Coty shares rise on strong sales of consumer fragrances and beauty products (NYSE:COTY)

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Despite inflationary fears, Coty (NYSE: COTY) managed to post a positive quarterly result and maintain its guidance for the full year.

For its fiscal first quarter results, EPS and revenue were mostly in line with analysts’ expectations. Whereas the Prestige segment saw modest declines in revenue due to the company’s exit from Russia and shutdowns in China, the consumer beauty business boomed with a 5% increase in revenue, management said that the company continued to gain market share. Meanwhile, gross margins increased by 70 basis points compared to the previous year, as tariff measures were able to offset the increase in input costs.

“We achieved robust growth across all of our regions, each of our key categories, including fragrances, cosmetics, skincare and bodycare, and across both divisions. ‘recording sales growth well above the underlying beauty market and among the best in our competitive set,’ said CEO Sue Nabi. “Our strong product delivery and gross margin expansion has allowed us to maintain our reinvestment in work media, and we remain committed to continuing on this trajectory, particularly during the crucial second quarter holiday period.”

As such, Coty kept the EPS growth forecast in the mid-teens percent range at $0.32 to $0.33, double the consensus expectation of $0.16. Earnings are expected to accelerate in 2023 despite recession fears weighing on the outlook.

“Coty continues to expect modest gross margin growth in the second quarter and in FY23, despite the elevated inflationary environment,” the press release added. “In addition, the company continues to target leverage toward 4x the exit from CY22 based on CY22 Adjusted EBITDA approaching $950 million, and continues to expect leverage of approximately 3x at the exit of CY23 and 2x at the exit of CY25.”

Shares of the New York-based cosmetics retailer rose 3.44% in pre-market hours.

Read the management results presentation.

Donovan B. Sanford