Coty's Beauty Sales Slump
August 22 2017 - 12:48PM
Dow Jones News
By Sharon Terlep
Coty Inc. spent billions on dozens of Procter & Gamble Co.
brands with the goal of becoming one of the world's top players in
the beauty business. So far, the deal has brought mostly pain.
The New York-based company posted a surprise quarterly loss
Tuesday that executives attributed largely to sinking sales of
those products, which include CoverGirl and Max Factor cosmetics
and Clairol hair dye, and unexpected costs associated with the
business it has owned since October. Shares of Coty fell 13% to
$16.93 in morning trading.
Retailers have been reducing shelf space allotted to those
long-struggling P&G brands, exacerbating the already
challenging market for mass-market beauty products.
In an interview, Coty Chief Executive Camillo Pane said
executives didn't realize the extent to which the P&G brands
were suffering until the deal closed. Mr. Pane said he remains
confident that the $11.6 billion acquisition was a good move for
Coty in the long run.
"We feel absolutely confident that we have a roster of brands
that was much stronger than the two legacy companies before," he
said.
Because P&G and Coty were competitors at the time of the
acquisition, provisions of the deal prevented Coty from getting
information on the inner workings of the business.
"We were not aware of anything," Mr. Pane said of the troubles
P&G faced with its brands, such as high fixed costs in the
business and retailers' plans to shrink shelf space. "I don't know
how much they were aware."
Coty reported an adjusted net loss of $3.4 million. A year ago,
it reported an adjusted profit, which excluded the P&G beauty
business, of $45.7 million. Organic sales fell 5%, including a 10%
decline for the consumer beauty business.
Executives declined to provide details on how they would cut
costs or when they expected the business to turn around. The
company plans to shed some of its brands, mainly fragrances and
beauty products, that currently comprise 6% to 8% of its net
sales.
Coty also is pouring money into relaunching struggling brands,
including CoverGirl and Clairol, which contributed to
higher-than-expected costs for the quarter. The company's costs
rose to 53.1% of sales in the quarter ended June 30, from 46.6% a
year earlier.
Write to Sharon Terlep at sharon.terlep@wsj.com
(END) Dow Jones Newswires
August 22, 2017 12:33 ET (16:33 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Coty (NYSE:COTY)
Historical Stock Chart
From Mar 2024 to Apr 2024
Coty (NYSE:COTY)
Historical Stock Chart
From Apr 2023 to Apr 2024