Beauty and fragrances company Coty has reported a net revenue drop of 3%, including a negative impact from foreign exchange rates for the second quarter of fiscal 2025.
The quarter's like-for-like (LFL) net revenue decreased by 1%, reflecting continued pressure on mass beauty markets and persistent headwinds in APAC.
Despite these challenges, Coty's Q2 adjusted gross margin improved year-on-year by up to 170 basis points, with operating income increasing by 13% to $268.2m.
Coty's net income in Q2 fell to $20.4m from $177.6m in the same quarter of the previous year. Reported EPS [earnings per share] was $0.02, a decrease from $0.20.
In the second half of fiscal 2025, Coty anticipates LFL sales trends to align closely with its Q2 performance at -1% to -2%.
The company expected a stronger US dollar to introduce more pronounced foreign exchange (FX) headwinds of approximately 3%, potentially leading to a low single-digit percentage decline in FY25 reported sales.
Sue Nabi, Coty's CEO, stated: “The pressure in pockets of our business which we discussed at length on the last earnings call, namely in China, Travel Retail Asia, Australia and in Consumer Beauty US, impacted us even more significantly in Q2. And in our core markets, despite a seemingly strong holiday period, where beauty performed strongly and consumers engaged with the category, this did not translate into improved replenishment orders for Coty as retailers managed their inventory very tightly.
“As a result of these factors, our Q2 LFL sales trends were below our expectations. While we are prudently assuming these patterns will continue into the second half as well, the strong sell-out growth of our fragrance brands gives us confidence that these headwinds are temporary and we should return to stronger sales growth as we enter FY26.”
Net revenue in the first half of fiscal 2025 was $3.34bn, dropping 1% on a reported basis. On an LFL basis, net revenue grew 2%.
The modest revenue uptick was fuelled by gains in prestige and mass fragrances, as well as mass skincare, which helped mitigate declines in cosmetics and body care segments.
During the period, the company’s Prestige division saw a 2% revenue rise on a reported basis and a 4% lift on an LFL basis.
Conversely, revenue of the Consumer Beauty business fell by 6% on a reported basis and 2% on an LFL basis during the same period.
Geographically, Coty’s Europe, Middle East and Africa (EMEA) region posted a 4% increase in reported net revenue and a 5% rise on an LFL basis.
The Americas experienced a 5% decrease in reported net revenue but managed a 1% LFL growth despite softness in US colour cosmetics and reduced body care revenue in Brazil.
In contrast, the Asia Pacific region recorded an 8% decline across both reported and LFL bases.
During the period, Coty's gross margin rose 66.1%, up by 180 basis points year-over-year.
The company’s operating income also climbed to $506.0m in the first half (H1) of FY25, marking a 17% increase from the previous year with operating margins expanding by 220 basis points to reach 15.1%.
However, reported net income dipped to $100.0m from $175.9m in the previous year, resulting in a reduced net income margin of 3%, down by 220 basis points year-on-year.
