Ongoing downturn in beauty sales hinders Coty’s comeback

By Becky Bargh 10-Feb-2021

Dwindling sales across the personal care conglomerate's global markets have knocked a million off Coty’s income for Q2

Kendall and Kylie Jenner for Kylie Cosmetics

Kendall and Kylie Jenner for Kylie Cosmetics

The impact of Covid-19 on beauty sales has hindered Coty’s return to profit for Q2.

The personal care conglomerate and licence holder of CoverGirl, Kylie Cosmetics and Rimmel London’s beauty lines, reported a revenue downturn of 16%, or a like-for-like decline of 18% to US$2,540m across the business.

While the figures show a one percent increase in performance from Q1, the impact of Covid-19 and forced lockdowns has crippled global consumer spending.

Dwindling revenues were driven in particular by a significant drop in revenues in the EMEA market – Coty’s worst performing segment – which saw a 25% nosedive in revenue for the quarter, knocking millions off Coty’s income.

Asia Pacific region revenues also tumbled 17.2% in spite of strong retail sales in the US and China, as well as broad-based growth in e-commerce.

Year-to-date Coty, helmed by former L’Oréal executive Sue Y. Nabi, reported operating losses of $49m, an increase from a reported operating loss of $16.5m, which Coty blamed on lower sales, high acquisition and divestiture-related expenses.

However, the company adjusted its gross margin of 58.7%, a drop of almost 4% for the three months.

Despite the group’s struggles to entice sales, Nabi is confident Coty’s savings objectives are on track to boost its profits.

“The strong execution on our fixed cost savings plan, with approximately $160m of savings generated in the first half of FY21, and a solid pipeline of projects for the second half, give us confidence to raise our savings target for the full year to approximately $300m,” she said.

“The additional savings will allow us to protect our profitability in the coming months of uncertainty while simultaneously freeing up funds to increase our A&CP investments in the second half of FY21 to support our carefully chosen strategic initiatives.”

At the end of 2020, Coty completed the sale of its Professional and Retail Hair businesses, selling off a 60% stake in Wella, Clairol, OPI and ghd.

The deal gave Coty a desperately needed cash injection of $2.5bn to help weather the storm of the Covid-19 pandemic.

However, the group reported a surprise profit for Q1 as countries emerged from various lockdowns.

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But new restrictions, particularly in Europe, have had a knock-on effect on beauty sales.