We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The coronavirus outbreak has limited growth prospects for many cosmetic players thanks to sluggish store and salon traffic, disrupted travel retail network, supply-chain hiccups and reduced makeup usage due to decline in social outings. One such company facing coronavirus-related challenges is Coty Inc. (COTY - Free Report) .
In fact, coronavirus-led concerns put pressure on Coty’s fourth-quarter fiscal 2020 results. During the quarter, the top and the bottom line slumped year over year and fell significantly short of the respective Zacks Consensus Estimate. Results were marred by broad-based channel shutdowns caused by coronavirus-induced restrictions.
Other Factors Hurting Coty’s Performance
Coty’s Consumer Beauty segment has been posting drab sales since the last few quarters. The segment continued to be under pressure in the fourth quarter of fiscal 2020, with revenues declining 55% year over year and Like for Like sales plunging 48%. Revenues in the segment were hurt by absence of Younique’s sales, which were included in the prior-year quarter. Also, reduced traffic in drugstores and mass retailers globally hampered results. Consumers’ shifting preference for more important personal care products put pressure on the color cosmetic category.
Apart from these, Coty is exposed to unfavorable foreign currency translations owing to the company’s exposure to international markets. During the fiscal fourth quarter, currency translations affected revenues to the tune of 2%.
The Bright Side
While Coty saw soft sales in the fiscal fourth quarter due to coronavirus-led concerns, the company’s e-commerce business was quite impressive. In fact, the company is witnessing strong momentum as well as market share gains for its ecommerce business. In Americas segment the company saw solid e-commerce sell-out for both mass and prestige brands. Even in the EMEA segment Coty witnessed double to triple digit e-commerce sell-out growth in its prestige and mass businesses.
Well, other cosmetic companies like Helen of Troy Limited (HELE - Free Report) , Estee Lauder (EL - Free Report) and e.l.f. Beauty, Inc. (ELF - Free Report) have also been benefiting from strength in their digital operations, especially amid the coronavirus pandemic.
Meanwhile, Coty has made several strategic acquisitions to enhance its brand portfolio. On Jun 29, the company announced partnership with one of the most influential celebrity—Kim Kardashian West. Further, Coty acquired a 51% stake in King Kylie this January and entered into a deal to produce, promote, distribute and sell certain products of King Kylie. Apart from this, the company’s buyout of the iconic Burberry brand in the second quarter of fiscal 2018 is noteworthy. Also, Coty is on course to turn around its operations. Coty’s latest move in this regard is its strategic alliance with KKR.
Apart from these, management is committed to optimizing the overall cost structure. Incidentally, the company has lowered its third-party costs, people on people expenses as well as non-working advertising and consumer promotion spends. Additionally, Coty is on track with reducing its capital expenditures
That being said, it is yet to be seen whether these upsides can help Coty counter the aforementioned hurdles.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Coronavirus-Led Woes Hurt Coty (COTY), E-commerce Looks Solid
The coronavirus outbreak has limited growth prospects for many cosmetic players thanks to sluggish store and salon traffic, disrupted travel retail network, supply-chain hiccups and reduced makeup usage due to decline in social outings. One such company facing coronavirus-related challenges is Coty Inc. (COTY - Free Report) .
In fact, coronavirus-led concerns put pressure on Coty’s fourth-quarter fiscal 2020 results. During the quarter, the top and the bottom line slumped year over year and fell significantly short of the respective Zacks Consensus Estimate. Results were marred by broad-based channel shutdowns caused by coronavirus-induced restrictions.
Other Factors Hurting Coty’s Performance
Coty’s Consumer Beauty segment has been posting drab sales since the last few quarters. The segment continued to be under pressure in the fourth quarter of fiscal 2020, with revenues declining 55% year over year and Like for Like sales plunging 48%. Revenues in the segment were hurt by absence of Younique’s sales, which were included in the prior-year quarter. Also, reduced traffic in drugstores and mass retailers globally hampered results. Consumers’ shifting preference for more important personal care products put pressure on the color cosmetic category.
Apart from these, Coty is exposed to unfavorable foreign currency translations owing to the company’s exposure to international markets. During the fiscal fourth quarter, currency translations affected revenues to the tune of 2%.
The Bright Side
While Coty saw soft sales in the fiscal fourth quarter due to coronavirus-led concerns, the company’s e-commerce business was quite impressive. In fact, the company is witnessing strong momentum as well as market share gains for its ecommerce business. In Americas segment the company saw solid e-commerce sell-out for both mass and prestige brands. Even in the EMEA segment Coty witnessed double to triple digit e-commerce sell-out growth in its prestige and mass businesses.
Well, other cosmetic companies like Helen of Troy Limited (HELE - Free Report) , Estee Lauder (EL - Free Report) and e.l.f. Beauty, Inc. (ELF - Free Report) have also been benefiting from strength in their digital operations, especially amid the coronavirus pandemic.
Meanwhile, Coty has made several strategic acquisitions to enhance its brand portfolio. On Jun 29, the company announced partnership with one of the most influential celebrity—Kim Kardashian West. Further, Coty acquired a 51% stake in King Kylie this January and entered into a deal to produce, promote, distribute and sell certain products of King Kylie. Apart from this, the company’s buyout of the iconic Burberry brand in the second quarter of fiscal 2018 is noteworthy. Also, Coty is on course to turn around its operations. Coty’s latest move in this regard is its strategic alliance with KKR.
Apart from these, management is committed to optimizing the overall cost structure. Incidentally, the company has lowered its third-party costs, people on people expenses as well as non-working advertising and consumer promotion spends. Additionally, Coty is on track with reducing its capital expenditures
That being said, it is yet to be seen whether these upsides can help Coty counter the aforementioned hurdles.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>