Coty’s preliminary Q1 numbers show continued growth despite some slowdowns

In a preliminary results release for Q1, beauty giant Coty has talked of “solid but slightly lower global growth” in the beauty market that impacted its business during the quarter, although its also reiterated its full-year profit target.

Without giving any monetary figures, the company said the prestige fragrance category “continues to outperform, supported by expansion in both volumes and price/mix, while mass beauty continues to experience slower growth trends fuelled entirely by unit demand. While beauty growth remains resilient in many parts of the world, the US market growth has slowed in the second half of Q1”.

Additionally, “very tight order and inventory management by retailers has resulted in Coty’s sell-in tracking well below sell-out in a number of markets”, including in the US, as well as in Australia, China and Travel Retail Asia, each of which account for only a low-single-digit percentage of the company’s business. 

Its revenue growth across other key markets “has remained robust, growing by a mid-single-digit to double-digit percentage”.

And due to its limited exposure in China, Coty “continues to be relatively less impacted by the market there”.

Its total Q1 sales grew between 4% and 5% on a like-for-like (LFL) basis, “despite the very elevated comparison of the prior year, though moderately below its prior Q1 estimated growth of 6% LFL”. 

Because of the “ongoing retailer caution and incrementally slower US market”, it now believes Q2 LFL sales will grow “moderately, with some growth acceleration expected in the second half supported by easier prior year comparisons, resumed alignment between sell-in and sell-out, several strong launch initiatives in both divisions, and select distribution expansion”.

All of this, along with investments, the timing of some fixed costs and the end of the Lacoste license, mean Q1 adjusted EBITDA is expected to be roughly flat to moderately lower year on year, despite strong gross margin expansion.

The company is “re-accelerating its cost reduction efforts across all parts of the P&L to deliver savings well above the initial FY25 target of approximately $75 million”. And as mentioned, it’s sticking by its FY24 adjusted EBITDA prediction of growth between 9% and 11%.

Its full Q1 results are due on 6 November.