Coty (NYSE:COTY) reported first-quarter fiscal 2027 revenue and adjusted earnings ahead of expectations, but executives said the beauty company remains in a transition year as it works to improve consumer demand, margins and market share.
Net revenue was $1.56 billion, down 1.6% on a like-for-like basis, a smaller decline than the low- to mid-single-digit decrease the company had forecast. Adjusted earnings before interest, taxes, depreciation and amortization fell 7% year over year to $274 million.
Executive Chairman and Interim Chief Executive Officer Markus Strobel said stronger U.S. trends and a milder-than-expected decline in the Middle East helped the quarter. He cautioned that “the recovery won’t be linear.”
Core Prestige Brands Grow, but Sell-Out Trails Market
Prestige revenue was $1.06 billion, down 1% like for like, while Consumer Beauty revenue was approximately $500 million, down 3%. Chief Financial Officer Soraya Benchikh said both divisions improved sequentially compared with the first and second halves of fiscal 2026.
Coty’s top six core Prestige brands grew 5% like for like in the quarter, with five of the six posting growth. Benchikh said the rollout of Marc Jacobs makeup contributed a couple of percentage points to the group’s growth. The six brands account for 73% of Prestige sales.
The company has concentrated more advertising and consumer promotion spending on those brands, raising their share of Prestige investment to 76% in the quarter from 64% in the first half of fiscal 2026.
Even so, Coty’s Prestige sell-out, or sales to consumers, declined 2%, while the overall Prestige beauty market grew 3%, Strobel said. Sell-out for the six core Prestige brands rose 1%. In mass beauty, Coty’s sell-out declined 3%, compared with 5% market growth.
Benchikh said Consumer Beauty’s recovery would take time. Its top four core brands represented 58% of division sales and received 71% of its advertising and consumer promotion spending, up from 64% a year earlier.
Margins Fall as Cash Flow Improves
Adjusted gross margin declined 120 basis points to 63.3%, a larger decrease than Coty’s previous expectation of 50 to 100 basis points. Benchikh attributed the shortfall primarily to higher-than-anticipated freight and excess and obsolescence costs.
Freight and material costs linked to the Middle East conflict weighed on results, while excess and obsolescence costs reflected elevated demand forecasts in the prior year. Benchikh said the company expects the Middle East cost headwind to remain elevated for the rest of fiscal 2027 at current oil prices.
Adjusted EBITDA margin also declined 120 basis points, to 17.6%. Coty reduced non-people fixed costs by 9%, with savings in areas including consulting, depreciation and information technology. Benchikh said near-term benefits from previously communicated headcount reductions were largely offset by labor cost inflation.
Adjusted earnings per share, excluding the equity swap, were 15 cents, unchanged from a year earlier and above the company’s forecast of 11 to 13 cents.
Free cash flow rose to $85 million, an improvement of $73 million year over year, primarily because of better payables and receivables performance. Net debt was approximately $2.6 billion at quarter-end, down about $300 million from June. Free cash flow and $250 million in July proceeds connected to the Gucci transition contributed to the reduction.
Brand Updates and Second-Quarter Outlook
Strobel said Marc Jacobs fragrance sales grew by a double-digit percentage like for like, supported by the Daisy franchise. Coty launched Marc Jacobs Beauty makeup in approximately 600 Sephora stores across the U.S., U.K., Australia and Canada, as well as online, and retail sales were exceeding targets, he said.
Kylie Cosmetics also posted double-digit like-for-like sales growth, while Burberry and Hugo Boss fragrance sales grew by low-single-digit percentages. In the U.S., CoverGirl retail value sales declined 2% over the latest 13 weeks, an improvement from a 4% decline over 52 weeks, though Strobel said the brand continued to trail a growing category.
For the second quarter, Coty expects a low-single-digit like-for-like revenue decline and a high-single-digit decline in adjusted EBITDA. It forecasts adjusted earnings per share, excluding the swap, of 16 to 18 cents. The company expects its six core Prestige brands to continue growing, though at a more moderate pace than in the first quarter.
Coty maintained its expectation for more than $300 million in free cash flow in the first half of fiscal 2027. Benchikh said the company plans to complete its strategic review by the end of calendar 2026 and then provide a longer-term outlook and financial framework.
About Coty (NYSE:COTY)
Coty Inc is a global beauty company that develops, manufactures and markets fragrances, cosmetics, skin care and body-care products. Its portfolio includes luxury, prestige and mass-market brands, with products sold through department stores, specialty retailers, e-commerce platforms and other distribution channels.
The company’s brands have included CoverGirl, Rimmel London, Max Factor, Bourjois, Gucci Beauty, Calvin Klein, Marc Jacobs, Burberry, Hugo Boss and Chloé, among others. Coty also participates in professional beauty through hair-care and salon brands, including the Wella portfolio.
Founded in Paris in 1904 by François Coty, the company built its early reputation in fragrance before expanding into broader beauty categories and international markets.
