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COTY Benefits From Solid Beauty Trends and Partnerships
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Coty Inc. (COTY - Free Report) is reaping benefits from brand strength and robust momentum in the global beauty market. The beauty products provider is focused on its six strategic pillars aimed at sustainable growth. The company’s strategic partnerships hold promise. Moreover, management is optimizing the overall cost structure amid cost woes.
Let’s delve deeper.
Solid Beauty Trends Fuel Growth
The beauty space continues to stand out and Coty is well-positioned to capitalize on this favorable market environment. The company is experiencing ongoing momentum in its core categories while achieving impressive results with product launches and gaining success in untapped areas. Consumers’ demand for fragrances, cosmetics and skincare products and their engagement in physical stores and online have been drivers.
These upsides boosted Coty’s second-quarter fiscal 2024 results, with the top and the bottom line increasing year over year and surpassing the Zacks Consensus Estimate. Quarterly net revenues came in at $1,727.6 million, up 13%. Like-for-like (LFL) revenues rose 11% on growth in the Prestige and Consumer Beauty business segments. For the fiscal 2024, management expects LFL revenue growth of 9-11%.
Image Source: Zacks Investment Research
Focus on Core Priorities
The Zacks Rank #3 (Hold) company is benefiting from its focus on six strategic pillars that are 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; and setting Coty as an industry leader in sustainability.
Prudent Partnerships
Coty has made several partnerships to enhance its brand portfolio. In its fiscal second-quarter earnings call, management highlighted that it has signed a license with Marni, an Italian luxury brand, which complements the prestige portfolio. In the Consumer Beauty space, the company extended two key licenses — bruno banani and Mexx. In January 2023, Coty and Jil Sander unveiled that they have renewed their license deal and are in for a long-running collaboration. The renewed deal is likely to solidify the ongoing business alliance while laying the foundation for a new strategic project stretching over 10 years.
Will Hurdles be Countered?
Coty is witnessing dynamic inflation and a supply chain environment. In the second quarter of fiscal 2024, the company’s cost of sales increased to $603.5 million from $525.3 million reported in the year-ago quarter. In the fiscal second quarter, the adjusted gross margin came in at 65.1%, contracting 40 basis points from increased excess and obsolescence, inflation and tough comparison with some benefits realized in the year-ago period.
The company’s focus on cost savings has been offering respite. COTY is progressing well with the All In to Win transformation program across five key work areas, driving notable improvement in cost, gross margins, sales growth and cash. Management targets savings of $110-$120 million for the fiscal 2024.
The stock has increased 8.5% in the past six months compared with the industry’s 21.5% growth.
The Zacks Consensus Estimate for IPAR’s current financial-year sales and earnings indicates advancements of 10.8% and 9.3%, respectively, from the prior-year figures. It has a trailing four-quarter earnings surprise of 16.4%, on average.
e.l.f. Beauty (ELF - Free Report) has a Zacks Rank #2. ELF has a trailing four-quarter earnings surprise of 69.2%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and earnings suggest growth of 71.6% and 83.1%, respectively, from the year-ago reported numbers.
Lamb Weston Holdings, Inc. (LW - Free Report) is a leading global manufacturer, marketer and distributor of value-added frozen potato products. LW currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggest growth of 28.3% and 26.9%, respectively, from the year-ago reported numbers. LW has a trailing four-quarter average earnings surprise of 28.8%.
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COTY Benefits From Solid Beauty Trends and Partnerships
Coty Inc. (COTY - Free Report) is reaping benefits from brand strength and robust momentum in the global beauty market. The beauty products provider is focused on its six strategic pillars aimed at sustainable growth. The company’s strategic partnerships hold promise. Moreover, management is optimizing the overall cost structure amid cost woes.
Let’s delve deeper.
Solid Beauty Trends Fuel Growth
The beauty space continues to stand out and Coty is well-positioned to capitalize on this favorable market environment. The company is experiencing ongoing momentum in its core categories while achieving impressive results with product launches and gaining success in untapped areas. Consumers’ demand for fragrances, cosmetics and skincare products and their engagement in physical stores and online have been drivers.
These upsides boosted Coty’s second-quarter fiscal 2024 results, with the top and the bottom line increasing year over year and surpassing the Zacks Consensus Estimate. Quarterly net revenues came in at $1,727.6 million, up 13%. Like-for-like (LFL) revenues rose 11% on growth in the Prestige and Consumer Beauty business segments. For the fiscal 2024, management expects LFL revenue growth of 9-11%.
Image Source: Zacks Investment Research
Focus on Core Priorities
The Zacks Rank #3 (Hold) company is benefiting from its focus on six strategic pillars that are 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; and setting Coty as an industry leader in sustainability.
Prudent Partnerships
Coty has made several partnerships to enhance its brand portfolio. In its fiscal second-quarter earnings call, management highlighted that it has signed a license with Marni, an Italian luxury brand, which complements the prestige portfolio. In the Consumer Beauty space, the company extended two key licenses — bruno banani and Mexx. In January 2023, Coty and Jil Sander unveiled that they have renewed their license deal and are in for a long-running collaboration. The renewed deal is likely to solidify the ongoing business alliance while laying the foundation for a new strategic project stretching over 10 years.
Will Hurdles be Countered?
Coty is witnessing dynamic inflation and a supply chain environment. In the second quarter of fiscal 2024, the company’s cost of sales increased to $603.5 million from $525.3 million reported in the year-ago quarter. In the fiscal second quarter, the adjusted gross margin came in at 65.1%, contracting 40 basis points from increased excess and obsolescence, inflation and tough comparison with some benefits realized in the year-ago period.
The company’s focus on cost savings has been offering respite. COTY is progressing well with the All In to Win transformation program across five key work areas, driving notable improvement in cost, gross margins, sales growth and cash. Management targets savings of $110-$120 million for the fiscal 2024.
The stock has increased 8.5% in the past six months compared with the industry’s 21.5% growth.
Top 3 Staple Picks
Inter Parfums (IPAR - Free Report) is engaged in the manufacturing, distribution and marketing of a wide range of fragrances and related products. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for IPAR’s current financial-year sales and earnings indicates advancements of 10.8% and 9.3%, respectively, from the prior-year figures. It has a trailing four-quarter earnings surprise of 16.4%, on average.
e.l.f. Beauty (ELF - Free Report) has a Zacks Rank #2. ELF has a trailing four-quarter earnings surprise of 69.2%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and earnings suggest growth of 71.6% and 83.1%, respectively, from the year-ago reported numbers.
Lamb Weston Holdings, Inc. (LW - Free Report) is a leading global manufacturer, marketer and distributor of value-added frozen potato products. LW currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggest growth of 28.3% and 26.9%, respectively, from the year-ago reported numbers. LW has a trailing four-quarter average earnings surprise of 28.8%.