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Coty (COTY) Beats on Q2 Earnings, Raises Bottom-line View
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Coty Inc. (COTY - Free Report) posted second-quarter fiscal 2022 results, with the top and the bottom line increasing year over year. Earnings surpassed the Zacks Consensus Estimate, while sales missed the same.
The company gained from strong performance across the Prestige and Consumer Beauty segments. Coty saw solid trends across Prestige fragrance portfolio, with double-digit sell-out growth coupled with strategic launches like Gucci Flora and Burberry Hero. Coty’s sturdy performance witnessed during the second quarter exemplifies the successful execution of the company’s key strategic growth pillars. Coty’s efforts to reposition its key Consumer Beauty brands are on track. Coty expects fiscal 2022 sales at the higher end of its guidance range. Management also raised its adjusted earnings per share (EPS) view.
The Zacks Rank #3 (Hold) company’s shares have increased 1.4% in the past six months against the industry’s decline of 27.9%.
Coty posted adjusted earnings of 17 cents per share, which surpassed the Zacks Consensus Estimate of 12 cents. The bottom line improved from 13 cents reported in the year-ago quarter.
Coty’s net revenues came in at $1,578.2 million, up 12% year over year. The metric lagged the Zacks Consensus Estimate of $1,611.1 million. LFL revenues increased 12%, backed by growth in the Prestige and the Consumer Beauty business segments.
Adjusted gross margin came in at 64.6%, increasing from 58.7% in the prior-year quarter. The upside was supported by favorable intra-category mix-shift, price and mix management, improvement in excess & obsolescence and better absorption.
Adjusted operating income came in at $236.3 million, rising from $203 million in the prior-year quarter. The adjusted EBITDA for the quarter amounted to $311.9 million, up 10% from $284.5 million in the prior-year quarter. The increase was mainly driven by a higher gross margin and continued fixed-cost reductions. These were somewhat offset by increased A&CP expenses.
Adjusted operating margin for the second quarter increased 70 bps to 15%, while the adjusted EBITDA margin came in at 19.8%.
Channel-Wise Details
Prestige: Net revenues in the segment advanced 12% to $1,008 million. The segment’s revenues were up 12% on an LFL basis, driven by strength in every region, including continued recovery in most EMEA markets, Travel Retail, China and the United States.
Consumer Beauty: Net revenues rose 11% year over year to $570.2 million, while LFL sales jumped 12%. The segment benefited from double-digit LFL growth across all regions in the quarter. Solid performance across the color cosmetics category was also an upside.
Segment Results
Net revenues in the Americas increased 9% to $587 million. LFL revenues were also up 9%, driven by solid growth of Prestige and Consumer Beauty segments.
Sales in EMEA increased 12% year over year to $795 million, while the figure rose 13% on an LFL basis. The unit’s performance gained from broad-based growth across the Prestige and Consumer Beauty segment.
Sales in the Asia-Pacific region rose 17% (up 16% at LFL) year on year to $196.2 million. The upside was driven by solid performance across China along with continued recovery in Travel Retail.
Image Source: Zacks Investment Research
Other Financial Updates
Coty ended the quarter with cash and cash equivalents of $523.4 million, net long-term debt of $4,878.5 million and immediate liquidity of $3,263.3 million.
During six months ended Dec 31, 2021,cash provided by operating activities amounted to $734.7 million. Free cash flow during the second quarter was $408 million.
Notable Developments
On Nov 18, 2021, Coty signed a licensing agreement with Orveda — an ultra-premium skincare brand made in France.
On Nov 10, 2021, the company unveiled the sale of KKR's remaining 2.4% ownership stake in Coty. The move further simplifies Coty's capital structure while resulting in additional annual dividend cash savings of nearly $11 million.
Outlook
The company saw solid sales and sell-out momentum in the first half of fiscal 2022, with LFL sales growth of more than 13%. Thanks to such upsides, Coty expects fiscal 2022 LFL sales to be at the upper end of its guidance range of low-to-mid teens percentage growth. The company expects unfavorable currency rates to impact reported sales by 3-4% in the back half of the year.
For fiscal 2022, adjusted EBITDA is expected to come in at $900 million at a minimum on a constant-currency basis, indicating solid year-over-year growth in EBITDA margin. Owing to solid fiscal second-quarter earnings performance, management pushed the fiscal 2022 earnings view upward. Fiscal 2022 adjusted EPS is expected in the range of 22-26 cents, up from earlier guidance of 20-24 cents.
Helen of Troy, the developer and distributor of a portfolio of consumer products worldwide, currently sports a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for Helen of Troy’s current financial year’s sales and EPS suggests growth of 0.8% and 0.6%, respectively, from the year-ago period’s figures. HELE has a trailing four-quarter earnings surprise of 19.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Inter Parfums develops, manufactures and distributes prestige perfumes and cosmetics. It currently sports a Zacks Rank #1. Inter Parfums has a trailing four-quarter earnings surprise of 29.7%, on average.
The Zacks Consensus Estimate for IPAR’s current financial-year sales and EPS suggests growth of 63.2% and 117.4%, respectively, from the year-ago period’s figures.
Medifast, one of the leading health and wellness companies, currently has a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 17.3%, on average.
The Zacks Consensus Estimate for MED’s current financial-year sales and earnings suggests growth of 63% and 49.3%, respectively, from the year-ago period’s figures.
