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Can Coty's Strategies Aid Revival at Consumer Beauty Unit?
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Coty Inc. (COTY - Free Report) , which has an impressive foothold in the cosmetics space, has seen its shares tumble 11.6% over a year, as against the industry’s 13.9% increase. Investors’ bearish stance on Coty can be mainly accountable to persistent softness at the Consumer Beauty segment, which has been posting weak organic sales for three straight quarters now. However, Coty is undertaking significant efforts to improve the performance of this segment.
So, let’s delve deeper into all aforementioned aspects and see if the Consumer Beauty segment is up for revival.
Coty’s consumer beauty segment has been grappling with underlying challenges in North America, mainly due to changing consumers’ preferences and a highly competitive environment. Notably, Avon Products was also bearing the brunt of dismal sales in North America to an extent which compelled this cosmetics player to exit the region. Coming back to Coty, soft market trends across some major categories and reduced shelf space for few brands (in United States and Europe) have been acting as deterrents for its consumer beauty segment.
Owing to these headwinds, organic sales at the segment declined 6% and 10% in the third and fourth quarters of fiscal 2017, respectively. In fact, fiscal 2017 also witnessed a 10% drop in organic sales at this division. In first-quarter fiscal 2018, consumer beauty organic sales tumbled 8% due to persistent softness in the global mass beauty market, along with weakness in some brands like retail hair. In fact, softness in Consumer Beauty was also a major reason for the 2% dip in Coty’s overall organic sales in the quarter.
Is There Any Scope for Revival?
Management remains focused on reviving the performance of this unit, which accounted for close to half of Coty’s top line in the first quarter. Evidently, the company has been taking steps to make innovations, and enhance product development and communication processes to address the changing consumer demands and provide on-trend products. Progressing on these lines, Coty recently announced the relaunch of COVERGIRL brand, and plans to reposition Max Factor and Sally Hansen brands.
Also, Coty is making considerable efforts to speed up end-to-end digital transformation and boost e-commerce development. Apart from this, management remains impressed with Consumer Beauty’s performance in the ALMEA region, especially Brazil that has been depicting robust results for a while now.
While these growth strategies and prospects from Brazil make this Zacks Rank #3 (Hold) company confident of seeing better trends at its vital Consumer Beauty segment, management expects the recovery to take some time. Until then, investors can count on the following better-ranked stocks from the same sector.
Wal-Mart Stores Inc. (WMT - Free Report) , with a Zacks Rank #2 (Buy) flaunts a splendid earnings surprise history.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Can Coty's Strategies Aid Revival at Consumer Beauty Unit?
Coty Inc. (COTY - Free Report) , which has an impressive foothold in the cosmetics space, has seen its shares tumble 11.6% over a year, as against the industry’s 13.9% increase. Investors’ bearish stance on Coty can be mainly accountable to persistent softness at the Consumer Beauty segment, which has been posting weak organic sales for three straight quarters now. However, Coty is undertaking significant efforts to improve the performance of this segment.
So, let’s delve deeper into all aforementioned aspects and see if the Consumer Beauty segment is up for revival.
What’s Behind Consumer Beauty’s Lackluster Performance?
Coty’s consumer beauty segment has been grappling with underlying challenges in North America, mainly due to changing consumers’ preferences and a highly competitive environment. Notably, Avon Products was also bearing the brunt of dismal sales in North America to an extent which compelled this cosmetics player to exit the region. Coming back to Coty, soft market trends across some major categories and reduced shelf space for few brands (in United States and Europe) have been acting as deterrents for its consumer beauty segment.
Owing to these headwinds, organic sales at the segment declined 6% and 10% in the third and fourth quarters of fiscal 2017, respectively. In fact, fiscal 2017 also witnessed a 10% drop in organic sales at this division. In first-quarter fiscal 2018, consumer beauty organic sales tumbled 8% due to persistent softness in the global mass beauty market, along with weakness in some brands like retail hair. In fact, softness in Consumer Beauty was also a major reason for the 2% dip in Coty’s overall organic sales in the quarter.
Is There Any Scope for Revival?
Management remains focused on reviving the performance of this unit, which accounted for close to half of Coty’s top line in the first quarter. Evidently, the company has been taking steps to make innovations, and enhance product development and communication processes to address the changing consumer demands and provide on-trend products. Progressing on these lines, Coty recently announced the relaunch of COVERGIRL brand, and plans to reposition Max Factor and Sally Hansen brands.
Also, Coty is making considerable efforts to speed up end-to-end digital transformation and boost e-commerce development. Apart from this, management remains impressed with Consumer Beauty’s performance in the ALMEA region, especially Brazil that has been depicting robust results for a while now.
While these growth strategies and prospects from Brazil make this Zacks Rank #3 (Hold) company confident of seeing better trends at its vital Consumer Beauty segment, management expects the recovery to take some time. Until then, investors can count on the following better-ranked stocks from the same sector.
2 Consumer Staples Stocks in the Spotlight
The Estee Lauder Companies Inc. (EL - Free Report) with a long-term growth rate of 12.5% sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Wal-Mart Stores Inc. (WMT - Free Report) , with a Zacks Rank #2 (Buy) flaunts a splendid earnings surprise history.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>