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Sep 30, 2022
Coty Q1 2023 Earnings Report
Results exceeded expectations and guidance, driven by sales growth ahead of the beauty market, strong gross margin, and profit expansion.
Key Takeaways
Coty Inc. reported strong Q1 2023 results, with sales increasing 1% as reported and 9% on a LFL basis. The company's performance was well ahead of the underlying beauty market, driven by robust consumer demand for beauty products, particularly prestige fragrances. Coty reaffirmed its FY23 revenue and profit outlook and remains committed to deleveraging.
Q1 sales increased 1% as reported, including over 7% of FX headwinds, with sales up 9% on a LFL basis.
Prestige revenues declined 1% as reported and grew 7% LFL, including approximately 300 bps of negative impact from Coty's exit from Russia.
Consumer Beauty Q1 revenues grew 5% as reported and 12% LFL, supported by sustained market share momentum and strong activity.
Reported gross margins expanded by 70 bps YoY to 63.9%, while adjusted gross margin grew 70 bps YoY to 64.1%.
Coty
Coty
Coty Revenue by Segment
Coty Revenue by Geographic Location
Revenue by Segment
Prestige Revenue
CapyFin.comConsumer Beauty Revenue
CapyFin.comRevenue by Geographic Location
Americas Revenue
CapyFin.comEMEA Revenue
CapyFin.comAsia Pacific Revenue
CapyFin.com Forward Guidance
Coty continues to see strong demand growth across nearly all markets, particularly in Prestige fragrances, with Coty maintaining strong launch activity in both Prestige and Consumer Beauty. The Company remains confident in its FY23 outlook, which is inline with its medium term growth algorithm.
Positive Outlook
- Coty continues to target FY23 adjusted EBITDA of $955-965M based on current FX rates.
- Coty continues to expect FY23 adjusted EPS growth in the mid-teens to $0.32-0.33.
- The Company continues to expect FY23 revenues for the core business, adjusting for the impact of the Russia exit, to grow 6-8% LFL.
- 1H23 core business LFL revenue growth trends are expected to be consistent with its annual growth target of +6-8%, with demand remaining robust in Q2 and component constraints the primary limitation to growth.
- Coty continues to expect modest gross margin expansion in both Q2 and in FY23, despite the elevated inflationary environment.
Challenges Ahead
- This robust demand is contributing to component shortages, which remain the primary limitation to near-term growth.
- Q2 sales results will include the impact from exiting the Russia business, estimated at approximately 3% of revenues.
- Q2 sales results will include an estimated FX headwind on sales of 7-9% at current rates.
- FY23 adjusted EPS growth excludes any mark-to-market adjustments on the equity swap.
- The exit from Russia is estimated to negatively impact FY23 sales by approximately 2%.
Revenue & Expenses
Visualization of income flow from segment revenue to net income