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Coty (COTY) Beats on Q2 Earnings, Raises Bottom-line View
Coty Inc. (COTY - Free Report) posted second-quarter fiscal 2022 results, with the top and the bottom line increasing year over year. Earnings surpassed the Zacks Consensus Estimate, while sales missed the same.
The company gained from strong performance across the Prestige and Consumer Beauty segments. Coty saw solid trends across Prestige fragrance portfolio, with double-digit sell-out growth coupled with strategic launches like Gucci Flora and Burberry Hero. Coty’s sturdy performance witnessed during the second quarter exemplifies the successful execution of the company’s key strategic growth pillars. Coty’s efforts to reposition its key Consumer Beauty brands are on track. Coty expects fiscal 2022 sales at the higher end of its guidance range. Management also raised its adjusted earnings per share (EPS) view.
The Zacks Rank #3 (Hold) company’s shares have increased 1.4% in the past six months against the industry’s decline of 27.9%.
Coty Price and EPS Surprise
Coty price-eps-surprise | Coty Quote
Quarter in Detail
Coty posted adjusted earnings of 17 cents per share, which surpassed the Zacks Consensus Estimate of 12 cents. The bottom line improved from 13 cents reported in the year-ago quarter.
Coty’s net revenues came in at $1,578.2 million, up 12% year over year. The metric lagged the Zacks Consensus Estimate of $1,611.1 million. LFL revenues increased 12%, backed by growth in the Prestige and the Consumer Beauty business segments.
Adjusted gross margin came in at 64.6%, increasing from 58.7% in the prior-year quarter. The upside was supported by favorable intra-category mix-shift, price and mix management, improvement in excess & obsolescence and better absorption.
Adjusted operating income came in at $236.3 million, rising from $203 million in the prior-year quarter. The adjusted EBITDA for the quarter amounted to $311.9 million, up 10% from $284.5 million in the prior-year quarter. The increase was mainly driven by a higher gross margin and continued fixed-cost reductions. These were somewhat offset by increased A&CP expenses.
Adjusted operating margin for the second quarter increased 70 bps to 15%, while the adjusted EBITDA margin came in at 19.8%.
Channel-Wise Details
Prestige: Net revenues in the segment advanced 12% to $1,008 million. The segment’s revenues were up 12% on an LFL basis, driven by strength in every region, including continued recovery in most EMEA markets, Travel Retail, China and the United States.
Consumer Beauty: Net revenues rose 11% year over year to $570.2 million, while LFL sales jumped 12%. The segment benefited from double-digit LFL growth across all regions in the quarter. Solid performance across the color cosmetics category was also an upside.
Segment Results
Net revenues in the Americas increased 9% to $587 million. LFL revenues were also up 9%, driven by solid growth of Prestige and Consumer Beauty segments.
Sales in EMEA increased 12% year over year to $795 million, while the figure rose 13% on an LFL basis. The unit’s performance gained from broad-based growth across the Prestige and Consumer Beauty segment.
Sales in the Asia-Pacific region rose 17% (up 16% at LFL) year on year to $196.2 million. The upside was driven by solid performance across China along with continued recovery in Travel Retail.
Other Financial Updates
Coty ended the quarter with cash and cash equivalents of $523.4 million, net long-term debt of $4,878.5 million and immediate liquidity of $3,263.3 million.
During six months ended Dec 31, 2021,cash provided by operating activities amounted to $734.7 million. Free cash flow during the second quarter was $408 million.
Notable Developments
On Nov 18, 2021, Coty signed a licensing agreement with Orveda — an ultra-premium skincare brand made in France.
On Nov 10, 2021, the company unveiled the sale of KKR's remaining 2.4% ownership stake in Coty. The move further simplifies Coty's capital structure while resulting in additional annual dividend cash savings of nearly $11 million.
Outlook
The company saw solid sales and sell-out momentum in the first half of fiscal 2022, with LFL sales growth of more than 13%. Thanks to such upsides, Coty expects fiscal 2022 LFL sales to be at the upper end of its guidance range of low-to-mid teens percentage growth. The company expects unfavorable currency rates to impact reported sales by 3-4% in the back half of the year.
For fiscal 2022, adjusted EBITDA is expected to come in at $900 million at a minimum on a constant-currency basis, indicating solid year-over-year growth in EBITDA margin. Owing to solid fiscal second-quarter earnings performance, management pushed the fiscal 2022 earnings view upward. Fiscal 2022 adjusted EPS is expected in the range of 22-26 cents, up from earlier guidance of 20-24 cents.
Some Solid Consumer Staple Bets
Some other top-ranked companies are Helen of Troy Limited (HELE - Free Report) , Inter Parfums, Inc. (IPAR - Free Report) and Medifast (MED - Free Report) .
Helen of Troy, the developer and distributor of a portfolio of consumer products worldwide, currently sports a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for Helen of Troy’s current financial year’s sales and EPS suggests growth of 0.8% and 0.6%, respectively, from the year-ago period’s figures. HELE has a trailing four-quarter earnings surprise of 19.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Inter Parfums develops, manufactures and distributes prestige perfumes and cosmetics. It currently sports a Zacks Rank #1. Inter Parfums has a trailing four-quarter earnings surprise of 29.7%, on average.
The Zacks Consensus Estimate for IPAR’s current financial-year sales and EPS suggests growth of 63.2% and 117.4%, respectively, from the year-ago period’s figures.
Medifast, one of the leading health and wellness companies, currently has a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 17.3%, on average.
The Zacks Consensus Estimate for MED’s current financial-year sales and earnings suggests growth of 63% and 49.3%, respectively, from the year-ago period’s figures.