Coty’s sales performance in the first quarter was well above that of the underlying beauty market, placing Coty among the best in its competitive set. First quarter sales increased 1%, including over 7% of currency headwinds, with sales up 9% on an LFL basis, which includes approximately 200 basis points of negative exit impact activities in Russia. As a result, LFL sales growth exceeded the company’s upwardly revised guidance, which called for LFL growth of +8-9% taking into account the impact of leaving Russia.
During the quarter, consumer demand for beauty products, particularly prestige fragrances, remained robust, with estimated sales in Coty’s Prestige division growing by double digits. This performance is higher than the estimated sale in Coty’s Consumer Beauty division, which is growing in the mid to high numbers.
At the same time, the company saw strong LFL growth across both divisions, with Prestige growth limited due to industry-wide supply chain pressures which were exacerbated by strong demand. of fragrances that exceeded expectations, the impact of the company’s exit from Russia and the phasing launch.
Commenting on operating results, Sue Y. Nabi, CEO of Cotysaid, “Our strong first quarter results, amid a complex external environment including ongoing component shortages, confirms the strength and resilience of Coty’s brands, teams, strategy and operating model. This is the ninth consecutive quarter that Coty has reported results in The progress we continue to make should be evident on all key financial KPIs, from sales to gross margins and adjusted EBITDA to our progress on deleveraging.
Activity area
Coty’s Prestige business maintained its strong momentum in the first quarter, supported by a robust fragrance market and Coty’s cutting-edge innovation. Q1 Prestige revenue decreased 1% as reported and increased 7% LFL, which included approximately 300 basis points of negative impact from Coty’s exit from Russia.
Prestige’s sales growth was also limited by industry-wide fragrance component shortages as well as difficult growth comparisons the previous year when Coty launched several successful launches.
In the first quarter, Coty continued its track record of launching successful fragrance innovations, with the recent launch of Gucci Flora Gorgeous Jasmine, building on the momentum of last year’s best-selling Gucci Flora Gorgeous Gardenia, elevating the Flora franchise in the Top 10 in North America and Europe. Similarly, the launch of Burberry Hero EDP built on the success of Burberry Hero EDT, propelling the Hero franchise into the Top 10 in the US and the highest market share for Burberry in the UK. The company continued to expand its online and offline presence across its three prestige cosmetics brands, even as periodic shutdowns in China weighed on Coty’s prestige cosmetics sales. Meanwhile, Coty continued to build momentum at its Lancaster skincare brand, with growth of more than 20% year-on-year, ahead of its key brand initiatives. in the second half of fiscal year 23.
Coty’s Consumer Beauty business delivered strong first quarter results, supported by sustained market share momentum and strong activity. Consumer Beauty Q1 revenue increased 5% reported and 12% LFL.
While revenue growth in mass cosmetics and fragrances was broadly in line with sales expectations, the division was boosted by a strong pipeline of launches and brand initiatives in its personal care business, including the premium Skin & Mind body care line from adidas, Monange’s silicone-free deodorant and the clinical line from Bozzano. During the quarter, the global mass beauty category grew at a moderate pace as Coty continued to outperform the market and grow market share globally, marking 10 consecutive months of gains.
Geographically, revenues increased in all regions at constant exchange rates. EMEA sales were down 3% as reported, but grew 11% LFL, fueled by significant momentum in Travel Retail and double-digit growth in most markets. The Americas saw strong momentum in Brazil and Latin America, while continued strength in US demand was offset by supply constraints. Asia-Pacific grew 6% as reported and 12% in LFL, with strong momentum in Asia-ex-China and Travel Retail, while China revenues returned to year-on-year growth .
Outlook
Coty continues to see strong demand growth in almost all markets, particularly in Prestige fragrances, with Coty maintaining strong launch activity in both Prestige and Consumer Beauty. At the same time, this robust demand is contributing to component shortages, which remain the main impediment to near-term growth. The company remains confident in its outlook for FY23, which is in line with its medium-term growth algorithm.
Coty continues to expect FY23 revenue for the core business, taking into account the impact of the exit from Russia, to grow 6-8% LFL. The exit from Russia is estimated to negatively impact FY23 sales by approximately 2%. Based on current exchange rates, the company anticipates FY23 revenue headwinds of 6-8%.