Coty has announced results for the fourth quarter of 2016, reporting a net loss of $31m in the lead-up to its record $12.5bn deal to buy much of P&G’s beauty business.
Revenue in the quarter and for fiscal 2016 overall also dropped 1% on a like-for-like basis. Coty said that this stemmed from a decline in fragrances, skin care and body care, although some of this was offset by 2% growth in colour cosmetics.
Bart Becht, Chairman and Interim CEO at Coty, said that the results demonstrated how the company was building “a healthier and better business”. He said that preparations for the planned purchase of P&G’s beauty brands was “well advanced”.
Becht said: “The future is now finalised, including office locations, structure and staffing of key positions.[…]Extensive work has been done on business, process and systems integration to prepare for the transition following the expected close of the transaction in October 2016.”
Looking to 2017, Becht said that it would be “premature” to comment on the outlook of Coty ahead of the merger. Although, he added: “We are targeting for the Coty stand-alone business net revenue momentum to improve and return to growth in the second half of the fiscal year excluding foreign currency, with solid improvement in the adjusted operating margin and strong operating cash flow conversion.”
Fragrance
Coty’s fragrance division saw an 8% decline in revenue, with 5% of this resulting from currency fluctuations. The company said this was led by the declining popularity of celebrity scents and a lower level of launch activity in some brands.
Miu Miu’s new fragrance and Marc Jacobs bucked the trend with strong launches in 2016.
Colour Cosmetics
Colour cosmetics was a standout category for the company, increasing net revenues 7% thanks in part to its acquisition of Bourjois.
Rimmel and Sally Hansen also saw strong growth, with Coty labelling them “power brands” after key launches including Sally Hansen’s Miracle Gel.
Skin care and body care
Revenue dropped 10% in body care and skin care, thanks largely to currency fluctuations but also a significant decline in the Playboy and philosophy ranges. Adidas products grew, partially offsetting these losses.
Regional breakdown
Sales in the UK, France and Coty’s travel retail outlets all declined, but the Middle East, Germany and Spain helped to offset this to keep revenue flat in the EMEA region.
Marc Jacobs, Rimmel and Sally Hansen all performed well in EMEA as well as in the US, where revenue overall declined 2%. The loss was said to stem from lower sales of NYC New York Color and OPI in Latin America.
In Asia Pacific, however, OPI was a top brand where Coty saw 5% growth, particularly driven by Australia. This was offset by like-for-like declines in China and a 7% negative impact from currency fluctuations.
