Core Insights - Coty Inc. reported a quarterly loss of $126.9 million, which is a significant outlier in the beauty and personal care sector, where competitors like Estée Lauder, L'Oréal, and Shiseido have shown stable or improving margins [2] - The company's like-for-like revenue declined approximately 3%, contrasting with previous guidance of low-single-digit growth, and the earnings per share (EPS) missed consensus estimates by 22%, indicating a substantial gap between public expectations and internal performance [2][3] - Coty has withdrawn its full-year FY 2026 guidance and introduced a new turnaround strategy called "Coty. Curated." under interim CEO Markus Strobel, which aims to refocus on core brands [3] Company Performance - The reported loss of $126.9 million places Coty among the widest negative earnings surprises in the mid-cap consumer space for the reporting period [2] - Prior to the earnings announcement, management had expressed optimism about the second quarter, expecting to be at the "more favorable end of our guidance range," which contrasts sharply with the actual reported loss [4] Strategic Changes - The introduction of the "Coty. Curated." strategy coincided with the withdrawal of forward-looking targets, leading to a negative reaction from investors and analysts [3]

Core Viewpoint - Coty Inc. reported disappointing financial results for the second quarter of fiscal year 2026, reflecting the challenges faced under former CEO Sue Nabi's leadership, with a notable decline in net income and a significant drop in stock value during her tenure [1][2][10]. Financial Performance - For Q2 of fiscal year 2026 (October-December 2025), Coty achieved net revenues of $1.679 billion (approximately ¥11.649 billion), representing a 1% year-over-year increase, but a 3% decline on a like-for-like (LFL) basis [1][3][4]. - The net loss for the same period was $126.9 million (approximately ¥8.81 billion), marking a significant downturn compared to previous years [1][3][4]. - For the full year of 2025, Coty's total net revenue was $402.9 billion, a 4.66% decrease from $422.61 billion in 2024, marking the first decline in net revenue in five years [10][11]. Segment Performance - The Prestige segment, which includes brands like Chloé and Hugo Boss, reported net revenues of $1.133 billion, a 2% increase year-over-year, but a 2% decline on an LFL basis [12][14]. - The Consumer Beauty segment saw a 2% decline in net revenues, contributing $545 million, with a 6% drop on an LFL basis [12][14]. - The overall operating income reported a 45% decrease, while adjusted operating income fell by 18% [4][12]. Regional Performance - In the EMEA region, Coty recorded net revenues of $864.2 million, a 3% increase year-over-year, but a 4% decline on an LFL basis [16][17]. - The Americas region experienced a 2% decline in net revenues, totaling $624.5 million, with a 3% drop on an LFL basis [16][17]. - The Asia Pacific region reported a slight decline of 1% in net revenues, amounting to $189.9 million, with a 2% drop on an LFL basis [16][17]. Leadership Changes - Following Sue Nabi's departure in December, Markus Strobel was appointed as the new Executive Chairman and interim CEO, taking office on January 1, 2026 [1][2]. - Strobel acknowledged the disappointing financial performance and the impact on Coty's stock price, which has been fluctuating between $3 and $5 [17][21]. Strategic Challenges - Coty is facing significant challenges due to the loss of brand licensing agreements, which are critical to its revenue model. The company has recently terminated agreements with brands like Orveda and Wella, and is set to lose the Gucci beauty license to L'Oréal [18][19][20]. - The company has initiated a new strategic framework called "Coty Select" to focus on clearer priorities and improve execution in its core business areas [20][21].

Group 1 - Coty is set to present its Second Quarter fiscal 2026 Earnings, with a live Q&A session scheduled for February 6, 2026 [2] - The presentation will feature key executives including Markus Strobel, the Executive Chairman and Interim CEO, and Laurent Mercier, the Chief Financial Officer [2][4] - The company will discuss financial results that may include forward-looking statements, with a reminder to refer to the earnings release and SEC filings for potential discrepancies [3]

