Coty Inc. may have seen net sales drop 16% in the holiday quarter, but chief executive Sue Nabi said earnings and net debt results were ahead of expectations.
“We are sustaining the momentum we had in the first quarter into the second quarter,” Nabi told WWD in an interview Tuesday morning. Revenue was “in line with expectations” and was driven by “good news from the luxury division,” she said, calling Marc Jacobs Perfect – the number one fragrance launch of 2020 – a key success.
The company began to reduce its debt leverage thanks to the conclusion of the Wella agreement, and accelerated e-commerce by 40% in the quarter. It now accounts for between 19 and 20 percent of total business, Nabi said.
At the same time, Coty is working to accelerate skin care and growth in China, where it has just launched a Tmall store for Gucci. Beauty. The Asia-Pacific region, a key growth driver for some of Coty’s competitors like Estée Lauder Cos., is Coty’s smallest region and reported sales of $ 167.2 million for the most recent quarter.
Gucci’s new Natural Finished Beauty Fluid Foundation, $ 68, is off to a good start, Nabi said. The formulation was created specifically for the requirements of beauty buyers in Asia, and in its first month, sold over 35,000 units, or about $ 2.4 million. “Once you have the right offer for this market, as it is mainly a facial, skin care and complexion market where we were mainly present with lipsticks, mascara, etc., … the results are there, ”Nabi said. “It really takes the brand to the next level in terms of productivity. This is to multiply by five the turnover of Gucci make-up.
Coty will also work to tailor Kylie Jenner’s Kylie Skin for the Asian market, and Kim Kardashian West’s KKW Skin formula specifically for the Chinese and wider Asian markets, Nabi said. She also said that Kylie’s manufacturing deal, which had been with Seed Beauty since the inception of the brand, had expired.
For the quarter ended Dec.31, Coty reported net sales of $ 1.4 billion, down 16% year-on-year. The company recorded a loss of $ 39.8 million for the quarter, which it said was due to charges related to the sale of Wella to KKR and other restructuring costs. Adjusted operating income rose 7%, the company said, to $ 188.4 million.
Coty’s prestige division saw sales drop 11% to $ 903.7 million.
In this segment, Nabi said he has seen the advertising and sales of perfumes evolve online and has used Marc Jacobs’ Perfect as an example of success. Before the pandemic, Nabi called the perfume “a category that held up online.” But Perfect was Coty’s biggest U.S. launch in 15 years, she said, and it was mostly supported by digital marketing efforts. The campaign reached 10 billion views on TikTok, she noted.
“It’s a reach that no one else can achieve with traditional advertising or even in tens of thousands of stores,” she said.
The reach of social media has also allowed consumers to talk about perfume using ordinary words, as opposed to the niche and exclusionary language often used by the beauty industry to describe perfumes.
“Sometimes you can hear people say ‘it’s musky’ or ‘it’s floral but it brings a kind of sweetness.’ And in a way, it’s a giant teasing campaign, because the people who order the perfume online try it, and share their impressions in front of their friends, their audiences, and suddenly, it’s a new way. to test scents, “Nabi said.” When you go talk to perfume experts sometimes, they tell you it’s musky and woody, and a lot of people don’t know what it means, musky and woody, etc. Now that it’s in the hands of what I would say are normal consumers, they are going to use normal words.
The mass segment, home of Cover Girl and Rimmel, “slowed,” said Nabi, down 23% to $ 511.5 million. Nabi called mass activity “increasing in market share” and “heading towards stabilization” in a call with Wall Street analysts on Tuesday.
Nabi told WWD that Cover Girl has made progress, the retail space remains stable, and the company will continue to promote its Clean Fresh franchise, a clean, vegan makeup segment led by actress Lili Reinhart. . “We’re starting with running a new kind of Cover Girl ad featuring Lili Reinhart in her backyard doing some sort of selfie ad,” Nabi said. “You’ll see it on screens in America next week.”
At Sally Hansen, who was doing well before pandemic nail salon closures even prompted many people to start doing their own nails at home, business has remained strong, Nabi said, thanks to the lines. Miracle Gel and Good Kind Pure.
In the United States, Coty saw sales fall 7.2% in the quarter to $ 539.5 million, while sales in Europe, the Middle East and Africa fell 21.9% compared to the same period of the previous year, to $ 708.9 million.
For the six-month period ended Dec. 31, Coty reported an 18% drop in net sales to $ 2.5 billion, with net income of $ 56.1 million.
Coty also said he will increase his savings target from $ 200 million to $ 300 million for the fiscal year. The savings so far are due in part to layoffs and other cuts, Coty CFO Laurent Mercier said on Tuesday.
“[Second quarter] the results have been better than expected given the difficult environment and all the changes taking place in the business and we are encouraged by the increased goal of cost savings, ”wrote the Citi analyst Wendy Nicholson in a note.
Jefferies analyst Stephanie Wissink said that “the results were driven by a directional improvement, namely a [nine point] acceleration of prestige and China, but still declining [year-over-year], reflecting a difficult context in the Americas and EMEA for sales of beauty products.
Coty’s shares closed about 15% lower on Tuesday, at $ 6.74.
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