Coty (NYSE:COTY) said it is shifting its internal focus toward retail sell-out and market-share gains as it works through a fiscal 2027 transition year, following a period in which sell-out trailed the broader beauty category.
Executive Chairman and Interim Chief Executive Officer Markus Strobel said the company historically had been more focused on sell-in, or shipments to retailers, and is now changing incentives to better align with consumer demand at the shelf. Market share and sell-out have become important measures in Coty’s fiscal 2027 bonus systems, he said.
Strobel said the pace at which Coty can reduce its sell-out gap versus the market represents a key source of potential upside or risk. Faster progress would benefit results, while a slower recovery would require the company to manage accordingly.
Consumer Beauty Changes Begin in U.S., Expand to Europe
Coty has begun a Consumer Beauty performance-improvement effort called Color the Future, which Strobel described as a consumer-focused version of its Coty.Curated initiative. The program began in the U.S. in January and includes simplifying product lineups, reducing the number of SKUs, concentrating investment behind fewer initiatives and prioritizing stronger innovation.
The initial efforts have focused largely on COVERGIRL and Sally Hansen. Strobel said both brands materially reduced their gap versus the category during the year, while Sally Hansen has begun to grow ahead of the market in value.
He attributed the progress more to equity-building advertising and targeted innovation than increased promotions. COVERGIRL has returned to national television advertising, aimed at Gen X consumers, with investment concentrated behind its Simply Ageless and LashBlast franchises. Sally Hansen has also resumed national advertising in nail care, while its Insta-Dri innovation has received a strong consumer response, Strobel said.
The company expects the actions to support Consumer Beauty profitability over time by reducing returns and obsolescence. Strobel said that selling fewer, faster-moving SKUs should lower excess inventory and the risk of products being returned by U.S. retailers when innovation does not sell through.
Coty plans to extend the approach across Europe. The company has already rolled out initiatives in the U.K. and said Rimmel has shown initial traction there, catching up with the category in the latest month. Strobel said brands including Max Factor, Bourjois and Manhattan will be among the European brands receiving the interventions in coming weeks and months.
On shelf space, Strobel said Coty expects its overall U.S. shelf presence to remain stable during fall resets. The company has “lost a bit” and “gained a bit,” he said, but does not currently see a major risk of shelf-space losses. Coty said a roughly 20% reduction in shelf SKUs is not expected to have a material sales impact, as it seeks to allocate space to products with faster turnover.
Pricing, Promotions and Consumer Beauty Review
Strobel said prestige beauty faced significant price competition during the October-to-December holiday season, though that pressure has eased since then. In Consumer Beauty, he said companies are becoming more selective about pricing rather than implementing broad-based increases or reductions.
“That differentiation is, I think, going to help stabilize this pricing and promotion environment a little in the next couple of months,” Strobel said.
Coty is continuing its strategic review of Consumer Beauty and intends to conclude it by the end of calendar 2026. Strobel called that deadline a “very strong aspiration,” while noting the company could take additional time if doing so produced a substantially better outcome.
Although Brazil could be easier to separate because it is “very ring-fenced,” Strobel said Coty is not pursuing simply the easiest path. Instead, it is evaluating the Consumer Beauty business as a whole and seeking the option that creates the most value.
Brazil has returned to growth following what Strobel described as a “wobble” early in the year. He said the market is growing, Coty is growing, and the company expects to regain share in the country.
Gucci Exit, Cost Actions and Fiscal 2028 Goal
Looking beyond fiscal 2027, Strobel said Coty is targeting a return to growth for its underlying portfolio excluding Gucci in fiscal 2028. The company is seeking to drive growth through a sharper focus on major global brands such as Burberry and Hugo Boss, as well as through more incremental innovation designed to lift entire brand franchises.
As an example, Strobel pointed to BOSS Bottled Beyond, which he said was among the year’s top two male fragrance launches but did not materially lift the broader Hugo Boss franchise. Coty has since launched BOSS Bottled Beyond for Her, beginning in travel retail, to establish a women’s business that it believes can also create a halo effect for the male franchise.
Coty is also bringing in new brands, including Swarovski and Etro, next year, Strobel said. Travel retail remains an important channel because it can provide prominent displays and brand-building opportunities, in addition to sales. He said Coty’s travel-retail business is growing nicely.
The company also plans a restructuring program to address the future loss of Gucci-related sales and profit. Strobel said the program is expected to cover Coty’s go-to-market setup, manufacturing and distribution network, organizational layers and central functions. He said Coty wants its cost-savings and restructuring actions alone to offset the impact, with portfolio growth providing additional support.
Coty said it was pleased with its agreement with Kering related to Gucci, citing compensation equivalent to a year of profit and cash, funds to support debt reduction, restructuring-related proceeds and a resolution to inventory matters. Strobel said the company expects to provide more details on its restructuring plans in coming months, after considering interdependencies with the Consumer Beauty review.
Outlook and Potential Variables
On profitability, Strobel said Coty’s ability to reduce the EBITDA decline seen in the prior two quarters could be influenced by conditions in the Middle East, oil prices, tariff refunds and continuing productivity savings. The company has included $20 million to $30 million of costs in its assumptions for oil prices between $90 and $100, he said, and is also awaiting a potential tariff refund of about $30 million.
In closing remarks, Strobel said Coty had seen improvements during the quarter but was not satisfied with its current performance. The company provided guidance only for the first quarter, while targeting fiscal 2027 EBITDA “above $50” and free cash flow close to fiscal 2026 levels, as stated on the call.
“Our priorities are straightforward: improve sell-out, close the gap to market, strengthen profitability,” Strobel said.
About Coty (NYSE:COTY)
Coty Inc is a multinational beauty company specializing in the development, manufacturing and marketing of fragrances, color cosmetics and skin and body care products. Established in 1904 by François Coty in Paris, the company has grown through a blend of organic innovation and strategic acquisitions to become one of the leading players in the global beauty industry. Coty’s portfolio encompasses a broad range of consumer and luxury brands, reflecting its commitment to catering to diverse consumer preferences and market segments.
The company’s product offerings span three main divisions: Coty Luxury, Coty Consumer Beauty and Coty Professional Beauty.
