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1. Company Snapshot

1.a. Company Description

Coty Inc., together with its subsidiaries, engages in the manufacture, marketing, distribution, and sale of beauty products worldwide.The company provides prestige fragrances, skin care, and color cosmetics products through prestige retailers, including perfumeries, department stores, e-retailers, direct-to-consumer websites, and duty-free shops under the Alexander McQueen, Burberry, Bottega Veneta, Calvin Klein, Cavalli, Chloe, Davidoff, Escada, Gucci, Hugo Boss, Jil Sander, Joop!, Kylie Jenner, Lacoste, Lancaster, Marc Jacobs, Miu Miu, Nikos, philosophy, Kim Kardashian West, and Tiffany & Co. brands.It also offers mass color cosmetics, fragrance, skin care, and body care products primarily through hypermarkets, supermarkets, drug stores, pharmacies, mid-tier department stores, traditional food and drug retailers, and e-commerce retailers under the Adidas, Beckham, Biocolor, Bozzano, Bourjois, Bruno Banani, CoverGirl, Jovan, Max Factor, Mexx, Monange, Nautica, Paixao, Rimmel, Risque, Sally Hansen, Stetson, and 007 James Bond brands.


Coty Inc.also sells its products through third-party distributors to approximately 150 countries and territories.The company was founded in 1904 and is based in New York, New York.


Coty Inc.is a subsidiary of Cottage Holdco B.V.

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1.b. Last Insights on COTY

Coty Inc.'s recent performance was negatively impacted by weak Q1 earnings, missing estimates with $0.12 per share versus the expected $0.15. The company's revenues declined 6% year-over-year, driven by excess inventory levels and destocking issues. Ongoing US weakness and a struggling Consumer Beauty segment have raised concerns. Management's guidance lacks credibility after multiple downward revisions, fueling an investigation into potential securities law violations. Coty's Q1 results reflect structural issues and declining brand relevance.

1.c. Company Highlights

2. Coty's Earnings Report: A Mixed Bag with Strategic Review on the Horizon

Coty reported revenue growth, with the company maintaining its position in the top 3 for total global fragrances and prestige fragrances. However, the actual EPS came out at $0.12, missing estimates of $0.15. The company's licensing model has proven to be a strong one, with approximately 85% of its portfolio being either an owned brand, a perpetual license, or a license with a long-term remaining duration of more than 7 years. The company's P/E Ratio stands at -8.3, indicating that investors are pricing in significant challenges, while the P/S Ratio is 0.52, suggesting a relatively low revenue multiple.

Publication Date: Nov -16

📋 Highlights
  • Core Brand Growth:: Burberry, Hugo Boss, and Chloe saw 140%, 33%, and 70% growth over 5 years, respectively.
  • Licensing Portfolio Strength:: 85% of Coty’s portfolio includes owned brands or long-term licenses (>7 years), with key renewals for Hugo Boss, Marc Jacobs, and adidas for 15 years.
  • Gucci License Exit Impact:: Profit impact expected post-license expiry, but offset by growth in other brands and cost optimization.
  • Mist Category Expansion:: Aiming to increase ultra-premium share from 1% to 10-20% using patented formulations and premium gross margins.
  • E-commerce Momentum:: $1 billion in net revenue with 5-6% sellout growth, driven by TikTok and Amazon adoption in mass beauty.

Strategic Review and Divestiture Options

The company is undergoing a strategic review of its color cosmetics business, considering options such as keeping the business, a joint venture, or an outright sale. This review is expected to take 12 to 18 months, and the outcome may lead to a rebalancing of the company's portfolio. The Brazilian business, a $400 million profitable business, may be sold to a new acquirer, as the company believes it has potential for growth with a new owner.

Growth Drivers and Innovation

Coty is driving growth in its core brands, including Burberry, Hugo Boss, and Chloe, which have seen significant growth over the last 5 years. The company is also focusing on innovation, particularly in the mist category, where it has designed products to appeal to Gen Z consumers. The company's ultra-premium portfolio is also expanding, with brands like Atelier des Fleurs, aiming to increase its share in this segment from 1% to 10-20%. Laurent Mercier, CFO, stated that Coty will return to growth, driven by strong momentum in the beauty category, particularly in prestige fragrances.

Valuation and Outlook

Analysts estimate next year's revenue growth at 0.6%, indicating a relatively slow growth trajectory. The company's EV/EBITDA ratio stands at 23.3, suggesting that investors are expecting significant EBITDA growth in the future. With a Net Debt / EBITDA ratio of 13.2, the company's debt levels are a concern. The company's ROE is -9.53%, indicating that it is currently unprofitable on a return on equity basis. As the company navigates its strategic review and focuses on driving growth in its core brands, investors will be watching closely to see if Coty can return to profitability and growth.

3. NewsRoom

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Bragar Eagel & Squire, P.C. Encourages Agilon, Soleno, Avita, and Coty Investors to Contact the Firm Regarding Ongoing Investigations

Dec -03

Source: globenewswire.com

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Coty Accelerates AI Across Operations: A New Margin Lever?

