Coty returns to revenues growth in Q3

Coty has posted its third fiscal quarter financial results for 2014, and is reporting that its net revenues are growing again – plus, the company’s brands are gaining momentum in emerging markets. 

Coty’s net revenues of $1,008.7 million increased 2% like-for-like and 1% as reported relative to the prior-year period. Its adjusted operating income of $81.4 million decreased from $103.7 million in the prior-year period.

Adjusted net income of $86.7 million increased from $68.4 million in the prior-year period, driven by an increase in one-time tax benefits of $14.3 million. Adjusted diluted EPS increased to $0.22 from $0.17 in the prior-year period.

Commenting on the Company's performance, Michele Scannavini, CEO of Coty Inc., said: "Coty returned to revenues growth in the 3rd quarter. The majority of our power brands showed positive development thanks to a competitive innovation program, and growth in the emerging markets accelerated to 15%. Both prove our strategic focus on these brands and geographies is starting to bear fruit. While market conditions remain challenging in some product segments in parts of the world, we are sticking to our current strategy and targeting for continued growth for the remainder of the calendar year while working to significantly improve the cost profile of the business."

In Fragrances, revenue growth was generated by power brands Calvin Klein, Davidoff, Marc Jacobs, and Playboy, as well as some of the Company's regional brands. Adjusted operating income for Fragrances decreased 2% to $54.3 million from $55.5 million in the prior-year period, resulting in 10.7% adjusted operating income margin, a decline of 70 basis points versus the prior year.

In Color Cosmetics, net revenues declined primarily due to pressure on Sally Hansen as a result of continued weakness in the U.S. nail category, unfavorable comparisons versus the sizeable sell-in of the successful gel technology launch in the prior-year period, and market share decline in the U.S. Rimmel continued to grow at a fast pace, gaining market share in Europe and the U.S. supported by a strong innovation pipeline, and gaining traction in the emerging markets. Adjusted operating income for Color Cosmetics decreased to $36.7 million from $50.4 million in the prior-year period, resulting in 10.6% adjusted operating income margin, a decline of 310 basis points compared to the prior-year period.

In Skin & Body Care, net revenues increased by 8% on a like-for-like basis, with growth across all key brands, including philosophy, adidas, and Lancaster. Philosophy recorded strong growth for the fourth consecutive quarter. The brand experienced growth across its three key distribution channels, including retail, QVC, and e-commerce supported by higher demand for new launches and existing core franchises. Positive progress in international expansion also fueled the brand strength. Adidas returned to growth in the quarter, fueled by momentum in the emerging markets, including China, Brazil, the Middle East, South Africa, and Southeast Asia. Adjusted operating loss for Skin & Body Care was ($9.6) million compared to ($2.2) million in the prior-year period, primarily as a result of ramped up advertising & promotion spending in support of the segment's expansion and growth.
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