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Coty Q1 Earnings Beat Estimates Despite Sales Decline, Margins Down
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Key Takeaways
Coty's Q1 adjusted EPS rose 33% to 16 cents, beating estimates, while revenues declined 1% to $1.56 billion.
Higher freight and material costs pressured Coty's gross margin, which contracted 120 basis points to 63.3%.
Coty's free cash flow surged to $84.6 million, while total debt declined to $2.79 billion from $3.09 billion.
Coty Inc. (COTY - Free Report) posted first-quarter fiscal 2027 adjusted earnings of 16 cents per share, up 33% from 12 cents in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of 12 cents per share.
Net revenues declined 1% year over year to $1,555.2 million but exceeded the consensus estimate of $1,532 million. Like-for-like (“LFL”) revenues fell 2%, reflecting improving trends across key markets.
Reported and adjusted gross margin contracted 120 basis points year over year to 63.3%. Higher freight and material costs associated with the Middle East conflict, along with elevated excess and obsolescence charges stemming from demand forecasts, weighed on profitability.
Adjusted operating income declined 8% year over year to $220.5 million, while the adjusted operating margin contracted 100 basis points to 14.2%.
Adjusted EBITDA decreased 7% to $274.2 million, with the margin shrinking 120 basis points to 17.6%.
Coty’s Segment-Wise Performance
Prestige revenues declined 1% year over year to $1,058.4 million, accounting for 68% of total sales. LFL revenues also decreased 1%. Prestige’s adjusted operating income dipped 1% to $235.5 million, while the adjusted operating margin remained unchanged at 22.3%.
Consumer Beauty revenues decreased 2% year over year to $496.8 million, contributing 32% of total sales. LFL revenues fell 3%. The segment recorded an adjusted operating loss of $15 million in contrast to an adjusted operating income of $1.5 million a year earlier.
Coty's Regional Trends Stay Mixed
Americas revenues increased 1% year over year to $653 million, while LFL sales remained flat. EMEA revenues declined 6% to $710 million, with LFL revenues falling 5%. Asia Pacific revenues advanced 11% to $192.2 million and increased 8% on an LFL basis.
COTY's Cash Flow Improves, Debt Declines
Cash flow from operating activities doubled to $130.4 million from $65.2 million a year earlier. Free cash flow increased to $84.6 million from $11.2 million.
Total debt declined to $2.79 billion as of Sept. 30, 2026, from $3.09 billion as of June 30. Financial net debt decreased to $2.58 billion from $2.91 billion. The financial leverage ratio improved to 3.1 times.
Coty's Strategic Moves and Fiscal 2027 Outlook
For the second quarter of fiscal 2027, management expects LFL revenues to decline by a low-single-digit percentage, with foreign exchange creating a low-single-digit headwind to reported sales. Adjusted EBITDA is projected to decline a high-single-digit percentage, while adjusted earnings, excluding the equity swap, are expected between 16 cents and 18 cents per share.
Coty reaffirmed its expectation for first-half fiscal 2027 free cash flow exceeding $300 million. Management expects fiscal 2027 to remain a transition year, with its strategic review scheduled for completion by the end of calendar 2026.
This Zacks Rank #3 (Hold) stock has gained 22.6% in the past three months compared with the industry’s growth of 21.3%.
The Zacks Consensus Estimate for Ulta Beauty’s current fiscal-year sales and earnings calls for growth of 10.7% and 12.9%, respectively, from the year-ago reported numbers. ULTA delivered a trailing four-quarter earnings surprise of 7.6%, on average.
Dollar General Corporation (DG - Free Report) is one of the largest discount retailers in the United States, selling low-priced merchandise, typically $10 or less. The company currently has a Zacks Rank of 2. Dollar General delivered a trailing four-quarter earnings surprise of 19.1%, on average.
The Zacks Consensus Estimate for Dollar General’s current fiscal-year sales and EPS is expected to rise 5.8% and 15.9%, respectively, from the year-ago reported figures.
Target Corporation (TGT - Free Report) operates as a general merchandise retailer in the United States. The company currently carries a Zacks Rank of 2. Target Corporation delivered a trailing four-quarter earnings surprise of 10.5%, on average.
The Zacks Consensus Estimate for Target Corporation’s current fiscal-year sales and EPS indicates growth of 4.6% and 39%, respectively, from the year-ago reported numbers.
