Companies and Brands

Has Coty Done Enough to Turn Around Its Awful Quarterly Results?

Paul Ausick

Published: August 27, 2020 8:00 am

Coty Inc. (NYSE: COTY) reported fiscal fourth-quarter and full-year 2020 results before markets opened Thursday. The beauty products company reported quarterly adjusted diluted loss per share of $0.51 on revenues of $922.1 million. In the same period a year ago, the company reported earnings per share (EPS) of $0.16 on revenue of $2.12 billion. Fourth-quarter results also compare to consensus estimates for a loss per share of $0.11 and $1.34 billion in revenue.

For the full year, the company’s loss per share was $0.25 on revenue of $6.7 billion. In the 2019 fiscal year, Coty reported EPS of $0.65 and revenue of $8.65 billion. Analysts had forecast full-year EPS of $0.15 and revenue of $7.15 billion.

Coty’s poor fourth-quarter performance was “marked by external shocks, as the COVID-19 pandemic triggered a crisis in the real economy and supply,” according to Peter Harf, the company’s executive chair. Harf also commented that sales trends gradually improved from April through June and have made “significant improvements” in July and August. He expects the “positive momentum” to continue and believes that Coty will post a profit in its current quarter.

A new CEO, Sue Nabi, moves into the corner office on September 1. She will be Coty’s fifth CEO since 2015, the year that Coty purchased 43 beauty brands from Procter & Gamble for $12.5 billion. Coty is controlled by European investment firm JAB, owners of 60% of the company’s stock.

Coty received $750 million in fresh capital during the quarter from KKR in exchange for 60% of Coty’s professional and retail hair business (Wella). The final $250 million of the $1 billion purchase price was paid on July 31.

Last year Coty paid $600 million for a majority interest in Kylie Jenner’s cosmetics line and paid $200 million earlier this year for a 20% stake in Kim Kardashian West’s KKW Beauty empire.

The company has suspended its dividend payments but did pay $6.5 million in preferred dividends to KKR. Share repurchases also have been stopped.

Coty’s attraction to investors has long been its dividend payment. At the time the company acquired P&G’s products, Coty paid an annual dividend of $0.25. Before suspending its dividend earlier this year, the company’s dividend had doubled to $0.50.

For Coty’s first fiscal quarter of 2021, analysts have estimated EPS of $0.03 and sales of $1.69 billion. For the full fiscal year, consensus estimates call for EPS of $0.37 on $7.17 billion in sales.

Shares traded down about 3.8% in Thursday’s premarket session, at $3.70 in a 52-week range of $3.02 to $13.42. The consensus price target on the stock is $5.55.