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COTY Benefits From its Business Strength, Headwinds Persist
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Coty Inc. (COTY - Free Report) has been witnessing solid momentum in its Prestige and Consumer Beauty businesses, which boosted its first-quarter fiscal 2024 performance. In the quarter, Prestige segment’s revenues increased by 23% year-over-year to $1,064.7 million. The improvement was driven by strength in the prestige fragrance category owing to the continued success of fragrance brands like Burberry, Hugo Boss, Calvin Klein and Gucci.
Solid demand for color cosmetics, mass fragrance, mass skin and body care products has been driving its Consumer Beauty segment’s performance. In the fiscal first quarter, the segment’s revenues increased 10% year-over-year to $576.7 million.
Apart from these, the company continues to witness impressive momentum in Travel Retail sales. Its Travel Retail business witnessed more than 20% growth in first-quarter fiscal 2024, driven by the continued recovery of international travel and Coty's expansion in the travel retail channel.
Driven by strength across its businesses, Coty raised its guidance for the first half of fiscal 2024. For the first half of fiscal 2024, the company expects its core like-for-like (“LFL”) sales to grow in the range of 11-13%, higher than the earlier outlook of 10-12%. Consequently, management currently anticipates overall fiscal 2024 core LFL sales growth of 9-11%, surpassing its previous guidance of 8-10%.
Coty remains committed to optimizing the overall cost structure. In this regard, it has been progressing well with the All In to Win transformation program. In the first quarter of fiscal 2024, the company delivered savings of nearly $35 million. The company now targets savings of more than $100 million for fiscal 2024.
Image Source: Zacks Investment Research
This Zacks Rank #3 (Hold) company’s shares have gained 2.5% in the past six months against the industry’s decline of 25.4%.
Despite the positives, COTY has been grappling with escalating operating costs and expenses. In the fiscal first quarter, its cost of sales increased by 20% to $599.5 million on a year-over-year basis. The increase can be attributed to a rise in manufacturing and material costs, higher designer license fees and a rise in obsolescence costs. If not controlled, a surge in costs and operating expenses might dent the company’s margins and profitability in the quarters ahead.
The company is exposed to the risk of adverse currency fluctuations owing to its extensive presence in international markets. For instance, it incurred more than $70 million of negative foreign exchange impacts on adjusted EBITDA in fiscal 2023.
Stocks to Consider
Here we have highlighted three better-ranked stocks from the same space, namely Dutch Bros (BROS - Free Report) , Inter Parfums (IPAR - Free Report) and Ingredion Incorporated (INGR - Free Report) .
Dutch Bros is an operator and franchisor of drive-thru shops that focus on serving high-quality, hand-crafted beverages with unparalleled speed and superior service. BROS has a trailing four-quarter earnings surprise of 57.1%, on average.
The Zacks Consensus Estimate for Dutch Bros’ current financial-year sales and earnings suggests growth of 30.6% and 75%, respectively, from the year-ago period's reported figures. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Inter Parfums manufactures, markets and distributes a range of fragrances and fragrance-related products and currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 19.7% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.9%, on average.
Ingredion, a producer and distributor of sweeteners, nutrition ingredients and biomaterial solutions, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for INGR’s current financial-year earnings per share is expected to rise 23.2% from the corresponding year-ago reported figure.
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COTY Benefits From its Business Strength, Headwinds Persist
Coty Inc. (COTY - Free Report) has been witnessing solid momentum in its Prestige and Consumer Beauty businesses, which boosted its first-quarter fiscal 2024 performance. In the quarter, Prestige segment’s revenues increased by 23% year-over-year to $1,064.7 million. The improvement was driven by strength in the prestige fragrance category owing to the continued success of fragrance brands like Burberry, Hugo Boss, Calvin Klein and Gucci.
Solid demand for color cosmetics, mass fragrance, mass skin and body care products has been driving its Consumer Beauty segment’s performance. In the fiscal first quarter, the segment’s revenues increased 10% year-over-year to $576.7 million.
Apart from these, the company continues to witness impressive momentum in Travel Retail sales. Its Travel Retail business witnessed more than 20% growth in first-quarter fiscal 2024, driven by the continued recovery of international travel and Coty's expansion in the travel retail channel.
Driven by strength across its businesses, Coty raised its guidance for the first half of fiscal 2024. For the first half of fiscal 2024, the company expects its core like-for-like (“LFL”) sales to grow in the range of 11-13%, higher than the earlier outlook of 10-12%. Consequently, management currently anticipates overall fiscal 2024 core LFL sales growth of 9-11%, surpassing its previous guidance of 8-10%.
Coty remains committed to optimizing the overall cost structure. In this regard, it has been progressing well with the All In to Win transformation program. In the first quarter of fiscal 2024, the company delivered savings of nearly $35 million. The company now targets savings of more than $100 million for fiscal 2024.
Image Source: Zacks Investment Research
This Zacks Rank #3 (Hold) company’s shares have gained 2.5% in the past six months against the industry’s decline of 25.4%.
Despite the positives, COTY has been grappling with escalating operating costs and expenses. In the fiscal first quarter, its cost of sales increased by 20% to $599.5 million on a year-over-year basis. The increase can be attributed to a rise in manufacturing and material costs, higher designer license fees and a rise in obsolescence costs. If not controlled, a surge in costs and operating expenses might dent the company’s margins and profitability in the quarters ahead.
The company is exposed to the risk of adverse currency fluctuations owing to its extensive presence in international markets. For instance, it incurred more than $70 million of negative foreign exchange impacts on adjusted EBITDA in fiscal 2023.
Stocks to Consider
Here we have highlighted three better-ranked stocks from the same space, namely Dutch Bros (BROS - Free Report) , Inter Parfums (IPAR - Free Report) and Ingredion Incorporated (INGR - Free Report) .
Dutch Bros is an operator and franchisor of drive-thru shops that focus on serving high-quality, hand-crafted beverages with unparalleled speed and superior service. BROS has a trailing four-quarter earnings surprise of 57.1%, on average.
The Zacks Consensus Estimate for Dutch Bros’ current financial-year sales and earnings suggests growth of 30.6% and 75%, respectively, from the year-ago period's reported figures. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Inter Parfums manufactures, markets and distributes a range of fragrances and fragrance-related products and currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 19.7% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.9%, on average.
Ingredion, a producer and distributor of sweeteners, nutrition ingredients and biomaterial solutions, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for INGR’s current financial-year earnings per share is expected to rise 23.2% from the corresponding year-ago reported figure.