Coty Announces Major Strategic Shift
Coty Beats Q4 Earnings Estimates as Strategic Overhaul and Gucci License Exit Loom
Key Points
Coty named Soraya Benchikh, a former Diageo Europe president and ex-BAT finance chief, as CFO as part of Coty.Curated governance changes, replacing Laurent Mercier.
Coty counted about a 1% revenue impact from the Middle East conflict in Q2, which was smaller than the 2%–3% impact it had previously forecast.
In the June-quarter (Q2 CY2026) Coty posted net revenue of $1.27 billion, up 1.3% year over year, beating estimates that had anticipated a decline of about 4.6%, with adjusted loss per share of $0.02 (narrowed from $0.05), versus expectations of a $0.01 loss.
Coty is expanding Marc Jacobs Beauty offerings under partner lines Swarovski, Etro, and Marni to offset the anticipated headwinds from returning the Gucci Beauty license to Kering.
Fiscal 2026 cash-flow highlights include full-year operating cash flow of about $538 million and free cash flow of roughly $348 million, underscoring cash generation despite a tougher operating environment.
Coty beat revenue expectations in its fiscal fourth quarter, posting $1.27 billion in sales — up 1.3% year over year — but signaled rough times ahead as it returns its Gucci Beauty license to owner Kering. The company will pocket $400 million plus inventory from the sale, then deploy those funds to pay down debt and invest in core brands like Marc Jacobs and Rimmel WWD.
The beauty giant posted a narrower adjusted loss of $0.02 per share versus forecasts for a $0.01 loss, and generated $348 million in free cash flow for the full year Yahoo Finance. Yet management withheld its fiscal 2027 outlook, branding the coming year a "transition period" as Gucci's exit will pressure sales and profit despite accelerating growth in other brands MarketScreener.
New CFO and Cost-Cutting Push
Coty named Soraya Benchikh — a former British American Tobacco finance chief and Diageo Europe president — as its new CFO to steer the company through restructuring Freedom 96.9. She replaces Laurent Mercier as part of the "Coty.Curated" plan, which aims to simplify the portfolio and cut overhead. The company is reviewing potential divestitures of brands such as CoverGirl and Rimmel.
Management is rightsizing commercial, R&D, and marketing teams to offset Gucci's exit. Coty generated $538 million in operating cash flow for fiscal 2026, showing the strategy is starting to work Yahoo Finance.
Gucci's Exit Leaves $400 Million Gap
Gucci Beauty has been a revenue driver for Coty, so losing the license stings. The company will receive $400 million in cash plus inventory from Kering, then use the proceeds to cut debt and invest in faster-growing brands WWD. Fiscal 2027 will feel the full impact of losing Gucci's sales.
To plug the hole, Coty is expanding Marc Jacobs Beauty offerings under partnership lines including Swarovski, Etro, and Marni WWD. These brands are growing faster than Gucci was, which could help offset the headwind by 2029.
Middle East Conflict's Smaller-Than-Feared Impact
Coty initially warned that Middle East unrest could cut sales by 2% to 3%, but the actual hit in the June quarter was only about 1% MarketScreener. The smaller impact reflects pent-up demand for beauty products and a quicker recovery in key markets than the company had feared.
Like-for-Like Sales Fall But Margins Expand
Coty's comparable-store sales fell 1% in the quarter, weighed down by the Gucci exit and softer demand in some regions WWD. Yet gross margins improved thanks to tighter cost control and lower promotional spending. The company is betting this margin strength will last even as sales face near-term pressure.
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