Coty's New CEO Prioritizes Core Brands, Withdraws Full-Year Outlook

• Coty reported Q2 revenue of $1.68 billion (up 0.5% year-over-year), slightly above expectations, but forecasts Q3 gross margins to decline 200-300 basis points from the prior year
• The company's net debt-to-adjusted EBITDA ratio reached a nine-year low of 2.7x after selling its remaining 25.8% Wella stake to KKR for $750 million in December, using proceeds to pay down debt
• Coty faces significant headwinds including losing its exclusive Gucci fragrance license in 2028 to L'Oréal and competition from affordable brands like Elf Beauty, while potentially divesting consumer brands like CoverGirl and Rimmel

Coty's New CEO Prioritizes Core Brands, Withdraws Full-Year Outlook

Leadership Change and Strategic Shift

Coty Inc. withdrew its full-year guidance as new interim CEO Markus Strobel, a Procter & Gamble veteran who assumed the role January 1, announced a strategic refocus on core brands. Strobel acknowledged the company's "disappointing" financial performance over the past 18 months and is implementing the "Coty. Curated" strategy to reduce complexity and concentrate resources on key assets.

Financial Performance

• Q2 net revenue: $1.68 billion (up 0.5% year-over-year), slightly above analyst expectations
• Q3 outlook: gross margins expected to decline 200-300 basis points year-over-year
• Net debt-to-adjusted EBITDA ratio: 2.7x, a nine-year low
• Sold remaining 25.8% stake in Wella to KKR for $750 million in December, using proceeds for debt reduction

Strategic Priorities

Management highlighted Kylie Cosmetics (doubled in size over three years) and licenses with Burberry and Marc Jacobs as core assets. The company is discontinuing its Orveda skincare license to focus on "scale, reach and profitability." Coty had already been reviewing its consumer beauty division, which includes CoverGirl and Rimmel, since September.

Market Challenges

Coty faces intensifying competition from L'Oréal, newer beauty brands, and value competitors like Elf Beauty. The company will lose its exclusive Gucci fragrance license in 2028 after Kering sold its beauty business to L'Oréal. Coty stock has underperformed the S&P 500 and industry rivals, prompting the strategic reset under new leadership.