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Coty (COTY) Poised on Strength in Core Priorities & Partnerships
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Coty Inc. (COTY - Free Report) looks well positioned, courtesy of focus on core priorities and e-commerce efforts. Moreover, the company is benefiting from its focus on undertaking prudent partnerships and divestitures. Additionally, it is on track with effective cost savings. That being said, some pandemic-led hurdles like soft traffic as well as a disrupted travel retail network amid the social distancing trends are a concern. Let’s discuss further.
Focus on Core Priorities
On April 23, Coty revealed its long-term strategy that was highlighted by six priorities aimed at sustainable growth. These include stabilizing Consumer Beauty make-up brands and mass fragrances; accelerating luxury fragrances and setting up Coty as a core player in prestige make-up; establishing a skincare portfolio in prestige and mass channels; strengthening e-commerce and Direct-to-Consumer (DTC) capabilities; growing presence in China via Prestige and certain Consumer Beauty brands; as well as setting Coty as an industry leader in sustainability.
With respect to its prestige fragrance category, Coty is particularly benefiting from strength and innovations in Gucci, Burberry and Marc Jacobs brands. In its last earnings call, management highlighted that its prestige makeup category is gaining from impressive performance from Gucci and Burberry brands worldwide. Certainly, the impact of these strategies was reflected in Coty’s third-quarter fiscal 2021 results, with sales in the prestige channel reverted to growth as the effects of coronavirus declined in a number of markets. The company saw strength in several core markets like China and the United States.
Image Source: Zacks Investment Research
What Else is Working Well for Coty?
Coty has made several strategic partnerships to enhance its brand portfolio. On Mar 3, 2021, the company signed a letter of intent to partner with LanzaTech — a pioneer in producing next-generation green and sustainable ingredients. This partnership is aimed at introducing sustainable ethanol produced from captured-carbon emissions into Coty’s fragrance offerings. Further, the company acquired 20% stake in Kim Kardashian West's businessin January 2021. The deal will help Coty and Kim Kardashian West focus on fresh beauty categories as well as expand their worldwide presence beyond the current line of products.
Apart from this, Coty and Kylie Jenner unveiled their long-term alliance in January 2020. The partnership is aimed toward further building upon Kylie’s beauty business, which includes Kylie Skin and Kylie Cosmetics. On the flip side, Coty completed the sale of a majority stake in its Professional and Retail Hair business (Wella) to KKR on Nov 30, 2020. In September 2019, Coty divested its controlling stake in Younique, LLC.
Further, Coty’s e-commerce business has been performing impressively, especially amid the pandemic. In the fiscal third quarter, the company’s e-commerce sales surged nearly 38%, with strength in all regions and channels. Also, Coty’s luxury e-commerce sales increased more than 20%, while its year-to-date penetration is pegged at mid 20% level. Notably, e-commerce sales in the Americas surged more than 50%, while the metric in EMEA soared about 90% in the quarter. Moreover, e-commerce sales jumped in triple digits Asia-Pacific region. Channel-wise, e-commerce sales rose more than 20% in Prestige. Further, e-commerce sales in Mass channel remained strong, surging more than 50%. The upside was backed by consistent growth at retailer sites as well as robust performance on Amazon (AMZN - Free Report) .
Roadblocks for Coty
In third-quarter fiscal 2021, Coty’s net revenues fell 3.3% year over year. Further, LFL net revenues slid 5.5% due to declines in the EMEA and Americas segments, somewhat compensated by growth in the Asia Pacific during the quarter. Net revenues in the Americas fell 6%, while LFL revenues were down 3.4% as weakness in the color cosmetics market continued to hurt the mass beauty category. Further, sales in EMEA dropped 7.8% (down 12.9% at LFL). LFL sales in the region were hurt by travel retail hurdles amid COVID-19. Apart from these, sales trends in both mass and prestige were hurt by pandemic-led curbs and lockdowns in huge parts of Western Europe.
Nevertheless, Coty’s cost-saving efforts along with the aforementioned upsides are likely to keep its growth story going. Management is committed toward its fixed cost-reduction program, which has helped it redirect capital to improve brands and delivery profit. In the fiscal third quarter, Coty’s fixed costs declined 15% year on year. Incidentally, the company delivered cost savings amounting to nearly $110 million in the quarter. Year to date, its cost savings amounted to more than $270 million. Well, the company is on track to achieve its savings target of about $300 million for fiscal 2021.
Shares of this Zacks Rank #3 (Hold) company have increased 10.4% in the past three months compared with the industry’s growth of 5.5%.
Nu Skin Enterprises, Inc. (NUS - Free Report) has a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 18.8%, on average.
