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Coty (COTY) on Growth Track, Raises LFL Sales View for FY23

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Coty Inc. (COTY - Free Report) raised its like-for-like (LFL) sales view for fiscal 2023 when it provided an update on its financial progress and growth opportunities at the 2023 Bank of America Consumer & Retail Conference held on Mar 15.

The company’s third-quarter core LFL sales growth is tracking at 10%, up from 7% increase witnessed in the second quarter. Notably, both Prestige and Consumer Beauty segments are seeing sequential growth.

Consequently, management now anticipates core LFL sales growth to be at the higher end of its previously guided range of 6-8% in fiscal 2023. Management expects 2% and a mid-single digit adverse impact from Russia’s exit and foreign exchange fluctuations, respectively. For the fourth quarter of fiscal 2023, Coty expects core LFL sales growth of 6-8%.

Despite raising its LFL core sales guidance, the company reaffirmed its fiscal 2023 adjusted EBITDA guidance of $955-$965 million as it intends to reinvest the additional profits into its skincare initiatives such as Lancaster Ligne Princiere, as well as the new Burberry and Gucci foundations.

Coty Price, Consensus and EPS Surprise

Coty Price, Consensus and EPS Surprise

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


What’s More?

Coty has been benefiting from its focus on six strategic pillars of 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 capabilities; growing presence in China via Prestige and certain Consumer Beauty brands; as well as setting Coty as an industry leader in sustainability.

Notably, Coty has made several strategic partnerships to enhance its brand portfolio. In January 2023, Coty and Jil Sander unveiled that they have renewed their license deal and are in for a long-running collaboration.

On Nov 18, 2021, Coty signed a licensing agreement with Orveda, an ultra-premium skincare brand made in France. Prior to this, Coty entered into a multi-channel agreement with Perfect Corp., a well-known beauty tech solutions provider.

Wrapping Up

In second-quarter fiscal 2023, the company’s bottom line beat the Zacks Consensus Estimate and increased year over year. The top line missed the consensus mark and decreased from the year-ago quarter’s reported figure.

Coty witnessed pressures from component shortages and currency headwinds in the quarter. However, consumer demand for beauty products, mainly prestige fragrances, remained solid, with high-single-digit growth in the prestige fragrance market and mid-single-digit growth across the mass beauty market.

The Zacks Rank #2 (Buy) stock has rallied nearly 21% in the past year against the industry’s decline of 18.7%.

Other Solid Staple Stocks

Some other top-ranked consumer staple stocks are Post Holdings (POST - Free Report) , General Mills (GIS - Free Report) and Lamb Weston (LW - Free Report) .

Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 111.3% from the year-ago reported number.

General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.7%, on average.

The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5% and 6.1%, respectively, from the corresponding year-ago reported figures.

Lamb Weston, a frozen potato product company, currently carries a Zacks Rank #2. LW has a trailing four-quarter earnings surprise of 52.6%, on average.

The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and EPS suggests an increase of 19.3% and 89.9%, respectively, from the year-ago reported number.

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