Core Insights - Coty Inc. reported mixed results for Q2 of fiscal 2026, with earnings missing expectations while revenues exceeded estimates, indicating improving sales momentum but ongoing margin pressures [1][9] Financial Performance - Adjusted earnings were 14 cents per share, below the Zacks Consensus Estimate of 18 cents, but improved from 11 cents in the same quarter last year [2] - Net revenues reached $1,678.6 million, a 1% year-over-year increase, surpassing the Zacks Consensus Estimate of $1,665 million, with a 4% benefit from foreign exchange [3] - On a like-for-like basis, revenues declined 3%, showing improvement from an 8% decline in the previous quarter [3] Margins and Profitability - Adjusted gross margin decreased by 260 basis points year-over-year to 64.2%, impacted by high promotions, lower volumes in Consumer Beauty, and tariffs [4] - Adjusted operating income fell 18% to $274.3 million, with the adjusted operating margin contracting 370 basis points to 16.3% [5] - Adjusted EBITDA declined 15% to $330.2 million, with the adjusted EBITDA margin slipping 370 basis points to 19.7% [5] Segment Performance - Prestige revenues were $1,133.6 million, accounting for 68% of total sales, with a 2% increase reported but a 2% decline on a like-for-like basis [6] - Consumer Beauty revenues were $545.0 million, representing 32% of total sales, with a 2% reported decline and a 6% decline on a like-for-like basis [7] Regional Highlights - In the Americas, revenues declined 2% reported and 3% like-for-like, reflecting weaker trends in Prestige fragrances [8] - EMEA revenues rose 3% reported but fell 4% like-for-like due to pressures in Prestige fragrance and Consumer Beauty [8] - Asia Pacific revenues slipped 1% reported and 2% like-for-like, with strength in China and Japan offset by weakness in Southeast Asia [8] Strategic and Financial Updates - Coty appointed Markus Strobel as Executive Chairman and Interim CEO, introducing the "Coty. Curated." strategic framework [10] - The company sold its remaining 25.8% stake in Wella for $750 million, strengthening its balance sheet [10] - Coty ended the quarter with financial net debt of $2.6 billion and a leverage ratio of 2.7, the lowest in over nine years [11] Guidance - Coty withdrew full-year fiscal 2026 guidance, providing only a third-quarter outlook, expecting mid-single-digit revenue declines driven by Consumer Beauty softness [12][13] - For the third quarter, Coty anticipates gross margin contraction of 200-300 basis points year-over-year, with adjusted EBITDA projected at $100-$110 million [15]

Financial Data and Key Metrics Changes - The company is experiencing a mid-single-digit sales decline in Q3, primarily driven by the Consumer Beauty segment, which is still in a phase of addressing operational gaps [40][39] - Gross margin for Q2 was lower than expected, with a contraction of 200-300 basis points attributed to high promotional activity, tariffs, and foreign exchange impacts [44][46] Business Line Data and Key Metrics Changes - The Consumer Beauty segment is underperforming, with a focus on streamlining the portfolio and improving sell-out growth [5][9] - The Prestige division is seeing a sequential recovery, with improved synchronization between sell-in and sell-out, although challenges remain in the U.S. market [41][42] Market Data and Key Metrics Changes - The company has reported over 30% sales growth in its Prestige portfolio on Amazon, indicating a successful strategy in new channels [14] - The promotional environment has intensified, with competitors increasing markdowns, which is expected to continue into Q3 [60] Company Strategy and Development Direction - The company is focusing on its most iconic brands and streamlining its product offerings to drive market share growth [5][13] - There is a clear emphasis on improving operational discipline and aligning marketing efforts with consumer needs to enhance sell-out performance [31][69] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that recent financial performance has not met expectations and emphasizes a commitment to transparency and focused execution moving forward [69] - The company is optimistic about future improvements, with plans for sharper priorities and resource allocation to key areas [69] Other Important Information - The company is investing in AI to enhance marketing asset creation efficiency, potentially reducing costs by 70%-80% [8] - There are significant growth opportunities identified in brands like Hugo Boss and Marc Jacobs, with new initiatives planned for the coming years [20][21] Q&A Session Summary Question: Future performance improvement plan for Consumer Beauty - Management is focusing on iconic brands and streamlining product offerings to improve sales and market share [5][9] Question: Changes in channel strategy - The company is investing heavily in online and e-commerce channels while maintaining focus on traditional retail [17] Question: Managing business after Gucci license ends - The company plans to drive growth in existing big brand franchises and explore new initiatives to compensate for the Gucci exit [20][22] Question: Impact of SKU rationalization on top line and gross margin - SKU rationalization is expected to improve productivity and gross margin over time, with a focus on driving top line growth [67] Question: Promotional environment and its impact - The promotional environment is expected to remain challenging, but the company is confident in its innovation and market strategies to mitigate these effects [60][61]

