Coty maintains outlook despite slower growth in Q1

Coty, the owner of Rimmel London and Max Factor, expects sales to increase 4-5% in the first quarter, reflecting "solid but slightly lower global growth".

The prestige fragrance category continued to outperform, supported by expansion in both volumes and price/mix.

However, mass beauty continued to experience slower growth trends driven entirely by unit demand.

While beauty growth remained resilient in many parts of the world, the US market slowed in the second half of Q1.

In addition, "very tight order and inventory management by retailers resulted in the company'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.

Coty said the timing of certain fixed costs and the profit impact from the divestiture of the Lacoste licence, also means adjusted EBITDA will be roughly flat to moderately lower despite "strong" gross margin expansion.

Revenue growth across other key markets 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".

Looking ahead, Coty expects second quarter like-for-like sales to 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".

Ahead of a more uncertain demand backdrop, including cautious retailer behaviour and a challenging macroeconomic environment, Coty added that it is re-accelerating its cost reduction efforts across all parts of the P&L to deliver savings above the initial FY25 target of approximately $75 million.

It continues to expect FY25 adjusted EBITDA to grow 9-11% year-on-year, consistent with prior guidance.