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After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%
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Coty (COTY) Poised on Strength in Core Priorities & Partnerships
Coty Inc. (COTY - Free Report) looks well positioned, courtesy of focus on core priorities and e-commerce efforts. Moreover, the company is benefiting from its focus on undertaking prudent partnerships and divestitures. Additionally, it is on track with effective cost savings. That being said, some pandemic-led hurdles like soft traffic as well as a disrupted travel retail network amid the social distancing trends are a concern. Let’s discuss further.
Focus on Core Priorities
On April 23, Coty revealed its long-term strategy that was highlighted by six priorities aimed at sustainable growth. These include stabilizing Consumer Beauty make-up brands and mass fragrances; accelerating luxury fragrances and setting up Coty as a core player in prestige make-up; establishing a skincare portfolio in prestige and mass channels; strengthening e-commerce and Direct-to-Consumer (DTC) capabilities; growing presence in China via Prestige and certain Consumer Beauty brands; as well as setting Coty as an industry leader in sustainability.
With respect to its prestige fragrance category, Coty is particularly benefiting from strength and innovations in Gucci, Burberry and Marc Jacobs brands. In its last earnings call, management highlighted that its prestige makeup category is gaining from impressive performance from Gucci and Burberry brands worldwide. Certainly, the impact of these strategies was reflected in Coty’s third-quarter fiscal 2021 results, with sales in the prestige channel reverted to growth as the effects of coronavirus declined in a number of markets. The company saw strength in several core markets like China and the United States.
What Else is Working Well for Coty?
Coty has made several strategic partnerships to enhance its brand portfolio. On Mar 3, 2021, the company signed a letter of intent to partner with LanzaTech — a pioneer in producing next-generation green and sustainable ingredients. This partnership is aimed at introducing sustainable ethanol produced from captured-carbon emissions into Coty’s fragrance offerings. Further, the company acquired 20% stake in Kim Kardashian West's businessin January 2021. The deal will help Coty and Kim Kardashian West focus on fresh beauty categories as well as expand their worldwide presence beyond the current line of products.
Apart from this, Coty and Kylie Jenner unveiled their long-term alliance in January 2020. The partnership is aimed toward further building upon Kylie’s beauty business, which includes Kylie Skin and Kylie Cosmetics. On the flip side, Coty completed the sale of a majority stake in its Professional and Retail Hair business (Wella) to KKR on Nov 30, 2020. In September 2019, Coty divested its controlling stake in Younique, LLC.
Further, Coty’s e-commerce business has been performing impressively, especially amid the pandemic. In the fiscal third quarter, the company’s e-commerce sales surged nearly 38%, with strength in all regions and channels. Also, Coty’s luxury e-commerce sales increased more than 20%, while its year-to-date penetration is pegged at mid 20% level. Notably, e-commerce sales in the Americas surged more than 50%, while the metric in EMEA soared about 90% in the quarter. Moreover, e-commerce sales jumped in triple digits Asia-Pacific region. Channel-wise, e-commerce sales rose more than 20% in Prestige. Further, e-commerce sales in Mass channel remained strong, surging more than 50%. The upside was backed by consistent growth at retailer sites as well as robust performance on Amazon (AMZN - Free Report) .
Roadblocks for Coty
In third-quarter fiscal 2021, Coty’s net revenues fell 3.3% year over year. Further, LFL net revenues slid 5.5% due to declines in the EMEA and Americas segments, somewhat compensated by growth in the Asia Pacific during the quarter. Net revenues in the Americas fell 6%, while LFL revenues were down 3.4% as weakness in the color cosmetics market continued to hurt the mass beauty category. Further, sales in EMEA dropped 7.8% (down 12.9% at LFL). LFL sales in the region were hurt by travel retail hurdles amid COVID-19. Apart from these, sales trends in both mass and prestige were hurt by pandemic-led curbs and lockdowns in huge parts of Western Europe.
Nevertheless, Coty’s cost-saving efforts along with the aforementioned upsides are likely to keep its growth story going. Management is committed toward its fixed cost-reduction program, which has helped it redirect capital to improve brands and delivery profit. In the fiscal third quarter, Coty’s fixed costs declined 15% year on year. Incidentally, the company delivered cost savings amounting to nearly $110 million in the quarter. Year to date, its cost savings amounted to more than $270 million. Well, the company is on track to achieve its savings target of about $300 million for fiscal 2021.
Shares of this Zacks Rank #3 (Hold) company have increased 10.4% in the past three months compared with the industry’s growth of 5.5%.
Solid Cosmetics Stocks
Inter Parfums, Inc. (IPAR - Free Report) has a Zacks Rank #1 (Strong Buy) and a trailing four-quarter earnings surprise of 27.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nu Skin Enterprises, Inc. (NUS - Free Report) has a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 18.8%, on average.
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
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