{"id":811123,"date":"2025-02-10T16:09:05","date_gmt":"2025-02-10T21:09:05","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/coty-reports-solid-1h25-financial-performance-with-strong-margin-expansion-and-cash-generation-in-an-uncertain-market-environment\/"},"modified":"2025-02-10T16:09:05","modified_gmt":"2025-02-10T21:09:05","slug":"coty-reports-solid-1h25-financial-performance-with-strong-margin-expansion-and-cash-generation-in-an-uncertain-market-environment","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/coty-reports-solid-1h25-financial-performance-with-strong-margin-expansion-and-cash-generation-in-an-uncertain-market-environment\/","title":{"rendered":"Coty Reports Solid 1H25 Financial Performance, With Strong Margin Expansion and Cash Generation in an Uncertain Market Environment"},"content":{"rendered":"

<\/p>\n

Coty Reports Solid 1H25 Financial Performance, With Strong Margin Expansion and Cash Generation in an Uncertain Market Environment<\/b><\/p>\n

Robust Gross Margin Expansion And Sustained Brand Investments<\/b><\/p>\n

Reaches Coty’s Lowest Leverage in Over 8 Years<\/b><\/p>\n

APAC Region and FX Headwinds Weigh on Q2 Sales<\/b><\/p>\n

On Track for Continued FY25 Margin Expansion and EPS Growth<\/b><\/p>\n

NEW YORK–(BUSINESS WIRE<\/a>)–
\nRegulatory News:<\/p>\n

\nCoty Inc. (NYSE: COTY) (Paris: COTY) (“Coty” or “the Company”) today announced its results for the first half and second quarter of fiscal year 2025, ended December 31, 2024. Across both periods, the Company delivered strong gross and operating margin expansion, while continuing to invest behind its brands and execute across its strategic growth pillars.<\/p>\n

\nIn 1H25, Coty’s reported net revenue decreased 1% year-over-year and included a 2% negative impact from FX and a 1% headwind from the divestiture of the Lacoste license. Coty’s LFL net revenue grew 2% despite elevated comparisons in the prior year when LFL revenues grew 14%. The 1H25 reported and LFL revenues were supported by growth in both prestige and mass fragrances, as well as mass skin care partially offset by declines in cosmetics and body care. In 2Q25, Coty’s reported net revenue declined 3% on a reported basis and included a 2% headwind from FX. Coty’s Q2 net revenue declined 1% on a LFL basis. The Q2 reported sales reflected the further slowing of the mass beauty market, particularly color cosmetics, together with continued headwinds in the APAC region, particularly China, Travel Retail Asia and Australia. At the same time, the global fragrance market remained robust, and estimated sell-out for Coty’s prestige fragrance portfolio grew at a high single digit percentage in the first half. In both 1H25 and Q2, LFL revenue growth on a company-wide basis includes a contribution of 1% from Argentina, which experienced hyperinflation.<\/p>\n

\nIn 1H25, Prestige net revenue grew 2% on a reported basis, which included a 1% negative impact from FX and a 1% headwind from the divestiture of the Lacoste license. On a LFL basis, Prestige net revenue grew 4% in the first half, despite lapping 18% LFL growth in the prior year. Prestige reported net revenue in the first half was supported by solid growth in the underlying fragrance category and Coty’s brands’ performance partially offset by lower cosmetics sales largely as a result of headwinds in the APAC region. The majority of Coty’s leading prestige fragrance brands grew by a mid-single-digit to double-digit percentage year-over-year, with solid growth in prestige fragrance volumes in 1H25. In Q2, Prestige net revenue decreased 1% on a reported basis, which included a 1% headwind from FX and a 1% negative impact from the divestiture of the Lacoste license. On a LFL basis, net revenue increased 1% supported by growth in Coty’s prestige fragrance category partially offset by prestige cosmetics. Despite strong sell-out in Coty’s prestige fragrances, Coty’s Prestige reported net revenue was impacted by broader headwinds in China and Travel Retail Asia, coupled with continued tight inventory management and lower than anticipated replenishment orders by retailers in the U.S., Europe, and Australia.<\/p>\n

\nIn 1H25, Consumer Beauty net revenue declined 6% on a reported basis, which included a 4% negative impact from FX. Consumer Beauty reported net revenue declined in body care and mass color cosmetics partially offset by reported net revenue growth in mass fragrance and mass skin care. 1H25 Consumer Beauty net revenue declined 2% on a LFL basis. In Q2, Consumer Beauty net revenue declined 8% on a reported basis and were impacted by a 4% headwind from FX, with LFL sales declining 4%. In 2Q25, Consumer Beauty reported net revenue declines in color cosmetics and body care were partially offset by growth in mass fragrance. Coty’s Consumer Beauty sell-out was below the broader mass beauty market due to the Company’s greater exposure to the more pressured mass color cosmetics category. In addition, Coty’s sell-in continued to track below sell-out driven by pressure on U.S. mass retailers due ongoing channel shifts, tight inventory management at retailers in Australia and parts of Europe, and higher trade investments.<\/p>\n

