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Mar 31, 2023
Coty Q3 2023 Earnings Report
Strong financial results were delivered, consistently executing across strategic growth pillars.
Key Takeaways
Coty's Q3 sales performance came in well ahead of expectations and recently raised guidance, fueled by accelerating demand for prestige fragrances, retailer restocking and Coty initiatives. Q3 sales increased 9% as reported, which includes approximately 3% of negative impact from the Russia business exit, with core LFL sales up 15%.
3Q23 net revenues grew strongly at 9% as reported, including an approximately 3% negative impact from the exit from Russia, and 15% LFL, reflecting strong double digit LFL growth in both Prestige and Consumer Beauty.
Fiscal year-to-date, revenues grew 2% as reported, with the core business growing 10% LFL excluding the impact from the Russia exit, driving year-to-date revenue growth trends ahead of the company's initial guidance for 6-8% core LFL revenue growth ex Russia.
3Q23 reported operating income totaled $43.5 million and year-to-date reported operating income totaled $414.7 million.
3Q23 adjusted EPS totaled $0.19, which includes a non-operating EPS benefit of $0.13 from the mark-to-market on the equity swap. Q3 adjusted EPS expanded from the $0.03 adjusted EPS reported in the prior year, driven by the swap benefit and a $0.03 operational improvement.
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 now expects FY23 revenues for the core business, adjusting for the impact of the Russia exit, to grow 9-10% LFL which reflects a significant increase from the Company's original outlook for 6-8% core LFL growth. Coty continues to target FY23 adjusted EBITDA of $955-965M based on current FX rates.
Positive Outlook
- Coty continues to see strong demand growth across nearly all categories and markets, particularly in Prestige fragrances, with Coty maintaining strong launch activity in both Prestige and Consumer Beauty.
- With FYTD core LFL revenue growth of +10%, and Q4 growth expected to be in a similar range, Coty now expects FY23 revenues for the core business, adjusting for the impact of the Russia exit, to grow 9-10% LFL which reflects a significant increase from the Company's original outlook for 6-8% core LFL growth.
- Coty continues to expect modest gross margin expansion in Q4 and FY23, despite the elevated inflationary environment, aided by savings as well as solid pricing execution, including mid-single-digit pricing increases exiting Q1 and another round of mid-single-digit pricing exiting Q3.
- The Company is also evaluating another round of pricing in Q1 FY24, as Coty continues its portfolio transition to cleaner and more sustainable products, while simultaneously driving category value expansion.
- Including the benefit from the equity swap and assuming the current share price holds, Coty now expects an overall FY23 adjusted EPS of $0.52-0.53, reflecting over 85% growth.
Challenges Ahead
- Coty continues to estimate a low-single-digit negative FX impact on revenues in Q4.
- Coty continues to expect modest gross margin expansion in Q4 and FY23, despite the elevated inflationary environment
- The Company has maintained its FY23 EBITDA outlook at current FX rates despite incurring over $50 million of negative FX impact on EBITDA FYTD, highlighting the stronger underlying profit expansion.
- The Company continues to target a mid 20s percent adjusted EPS CAGR through FY26, excluding any mark-to-market adjustments on the equity swap.
- The Company continues to target leverage towards 3x exiting CY23 and approximately 2x exiting CY25.
Revenue & Expenses
Visualization of income flow from segment revenue to net income