marc Jacobs Fragrances for the past 20 years
Boss Bottled Parfum, Burberry Hero EDP and Gucci Gorgeous Gardenia were the key performers from the business prestige division in Q4.
Consumer beauty net revenues also reached $552m, around 41% of Coty sales, with CoverGirl being the standout beauty brand for the division.
Rimmel, Bourjois, Risque, Bozzano and Paixao were also highlighted as key growth drivers, which Coty said benefited from “impactful innovations” and “strong pricing execution”.
“In the midst of on-going macroeconomic uncertainty, beauty demand remains resilient across our key categories and geographies, with no signs of tradedown, while the 'fragrance index' we have been discussing for over a year shows no sign of slowing,” added Nabi.
“In fact, the beauty category continues to be a standout in key markets like the US, as the only category amongst all CPG and general merchandise categories to grow volumes in the last six months, speaking to the beauty industry's ability to meet consumers' emotional needs.”
Coty’s strong results come after the beauty goliath penned a deal to take on and revive Marc Jacobs beauty division.
The expanded 15-year licence agreement comes after Marc Jacobs discontinued its beauty line in 2021 for unexplained reasons.