\nBy geography, EMEA net revenue increased 4% on a reported basis and 5% on a LFL basis in the first half and increased 2% on both a reported basis and LFL basis in Q2. The reported net revenue growth in EMEA in each of these periods was supported by growth across several European markets, including the U.K., Ireland, Spain and Portugal, coupled with strong growth in Africa and the addition of a new export distributor. In the first half, Americas net revenue decreased 5% on a reported basis, but grew 1% on a LFL basis. In 2Q25, Americas net revenue declined 7% on a reported basis and by 1% on a LFL basis. The Americas region was impacted by the softness in the color cosmetics market in the U.S. and lower body care revenue in Brazil. In both Q2 and 1H25, Americas LFL net revenue included a 3% contribution from Argentina, which experienced hyperinflation. In 1H25, Asia Pacific net revenue decreased 8% on a reported and LFL basis. In Q2, Asia Pacific net revenue declined 11% on both a reported and LFL basis. The reported net revenue in each of these periods was lower year-over-year due to the challenging dynamics impacting the market in the Chinese mainland and the regional Travel Retail channel, further exacerbated by significant retailer inventory reduction.<\/p>\n

\nCoty delivered continued very strong gross margin expansion both in the first half and second quarter. In the first half, reported and adjusted gross margin of 66.1% increased 180 basis points year-over-year. 2Q25 reported gross margin of 66.7% increased 160 basis points year-over-year, while adjusted gross margin of 66.8% increased by 170 basis points year-over-year. Coty’s reported gross margin improvement in both periods was fueled by supply chain savings including procurement savings and productivity gains, excess & obsolescence reduction, a net benefit from pricing, and strong discipline with regard to promotional activity.<\/p>\n

\nIn the first half, Coty generated reported operating income of $506.0 million, up 17% year-over-year, with a reported operating margin of 15.1%, reflecting 220 basis points of margin expansion year-over-year. In 1H25, Coty’s adjusted operating income of $637.3 million increased by 4% year-over-year, while the adjusted operating margin of 19.1% reflected 90 basis points of margin expansion. In Q2, Coty generated reported operating income of $268.2 million, up 13% year-over-year, resulting in 240 basis points of reported operating margin expansion to 16.1%. Coty’s Q2 adjusted operating income of $333.7 million grew 8% year over year, resulting in an adjusted operating margin of 20.0%, which expanded by 210 basis points year-over-year. The higher reported and adjusted operating margin reflected strong gross margin expansion and a reduction in fixed costs, while the A&CP percentage moderately increased as Coty continued to invest behind its brands.<\/p>\n

\nIn the first half, Coty’s reported net income of $100.0 million decreased from a net income of $175.9 million in the prior year, resulting in a reported net income margin of 3.0%, down 220 basis points year-over-year. In the first half, reported and adjusted net income included a $129 million negative impact from the equity swap mark-to-market in the first half, compared to a negligible net impact in the prior year period. Q2 reported net income of $20.4 million declined from a net income of $177.6 million in the prior year. Adjusted net income of $98.8 million decreased from $229.1 million. The decrease in both reported and adjusted net income in Q2 reflects a $97 million negative impact from the equity swap mark-to-market, compared with a $55 million benefit from the mark-to-market on the equity swap in the prior year.<\/p>\n

\nIn the first half, Coty’s adjusted EBITDA totaled $750.8 million, up 3% year over year, resulting in an adjusted EBITDA margin of 22.5%, which reflected a strong 90 basis points of margin expansion. In Q2, adjusted EBITDA of $390.7 million increased 7% year-over-year driving an adjusted EBITDA margin of 23.4%, expanding significantly by 220 basis points year-over-year.<\/p>\n

\nIn the first half, cash from operating activities was $531.9 million and free cash flow was $411.1 million. In Q2, cash flow from operating activities was $464.5 million and free cash flow totaled $419.0 million. Total debt at the end of the second quarter totaled $3,459.0 million, while financial net debt was $3,209.4 million. This drove the total debt to net income ratio to 100.3x and the financial leverage ratio (net debt to adjusted EBITDA) to 2.9x, a reduction of 0.2x versus a year ago and consistent with recent guidance to end CY24 with leverage below 3x. Coty\u2019s retained 25.8% Wella stake was valued at $1,053.0 million at quarter-end, supporting economic net debt of $2,156.4 million.<\/p>\n

Updates on Strategic Pillars<\/span><\/b><\/p>\n