Financial Data and Key Metrics Changes - The company is experiencing a mid-single-digit sales decline in Q3, primarily driven by the Consumer Beauty segment, which is still in a phase of addressing operational gaps [34][38] - Gross margin for Q2 was lower than expected, with a contraction of 200-300 basis points attributed to high promotional activity, tariffs, and foreign exchange impacts [44][46] Business Line Data and Key Metrics Changes - Consumer Beauty is underperforming, with significant declines in iconic brands like COVERGIRL, although recent initiatives have shown early signs of improvement [5][40] - The Prestige division is seeing a sequential recovery, with improved synchronization between sell-in and sell-out, although challenges remain in the U.S. market [41][46] Market Data and Key Metrics Changes - The company has reported over 30% sales growth in its prestige portfolio on Amazon, indicating a successful adaptation to changing consumer purchasing behaviors [14][15] - The promotional environment has intensified, with competitors increasing markdowns, which is expected to continue into Q3 [59][60] Company Strategy and Development Direction - The company is focusing on streamlining its portfolio by prioritizing iconic brands and reducing SKU proliferation to enhance market share and sell-out growth [5][13] - Future initiatives include launching sharper, more focused product bundles and leveraging AI for cost-effective asset creation [8][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that recent financial performance has not met expectations and emphasizes a commitment to transparency and disciplined execution moving forward [69] - There is confidence that the changes being implemented will lead to improved performance over time, although it will not happen overnight [69] Other Important Information - The company is actively investing in new channels such as TikTok and e-commerce to capture emerging consumer segments, particularly Gen Z [17][62] - The exit from the Gucci license in 2028 is prompting the company to focus on building its existing brand franchises and exploring new growth opportunities [20][22] Q&A Session Summary Question: Future performance improvement plan for Consumer Beauty - Management is focusing on iconic brands and streamlining product offerings to improve sales and market share, with expected benefits materializing in fiscal 2027 [4][9] Question: Changes in channel strategy - The company is investing heavily in online and e-commerce channels while also protecting existing retail channels to cater to diverse consumer demographics [17][19] Question: Managing business after Gucci license ends - The company plans to drive growth in existing franchises and explore new brand opportunities while adjusting cost structures as needed [20][22] Question: Impact of SKU rationalization on top line and gross margin - SKU rationalization is expected to improve operational efficiency and gross margins over time, with a focus on driving top line growth as a priority [66][67]

Financial Data and Key Metrics Changes - The company reported a mid-single-digit sales decline expected in Q3, primarily driven by the Consumer Beauty segment, which has been underperforming [33][36] - Gross margin contraction of 200-300 basis points was noted, influenced by input cost inflation, promotional activities, and geographic mix [42][45] Business Line Data and Key Metrics Changes - Consumer Beauty is significantly below corporate average margins, with a focus on iconic brands like COVERGIRL and Rimmel to drive sell-out growth [4][8] - The Prestige division is experiencing a sequential recovery, with improved synchronization between sell-in and sell-out, although challenges remain [38][39] Market Data and Key Metrics Changes - The company has seen over 30% sales growth on Amazon for its prestige portfolio, indicating a successful adaptation to changing consumer purchasing behaviors [12][13] - The promotional environment has intensified, with competitors increasing markdowns, impacting gross margins [58][60] Company Strategy and Development Direction - The company is focusing on streamlining its portfolio by prioritizing key brands and reducing SKU proliferation to enhance market performance [4][12] - There is a clear emphasis on leveraging new channels like TikTok and e-commerce to reach consumers effectively while maintaining presence in traditional retail [15][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that recent financial performance has not met expectations, emphasizing a commitment to transparency and disciplined execution moving forward [70] - The company is optimistic about future improvements, with plans for sharper priorities and focused execution to drive growth [70] Other Important Information - The company is investing in AI to enhance asset creation efficiency, potentially reducing costs by 70-80% [6] - Upcoming product launches, including a significant Calvin Klein initiative and a Marc Jacobs beauty line, are expected to drive growth [55] Q&A Session Summary Question: Future performance improvement plan for Consumer Beauty - Management highlighted a focus on iconic brands and streamlined innovation bundles to improve sales and market share [4][8] Question: Impact of SKU rationalization on top line and gross margin - Management indicated that SKU rationalization will positively impact gross margin over time, with a focus on driving top line growth [66][68] Question: Changes in channel strategy - The company is investing in online and e-commerce channels while ensuring traditional retail channels remain strong [15][60] Question: Promotional environment and its impact - Management noted that increased promotional activity from competitors is expected to continue into Q3, affecting gross margins [58][60] Question: Assessment of internal controls and operational discipline - Management acknowledged the need for improved operational discipline and is investing in data analytics to enhance decision-making [29][31]

SECOND QUARTER FY 2026 RESULTS FEBRUARY 5, 2026 INTRODUCTION Markus Strobel, Executive Chairman & Interim Chief Executive Officer Laurent Mercier, Chief Financial Officer 2 OVERVIEW JOINING COTY AT A PIVOTAL MOMENT Markus Strobel, Executive Chairman & Interim Chief Executive Officer ABOUT MARKUS STROBEL 4 ➢ 33-year career at Procter & Gamble with strong discipline and operational expertise ➢ 25 years at P&G Beauty, where he most recently served as President of P&G's Global Skin & Personal Care business whic ...

