CoverGirl parent Coty has forecast annual profit below Wall Street expectations, hurt by steeper input expenses, even as the company raised product prices to shield itself from towering costs and a strong dollar.
Raw material and freight costs have eased from pandemic-era highs, but a tight labour market is exacerbating the drag of persistent inflation on production costs.
A strong dollar has hurt the company, which makes more than half of its sales from overseas markets, mainly Europe, the Middle East and Africa.
Coty's chief financial officer, Laurent Mercier, told Reuters in an interview that inflation is here to stay, at least in the first half of fiscal 2024.
"But then we are expecting some easing of these cost of goods inflation in the second half," Mercier said.
Coty's cost of sales grew to $502.1 million, from $446.2 million a year ago. The company reported a quarterly adjusted profit of 1 cent per share, while analysts had expected a profit of 2 cents, as per Refinitiv data.
Still, consistent price hikes helped it bump up its margins by 110 basis points, to 62.9%, in the quarter ended 30 June.
Coty forecast 2024 adjusted profit between 44 cents and 47 cents per share. Analysts on average had expected a profit of 48 cents, according to Refinitiv data.
Its net revenue for the fourth quarter rose 16%, to $1.35 billion, topping an expectation of $1.31 billion.
"When you look at the geographical performance, they look more in line with what we have seen at L'Oreal in the beauty category, rather than Estee Lauder, which continues to be dragged down by specific issues," said Javier Gonzalez Lastra, portfolio manager at Tema ETFs for luxury funds.
In contrast, rival Estée Lauder provided downbeat annual forecasts, hurt by frail recovery in travel retail and slowing US demand.