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COTY Gains From Solid Beauty Product Business Amid Headwinds
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Coty Inc. (COTY - Free Report) is well poised to grow from strength across its Prestige and Consumer Beauty businesses. In the first quarter of fiscal 2024, revenues from the company’s Prestige segment increased 23% on a year-over-year basis to $1,064.7 million. The improvement was driven by strength in the prestige fragrance category on the continued success of fragrance brands like Hugo Boss, Calvin Klein, Burberry and Gucci.
The Consumer Beauty segment has also been witnessing solid momentum, driven by robust demand for color cosmetics, mass fragrances, mass skin and body care products. For instance, in the fiscal first quarter, the segment’s revenues grew 10% year over year to $576.7 million. Also, the continued recovery of international travel and Coty's expansion in the travel retail channel have been driving its Travel Retail sales. Its Travel Retail business witnessed more than 20% growth in first-quarter fiscal 2024.
With such favorable trends and momentum in the core categories, the company provided a solid sales outlook for the first half, as well as fiscal 2024. For the first half of fiscal 2024, COTY expects its core like-for-like (“LFL”) sales to grow 11-13%. Consequently, management raised its overall fiscal 2024 core LFL sales view from an increase of 8-10% to 9-11%.
The company remains committed to undertaking initiatives to accelerate sales and profit growth, deleverage its balance sheet and simplify its capital structure. In July 2023, it unveiled that it inked a letter of intent to divest part of its stake in Wella to IGF Wealth Management. In December 2022, Coty announced the sale of the Lacoste fragrance license back to the latter in a mutual deal. The move will help the firm focus on its most significant fragrance licenses while speeding up its deleveraging plan via the sale proceeds.
Image Source: Zacks Investment Research
This Zacks Rank #3 (Hold) company’s shares have gained 9.1% in the past three months against the industry’s decline of 3%.
However, COTY has been witnessing rising operating costs and expenses. In the fiscal first quarter, its cost of sales grew 20% to $599.5 million year over year. The increase was attributable to higher manufacturing and material costs, a rise in designer license fees and obsolescence costs.
Given the company’s extensive presence in international markets, its business is exposed to the risk of adverse currency fluctuations. For instance, in fiscal 2023, it incurred more than $70 million of negative foreign exchange impacts on adjusted EBITDA.
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.
Inter Parfums manufactures, markets and distributes a range of fragrances and fragrance-related products. The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 20.9% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.7%, on average.
Ingredion is a producer and distributor of sweeteners, nutrition ingredients and biomaterial solutions. The Zacks Consensus Estimate for INGR’s current financial-year earnings per share indicates an increase of 24.7% from the corresponding year-ago reported figure. INGR reported an earnings surprise of 23.9% in the last reported quarter.
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COTY Gains From Solid Beauty Product Business Amid Headwinds
Coty Inc. (COTY - Free Report) is well poised to grow from strength across its Prestige and Consumer Beauty businesses. In the first quarter of fiscal 2024, revenues from the company’s Prestige segment increased 23% on a year-over-year basis to $1,064.7 million. The improvement was driven by strength in the prestige fragrance category on the continued success of fragrance brands like Hugo Boss, Calvin Klein, Burberry and Gucci.
The Consumer Beauty segment has also been witnessing solid momentum, driven by robust demand for color cosmetics, mass fragrances, mass skin and body care products. For instance, in the fiscal first quarter, the segment’s revenues grew 10% year over year to $576.7 million. Also, the continued recovery of international travel and Coty's expansion in the travel retail channel have been driving its Travel Retail sales. Its Travel Retail business witnessed more than 20% growth in first-quarter fiscal 2024.
With such favorable trends and momentum in the core categories, the company provided a solid sales outlook for the first half, as well as fiscal 2024. For the first half of fiscal 2024, COTY expects its core like-for-like (“LFL”) sales to grow 11-13%. Consequently, management raised its overall fiscal 2024 core LFL sales view from an increase of 8-10% to 9-11%.
The company remains committed to undertaking initiatives to accelerate sales and profit growth, deleverage its balance sheet and simplify its capital structure. In July 2023, it unveiled that it inked a letter of intent to divest part of its stake in Wella to IGF Wealth Management. In December 2022, Coty announced the sale of the Lacoste fragrance license back to the latter in a mutual deal. The move will help the firm focus on its most significant fragrance licenses while speeding up its deleveraging plan via the sale proceeds.
Image Source: Zacks Investment Research
This Zacks Rank #3 (Hold) company’s shares have gained 9.1% in the past three months against the industry’s decline of 3%.
However, COTY has been witnessing rising operating costs and expenses. In the fiscal first quarter, its cost of sales grew 20% to $599.5 million year over year. The increase was attributable to higher manufacturing and material costs, a rise in designer license fees and obsolescence costs.
Given the company’s extensive presence in international markets, its business is exposed to the risk of adverse currency fluctuations. For instance, in fiscal 2023, it incurred more than $70 million of negative foreign exchange impacts on adjusted EBITDA.
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) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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.
Inter Parfums manufactures, markets and distributes a range of fragrances and fragrance-related products. The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 20.9% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.7%, on average.
Ingredion is a producer and distributor of sweeteners, nutrition ingredients and biomaterial solutions. The Zacks Consensus Estimate for INGR’s current financial-year earnings per share indicates an increase of 24.7% from the corresponding year-ago reported figure. INGR reported an earnings surprise of 23.9% in the last reported quarter.