Coty has delivered an above-anticipated second-quarter and first-half 2023 financial performance, despite significant industry-wide constraints for key fragrance components.
Coty’s Q2 sales decreased 3%, driven by foreign exchange headwinds, with sales up 4% on a like-for-like (LFL) basis.
The company’s 1H sales declined 1%.
But, in LFL terms, the six months ended 31 December 2022 outperformed Coty’s guidance of 6-8% LFL growth, adjusted for the impact of its exit from Russia.
According to Coty, its prestige fragrance market delivered strong LFL growth, but was somewhat hampered by industry-wide component shortages, stemming from accelerated fragrance demand.
Despite the company’s launch pipeline comprising mainly brand extensions, the performance of newcomers Burberry Hero, Boss Bottled Parfum and Gucci Flora Gorgeous Jasmine were described as ‘successful’ in key markets.
Overall, the company’s prestige segment saw Q2 net revenues of US$957.7m, a decrease of 5% on a reported basis versus the prior year and up 3% on a LFL basis.
It called consumption of its prestige cosmetics in the US market ‘robust’, with both Gucci and Kylie Cosmetics growing more than 40% in that market.
Meanwhile, Coty’s consumer beauty division (which includes CoverGirl, Rimmel and Max Factor) net revenues were $565.9m in Q2, down 1% as reported versus the prior year and up 6% on a LFL basis.
“Demand for beauty products remains as strong as ever, fuelled by consumers’ desire for self-expression, confidence building and wellbeing,” said Sue Y Nabi, Coty’s CEO.
“The ‘fragrance index’ remains in full force, as consumers turn to fragrances as mood-boosting and affordable luxuries in an uncertain environment.
“As a result, Coty’s business should outperform against any slowdown in global economic growth for three key reasons.
“First, we are not yet in the mature phase of our growth evolution, with significant white space opportunities ahead, including skin care, China, travel retail and prestige make-up.
“Secondly, our prestige division remains protected by our affordable luxury beauty offerings relative to much more expensive luxury goods.
“And finally, our consumer beauty business continues to perform from a position of strength, consistently offering consumers value through high-quality and desirable beauty products at an affordable price.”
She added: “Against this backdrop, we are delivering on our balanced growth agenda, with solid LFL growth across both divisions, all regions and each of our key categories including fragrances, cosmetics and body care.”
Nabi stressed that plans were underway to accelerate Coty’s skin care business, including the upcoming launch of an ultra-premium skin care line under its Lancaster Ligne Princiere brand in China.
Given its Q2 and H1 2023 performance, Coty has not amended its existing full-year 2023 adjusted EBITDA target of $955m-$965m.