Moodie Davitt snapshot: Coty Q2 results (three months ended 31 December 2017)
Sales up +10.3%(constant currency) to US$2.6 billion
– Adjusted operating income rises +12.8%
Strongest growth in ALMEA region (+28.8% at constant currency)
– “Ongoing success” for new fragrances Tiffany & Co. and Gucci Bloom
Source: The Moodie Davitt Report

Coty’s second quarter net revenues increased +10.3% year-on-year (on a constant currency basis) to US$2.6 billion.

This rise reflected a +7.5% contribution from Younique, Burberry and two months of ghd, and a +2.8% increase in the underlying business, which was driven by strong growth in Luxury and sustained momentum in Professional Beauty. A modest decline in Consumer Beauty partially offset the performance, said Coty.

Reported net income (excluding costs related to the P&G merger) amounted to US$109 million, compared to US$46.8 million for the prior year period. Adjusted net income for the period was US$237.2 million, up from US$223.3 million.

Adjusted operating income increased +12.8% to US$347.5 million, driven by “improved net revenues and tight cost controls”.

Coty CEO Camillo Pane said: “Q2 was a very strong quarter marked by Coty’s return to organic top line growth. We delivered excellent growth in Luxury, an acceleration in positive momentum in Professional Beauty and a significant improvement in Consumer Beauty.

“Our recent acquisitions continue to have a strong performance. Across each of our three businesses we continue to see improving results with our strong performance in Q2 directly linked to our growth strategy. Recent innovations are working well, e-commerce is performing ahead of the market and we are working to implement better in-store execution.

“Fiscal 2018 continues to be a year of stabilisation and this is what our results have shown so far. While I am pleased with our performance, there is still much work to be done before we achieve the consistency that we seek as we still need to relaunch many brands, deliver our synergies and continue with our integration of the P&G Beauty business.

The Tiffany & Co. fragrance, which launched late last year, has been an “ongoing success” according to Coty

Blue box effect: Tiffany & Co. has been heavily promoted in travel retail through animations such as the above at New York John F. Kennedy Airport

“Based on the much-improved results to date, we have refined our revenue growth objectives for the remainder of the fiscal year. While revenue recovery will not be a straight line, we now aim to deliver positive but modest net revenue growth for the second half of the year. For margin, we continue to aim for a healthy improvement in the second half of the year versus the prior year, with most of the impact coming in Q4, as we continue to deliver on our merger synergies.

“I remain confident that the real progress we have seen year-to-date, coupled with our commitment to our growth strategy, will continue to move Coty gradually onto the path of full recovery.”

Regional breakdown

North America

Reported net revenues increased +6.1% compared to the prior year and grew +5.6% on a constant currency basis. Growth was driven primarily by the contribution from Younique and the ongoing success of Tiffany & Co. and Gucci Bloom. The performance was partially offset by declines in the US Consumer Beauty division.

 

Europe

Reported net sales were up +13.7% year-on-year and +5.7% on a constant currency basis. Ghd, Tiffany & Co. and Gucci Bloom as well as mass fragrances and retail hair across the region were all growth contributors.

ALMEA (Asia, Latin America, Middle East & Africa)

Reported net revenues jumped +30.9% (+28.8% on a constant currency basis) reflecting strong growth in all three divisions.

Coty said the results reflect strength in retail hair in Brazil and Max Factor in China, the ongoing success of Tiffany & Co. and Gucci Bloom and the initial restage of OPI gel.

Segment breakdown 

Luxury

Sales increased +13.9% on a reported basis and +9.1% on a constant currency basis. The constant currency gains reflect +8.1% growth in the underlying business driven by Tiffany & Co. and Gucci Bloom fragrance launches as well as growth in Chloe, and a 1% contribution from Burberry.

Consumer Beauty

Net revenues grew +13.7% (reported) compared to the prior year and +9.8% on a constant currency basis. The increase in constant currency reflects an +11.1% contribution from Younique and a ‘modest’ decline in the underlying business.

Professional

Sales rose +19.1% compared to the prior year and +13.6% on a constant currency basis. The increase in constant currency reflects a +11.6% contribution from ghd and +2% growth in the underlying business driven by the strength in OPI globally.