Nov -28

Source: zacks.com

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COTY SECURITIES ALERT: BFA Law Notifies Coty Inc. Shareholders with Losses to Contact the Firm about Pending Securities Fraud Class Action Investigation

Nov -26

Source: newsfilecorp.com

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COTY SHAREHOLDERS: A Securities Investigation into Coty Inc. has been Initiated on behalf of Investors -- Contact BFA Law if You Suffered Losses

Nov -21

Source: globenewswire.com

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COTY STOCK: Coty Inc. Investigated for Securities Fraud after Excess Inventory Levels Cause 21% Stock Drop -- Investors Notified to Contact BFA Law

Nov -19

Source: globenewswire.com

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COTY STOCK LOSS: Coty Inc. Faces Securities Fraud Class Action Investigation due to Excess Inventory Levels – Contact BFA Law if You Suffered Losses

Nov -17

Source: globenewswire.com

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INVESTIGATION ALERT: Edelson Lechtzin LLP Announces Investigation of Coty Inc. (NYSE: COTY) and Encourages Investors with Substantial Losses or Witnesses with Relevant Information to Contact the Firm

Nov -16

Source: prnewswire.com

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Coty: Too Much Bad News Priced In - Initiating With A Buy

Nov -14

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.99%)

6. Segments

Prestige

Expected Growth: 8.37%

Prestige segment's 8.37% growth is driven by Coty's strategic focus on luxury beauty, successful brand relaunches, and expansion in high-growth markets. Strong demand for premium fragrances, skincare, and makeup, particularly among younger consumers, also contributes to growth. Additionally, Coty's investments in e-commerce and digital marketing have enhanced brand visibility and accessibility, further fueling segment growth.

Consumer Beauty

Expected Growth: 4.77%

Coty Inc.'s Consumer Beauty segment growth of 4.77% is driven by increasing demand for skincare and haircare products, particularly among younger generations. Strong brand portfolios, such as Rimmel and Sally Hansen, contribute to growth. Additionally, strategic acquisitions, like Kylie Cosmetics, expand Coty's presence in the market. Effective marketing campaigns and e-commerce investments also support sales growth.

7. Detailed Products

Fragrances

Coty's fragrance portfolio includes a wide range of luxury, prestige, and mass fragrances for men and women.

Color Cosmetics

Coty's color cosmetics portfolio includes a variety of makeup products, including foundation, eyeshadow, mascara, lipstick, and nail polish.

Skin Care

Coty's skin care portfolio includes a range of products focused on anti-aging, hydration, and brightening, including moisturizers, serums, and cleansers.

Hair Care

Coty's hair care portfolio includes a range of products for hair coloring, styling, and care, including shampoos, conditioners, and hair dyes.

Body Care

Coty's body care portfolio includes a range of products for body wash, body lotion, and hand care.

8. Coty Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Coty Inc. operates in a competitive industry with many substitutes available, but the company's strong brand portfolio and wide distribution network mitigate the threat of substitutes.

Bargaining Power Of Customers

Coty Inc.'s customers are largely retailers and distributors, who have limited bargaining power due to the company's strong brand portfolio and wide distribution network.

Bargaining Power Of Suppliers

Coty Inc. relies on a diverse supplier base, which reduces the bargaining power of individual suppliers. However, the company's dependence on a few key suppliers for certain raw materials increases the bargaining power of those suppliers.

Threat Of New Entrants

The beauty industry has high barriers to entry, including significant capital requirements, regulatory hurdles, and the need for a strong brand portfolio. These barriers limit the threat of new entrants.

Intensity Of Rivalry

The beauty industry is highly competitive, with many established players competing for market share. Coty Inc. faces intense rivalry from other multinational companies, which increases the competitive pressure.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 53.14%
Debt Cost 7.75%
Equity Weight 46.86%
Equity Cost 13.12%
WACC 10.26%
Leverage 113.41%

11. Quality Control: Coty Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Inter Parfums

A-Score: 5.9/10

Value: 4.9

Growth: 8.1

Quality: 8.1

Yield: 5.0

Momentum: 2.5

Volatility: 7.0

1-Year Total Return ->

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Stock-Card
Clorox

A-Score: 5.3/10

Value: 4.0

Growth: 3.9

Quality: 6.5

Yield: 7.0

Momentum: 1.0

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
e.l.f. Beauty

A-Score: 4.4/10

Value: 0.8

Growth: 9.6

Quality: 7.1

Yield: 0.0

Momentum: 7.0

Volatility: 2.0

1-Year Total Return ->

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Stock-Card
Newell Brands

A-Score: 3.9/10

Value: 7.8

Growth: 1.4

Quality: 1.9

Yield: 9.0

Momentum: 1.0

Volatility: 2.0

1-Year Total Return ->

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Stock-Card
Helen of Troy

A-Score: 3.0/10

Value: 9.5

Growth: 3.0

Quality: 3.1

Yield: 0.0

Momentum: 0.0

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
Coty

A-Score: 2.8/10

Value: 6.4

Growth: 3.1

Quality: 2.8

Yield: 0.0

Momentum: 0.5

Volatility: 4.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

3.47$

Current Price

3.48$

Potential

-0.00%

Expected Cash-Flows