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Coty Lifts Profit Forecast As Luxury Shoppers Seek Cosmetics, Fragrances

By Reuters
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Coty Lifts Profit Forecast As Luxury Shoppers Seek Cosmetics, Fragrances

Coty Inc raised its annual profit forecast for the second time and beat third-quarter revenue estimates, buoyed by the CoverGirl parent's price hikes and steady demand for its high-end and affordable cosmetics and fragrances.

The results buttress a recent trend of luxury shoppers indulging in lipsticks and fragrances even as they shun high-end purchases amid rising interest rates and product prices.

Coty signalled that retailers were restocking after plumping for leaner inventory in the previous quarters.

'Rebuilding And Reordering'

"Our retailers are now rebuilding and reordering. At the end of third quarter, level of inventory was very healthy," chief financial officer Laurent Mercier told Reuters.

Coty said a post-pandemic recovery in travel retail extended into the quarter. The segment is an area of focus for luxury companies where customers snap-up products from duty-free stores at airports and major shopping districts like Hainan in China.

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The company's prestige division, which houses cosmetics and fragrances from the Hugo Boss, Gucci and Burberry brands, reported an over 30% jump in global travel retail sales across all regions.

In contrast, peer Estée Lauder last week forecast weaker sales and profit, blaming slow recovery in travel retail, especially in Asia.

Coty is also seeing sturdy demand from Gen Z consumers, who are splurging on both luxury brands, as well as relatively more affordable products like Rimmel cosmetics, Mercier said.

Price Hike

The company has been increasing prices of its products to ease the pressure on margins from sky-high commodity and shipping costs.

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Coty raised its 2023 adjusted per-share profit expectations to between 38 cents and 39 cents, from 35 cents to 36 cents earlier.

Third-quarter revenue rose 9% to $1.29 billion, topping Refinitiv estimates of $1.22 billion, while adjusted profit of 19 cents per share crushed expectations of 3 cents per share.

Read More: Coty Eyes Dual Listing On Paris Stock Exchange

News by Reuters, edited by ESM – your source for the latest A Brands news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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