View the Zacks #1 Rank List
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Coty Q1 Earnings Beat Estimates Despite Sales Decline, Margins Down
Key Takeaways
Coty Inc. (COTY - Free Report) posted first-quarter fiscal 2027 adjusted earnings of 16 cents per share, up 33% from 12 cents in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of 12 cents per share.
Net revenues declined 1% year over year to $1,555.2 million but exceeded the consensus estimate of $1,532 million. Like-for-like (“LFL”) revenues fell 2%, reflecting improving trends across key markets.
Coty Price, Consensus and EPS Surprise
Coty price-consensus-eps-surprise-chart | Coty Quote
COTY's Margins Contract on Higher Costs
Reported and adjusted gross margin contracted 120 basis points year over year to 63.3%. Higher freight and material costs associated with the Middle East conflict, along with elevated excess and obsolescence charges stemming from demand forecasts, weighed on profitability.
Adjusted operating income declined 8% year over year to $220.5 million, while the adjusted operating margin contracted 100 basis points to 14.2%.
Adjusted EBITDA decreased 7% to $274.2 million, with the margin shrinking 120 basis points to 17.6%.
Coty’s Segment-Wise Performance
Prestige revenues declined 1% year over year to $1,058.4 million, accounting for 68% of total sales. LFL revenues also decreased 1%. Prestige’s adjusted operating income dipped 1% to $235.5 million, while the adjusted operating margin remained unchanged at 22.3%.
Consumer Beauty revenues decreased 2% year over year to $496.8 million, contributing 32% of total sales. LFL revenues fell 3%. The segment recorded an adjusted operating loss of $15 million in contrast to an adjusted operating income of $1.5 million a year earlier.
Coty's Regional Trends Stay Mixed
Americas revenues increased 1% year over year to $653 million, while LFL sales remained flat. EMEA revenues declined 6% to $710 million, with LFL revenues falling 5%. Asia Pacific revenues advanced 11% to $192.2 million and increased 8% on an LFL basis.
COTY's Cash Flow Improves, Debt Declines
Cash flow from operating activities doubled to $130.4 million from $65.2 million a year earlier. Free cash flow increased to $84.6 million from $11.2 million.
Total debt declined to $2.79 billion as of Sept. 30, 2026, from $3.09 billion as of June 30. Financial net debt decreased to $2.58 billion from $2.91 billion. The financial leverage ratio improved to 3.1 times.
Coty's Strategic Moves and Fiscal 2027 Outlook
For the second quarter of fiscal 2027, management expects LFL revenues to decline by a low-single-digit percentage, with foreign exchange creating a low-single-digit headwind to reported sales. Adjusted EBITDA is projected to decline a high-single-digit percentage, while adjusted earnings, excluding the equity swap, are expected between 16 cents and 18 cents per share.
Coty reaffirmed its expectation for first-half fiscal 2027 free cash flow exceeding $300 million. Management expects fiscal 2027 to remain a transition year, with its strategic review scheduled for completion by the end of calendar 2026.
This Zacks Rank #3 (Hold) stock has gained 22.6% in the past three months compared with the industry’s growth of 21.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Ulta Beauty, Inc. (ULTA - Free Report) operates as a specialty beauty retailer in the United States, Mexico and Kuwait, and currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ulta Beauty’s current fiscal-year sales and earnings calls for growth of 10.7% and 12.9%, respectively, from the year-ago reported numbers. ULTA delivered a trailing four-quarter earnings surprise of 7.6%, on average.
Dollar General Corporation (DG - Free Report) is one of the largest discount retailers in the United States, selling low-priced merchandise, typically $10 or less. The company currently has a Zacks Rank of 2. Dollar General delivered a trailing four-quarter earnings surprise of 19.1%, on average.
The Zacks Consensus Estimate for Dollar General’s current fiscal-year sales and EPS is expected to rise 5.8% and 15.9%, respectively, from the year-ago reported figures.
Target Corporation (TGT - Free Report) operates as a general merchandise retailer in the United States. The company currently carries a Zacks Rank of 2. Target Corporation delivered a trailing four-quarter earnings surprise of 10.5%, on average.
The Zacks Consensus Estimate for Target Corporation’s current fiscal-year sales and EPS indicates growth of 4.6% and 39%, respectively, from the year-ago reported numbers.