COTY Coty Inc

By Sharon Terlep and Lisa Beilfuss 

Beauty-products maker Coty Inc. swung to a quarterly loss as charges associated with recent acquisitions more than offset improving sales in its fragrance business.

The New York company has been aggressively hunting deals to improve its business and grow its footprint. Last year Coty said it would snap up much of Procter & Gamble's beauty business, including labels such as CoverGirl makeup, Gucci fragrances and Clairol hair dye, for about $13 billion. Coty said Tuesday that it still expects to close the transaction in October, at which point Camillo Pane will take the reins from interim chief executive Bart Becht.

In addition to the P&G deal, the company in 2015 completed its purchase of Bourjois cosmetics from Chanel and bought several Brazilian skin-care brands. Late last year, Coty struck a deal to buy digital marketing firm Beamly in a bid to ramp up its e-commerce business.

Mr. Becht said Tuesday the company is making good progress folding in the new businesses and expects the integration to be complete by next spring. He said cost savings and increased revenue from the deals will outweigh acquisition costs.

"We've built a much stronger financial business, with a higher margin structure," Mr. Becht said in an interview. "Clearly we would like to see more top-line growth, which we are focused on."

Recent acquisitions helped push sales in Coty's latest quarter up 5.5%, more than analysts expected. But at the same time, costs stemming from closing the deals and integrating the new brands have piled up, resulting in back-to-back quarterly losses. Acquisition and restructuring-related expenses totaled $83.3 million in the June period, up from $51.2 million a year earlier.

Shares of Coty fell 6.3% to $27.89 in Tuesday morning trade.

Looking ahead, Coty said it is too early to give guidance for the newly-started fiscal year including the P&G beauty brands. The company said revenue for its stand-alone businesses are expected to return to growth in the first half of 2017. "We continue our work on building a healthier and better Coty stand-alone business," said Mr. Becht, suggesting the company's color cosmetic and skin-care segments would turn around after declining in fiscal 2016.

For the June quarter, Coty reported a loss of $31 million, or 9 cents a share, compared with a year-earlier profit of $21 million, or 5 cents a share. Excluding acquisition-related costs, among other items, the company reported a profit of 13 cents a share, up 8% from the year-ago quarter.

Revenue was $1.08 billion, thanks in part to $95.5 million in new revenue from Coty's Brazilian brand acquisitions. Sales in the perfume business rose 2% from a year ago, while its color cosmetics business declined 4%.

The struggling perfume business notched the biggest increase in years, though analysts questioned whether the growth came at the expense of pricing and margins. Pricing in the fourth quarter wasn't as strong as in previous quarters, when sales fell. "We still have work to do from a fragrance point of view," Mr. Becht said.

Write to Sharon Terlep at sharon.terlep@wsj.com and Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

August 16, 2016 11:08 ET (15:08 GMT)

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