Core Viewpoint - Coty reported mixed second-quarter results, with lower earnings offset by significantly reduced debt following strong cash generation and the completion of its Wella divestment [1][4]. Financial Performance - For the three months ending December 31, 2025, Coty recorded net revenue of $1.67 billion, a 1% increase year-on-year on a reported basis but a 3% decline on a like-for-like (LFL) basis [1]. - Reported operating income fell 45% to $148.2 million, while shareholders faced a net loss of $126.9 million compared to a net income of $20.4 million a year earlier, resulting in a 7.6% loss margin [1]. - Adjusted EBITDA decreased 15% to $330.2 million, although adjusted diluted earnings per share improved to $0.14 [2]. - For the first half of the fiscal year, revenue dropped 3% to $3.25 billion, with operating income falling 34% to $333.2 million, and the group posted a net loss of $62.3 million compared to a net income of $100 million in the prior year [2]. - Free cash flow totaled $513.1 million for the quarter and $524.3 million for the half [3]. Debt and Cash Flow - At the end of the quarter, total debt was $3.04 billion, down from $4.06 billion on September 30, 2025, while financial net debt was $2.60 billion compared to $3.20 billion at the end of September 2025 [3]. - Quarterly operating cash flow reached $559.7 million, lifting year-to-date inflows to $624.9 million [2]. Strategic Developments - Coty completed the sale of its remaining 25.8% Wella holding to KKR for $750 million upfront, with most proceeds directed towards long-term debt reduction [4]. - The company withdrew full-year EBITDA and free cash flow guidance, projecting mid-single-digit LFL revenue falls in the third quarter and adjusted EBITDA of $100 million to $110 million [5]. Leadership Changes - Markus Strobel became executive chairman and interim CEO on January 1, 2026, after a long career at Procter & Gamble [3][6].

Core Insights - Coty is entering a "fresh chapter" under interim CEO Markus Strobel, focusing on realism, discipline, and improved execution after recent performance has not met expectations [4] - The company aims to restore sell-out momentum and tighten operational discipline, particularly in the Consumer Beauty segment [4] Group 1: Strategic Initiatives - Coty plans to rebalance spending towards consumer-facing working media, such as digital and influencer marketing, by freeing up funds from asset creation [1] - The company will streamline innovation bundles for fiscal 2026, focusing on fewer SKUs to avoid crowding out productive items and reduce trade returns [2] - A focus on "iconic assets" within key brands like COVERGIRL and Rimmel is expected to moderate declines in sales from "high single digits" to "low single digits" or "mid-single digits" [3] Group 2: Financial Performance - Q2 results showed a ~3% decline in like-for-like sales, with adjusted EBITDA down 15% to $330 million and a gross margin decrease of 260 basis points [6] - Management has withdrawn full fiscal 2026 guidance but provided Q3 targets of mid-single-digit like-for-like decline and $100–110 million EBITDA [6] Group 3: Operational Changes - The company is implementing a $750 million upfront divestiture of Wella and targeting ~$200 million in savings for FY26, alongside accelerated AI initiatives that could reduce digital asset post-production costs by 70–90% [5] - Management is focusing on improving operational discipline and platforming across brands, with expectations for margin improvement beginning in fiscal 2027 [9][10] Group 4: Market Strategy - Coty is investing in e-commerce and new channels like TikTok Shop while maintaining legacy channels, responding to shifts in consumer behavior [11] - Sales on Amazon have grown by over 30% in the last six months, with the launch of Marc Jacobs on Amazon contributing to double-digit growth [12] Group 5: Future Outlook - The company anticipates a mid-single-digit sales decline in fiscal Q3 due to Consumer Beauty headwinds and prior innovation complexity [16] - Management expects gross margin pressures to continue in Q3 but anticipates recovery in Q4 and ongoing improvements into fiscal 2027 [19]