Coty raises this year’s sales outlook on strong fragrance demand

Coty Inc. raised its sales outlook for its current fiscal year, citing continued robust demand for its higher-end fragrances.

The maker of Burberry and Gucci fragrances now sees like-for-like sales growth of 8% to 10% in the fiscal year that started in July. That’s up from the 6% to 8% sales-growth forecast the company gave in August. Sales are expected to accelerate at a faster pace in the first half of the fiscal year, Coty said in a statement Wednesday.

The recently launched Burberry Goddess fragrance is selling particularly well and helping to power the more optimistic outlook, according to Coty. The company also slightly raised its outlook for a measure of earnings excluding interest, taxes, depreciation and amortization.

Sales of perfumes, candles and fragrances boomed during the pandemic as consumers turned to scents to boost their mood and treat themselves. Revenue has remained strong, and the long tailwind has surprised investors and analysts and pushed the shares of major fragrance companies such as Coty higher.

Coty shares have risen 34% this year through Tuesday’s close, compared to the 3.4% advance of the Russell 1000 Value Index.

When Coty reported its fourth-quarter results on August 22, several analysts, including Nik Modi of RBC Capital Markets, said that the company’s outlook for its current fiscal year was relatively modest and flagged the possibility that Coty could raise its guidance.

Coty’s share gain has stalled in recent months. That’s in part due to investor concerns that companies including Kering and Richemont have recently launched their own beauty businesses and might want to reclaim fragrance licenses, such as Gucci, from Coty, according to Raymond James analyst Olivia Tong.

Tong said in a research note that none of Coty’s major licenses are up for renewal in the next five years and that no individual brand accounts for more than 10% of sales.

New York-based Coty has repeatedly raised its guidance recently, with the company increasing its revenue outlook for fiscal 2023 several times since February.