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Coty (COTY) Q4 Loss Wider Than Estimates, Revenues Increase

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Coty Inc. (COTY - Free Report) released mixed fourth-quarter fiscal 2021 results, with the bottom line improving year over year but lagging the Zacks Consensus Estimate. The top line increased year over year and surpassed the consensus mark. Trends improved year over year across all regions in which the company operates.  

Coty continued to focus on curtailing cost structure in the fourth quarter, with savings amounting to nearly $70 million. Fiscal 2021 cost savings amounted to more than $330 million. Well, the company is on track to achieve its savings target of $600 million for fiscal 2023. Also, management is impressed with its progress toward the transformational strategy.

Coty Inc. Price, Consensus and EPS Surprise


Coty Inc. Price, Consensus and EPS Surprise

Coty Inc. price-consensus-eps-surprise-chart | Coty Inc. Quote


Quarter in Detail

Coty posted adjusted loss of 9 cents per share. The bottom line was narrower than the year-ago quarter’s adjusted loss of 46 cents per share. The figure was wider than the Zacks Consensus Estimate, which was pegged at a loss of 5 cents per share.

Coty’s net revenues came in at $1,062.4 million, which surged 89.6% year over year. The metric surpassed the Zacks Consensus Estimate of $1,022.3 million. Currency translations had 8.9% positive impact on the top line.

LFL net revenues increased 80.7% due to gains in the EMEA, Americas and Asia Pacific segments.  The LFL mass business revenues saw 37.9% growth and the prestige business was up significantly.

Adjusted gross margin increased from 40.6% to 60.9% on improved volumes, favorable revenue mix as well as reduced excess and obsolescence.

Adjusted operating income came in at $44.3 million against an adjusted loss of $335.3 million in the year-ago quarter. Further, adjusted EBITDA for the quarter came in at $127.3 million against a loss of $246.6 million in the prior-year quarter. The upside was a result of improved gross margin and constant fixed-cost curtailments (including people and non-people expenses).

Channel-Wise Details

Prestige: Net revenues in the segment advanced significantly (same at LFL) to $570.2 million. The upside was backed by growth in the United States, EMEA and China. Brand-wise, the company benefited from impressive performance across Gucci, Marc Jacobs, Burberry, Calvin Klein and Chloe.

Mass: Net revenues rose 44.4% year over year to $492 million, while LFL sales jumped 37.9%. The channel benefited from double-digits growth across EMEA and Americas regions. Asia Pacific region registered growth, but at a slower rate. Easing of pandemic-induced restrictions like masking mandates contributed to the upside.

Segment Results

Net revenues in the Americas surged 68.9% to $447.2 million. LFL revenues were up 67.2%.  Prestige brand sales increased triple digits on the back of solid growth in fragrances, cosmetics and skincare. Mass beauty product sales jumped double-digits owing to improvements in color cosmetics. During the quarter, e-commerce sales surged 36% in the region, despite tough year-over-year comparisons.

Sales in EMEA surged significantly (same at LFL) year over year to $471.4 million. Sales in the prestige and mass brands jumped triple-digits and double-digits, respectively, despite pandemic-led hurdles in many markets. During the quarter, e-commerce sales surged 20% in the region.

Sales in the Asia-Pacific region rose 70% (up 58.7% at LFL) year on year to $143.8 million. LFL revenues were driven by solid growth across prestige brands. The company saw strength, particularly in China. E-commerce sales jumped in triple-digit rate.

Other Financial Updates

Coty ended the quarter with cash and cash equivalents of $253.5 million and immediate liquidity of $2,323.2 million.

The company’s financial net debt of $5,228 million as of Jun 30, 2021, escalated from $5,106.6 million as of the end of the preceding quarter (Mar 31, 2021). During the quarter, Coty provided cash in operations of $32.3 million. Operating cash flow for the year-to-date period came in at $318.7 million. Free cash flow during the fourth quarter was $2.1 million.

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At the beginning of first-quarter fiscal 2022, Coty is seeing momentum in the fragrance market across the United States and China. The company is also witnessing some recovery in the EMEA region as well as broader color cosmetics. Along with these, an impressive product launch calendar has been driving sales momentum in the quarter. The company saw double-digit growth during July as well as August to-date period. Management expects fiscal first-quarter LFL sales growth in the high-teens percentage.

Owing to tough base year comparisons and uncertainty surrounding the Delta variant of COVID-19, the company projects fiscal 2022 LFL sales growth to be in low teens. During fiscal 2022, adjusted EBITDA is expected to come in at $900 million on a constant-currency basis, indicating solid year-over-year growth in EBITDA margin.

Shares of the Zacks Rank #3 (Hold) company have increased 17.3% so far this year compared with the industry’s growth of 21.5%.

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Inter Parfums, Inc. (IPAR - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 25.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nu Skin Enterprises, Inc. (NUS - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 15.7%, on average.

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