Duty-free demand, cost cuts drive Coty's rosy forecast

·2 min read
Rimmel cosmetics owned by Coty Brands are shown for sale in a retail store in Encinitas, California

By Aditi Sebastian and Praveen Paramasivam

(Reuters) - Coty Inc forecast annual earnings largely above estimates on Monday, as the cosmetics maker benefits from cost cuts to ward off inflation impacts and a revival in demand for its products at airport duty-free stores.

Shares jumped about 13% in morning trade as quarterly net revenue in its prestige segment increased 35.1% to $870.7 million.

Coty, which is grappling with industry-wide supply-chain bottlenecks, said it is managing cost pressures through high-end product launches, price increases, fixed cost cuts and freight under contract.

The Max Factor parent forecast fiscal 2022 adjusted per-share earnings between 19 cents and 23 cents, largely above estimates, after topping expectations for the first quarter.

The company has benefited from its investments in advertising, launch of the fragrances Gucci Flora Gorgeous Gardenia and Burberry Hero and its efforts to rebuild its CoverGirl and Max Factor brands through marketing.

The Kylie Cosmetics seller also said it is optimistic for the holiday season as people return to offices, parties and social events and shoppers, taking trips again, buy more at its duty-free stores following easing of restrictions.

"Travel retail is clearly back. It's not at the level of pre pandemic (but)...this is clearly helping the prestige performance," Coty Chief Executive Sue Nabi told Reuters.

Coty also forecast organic sales growth of low to mid-teens percentage growth, above its previous forecast of low-teens growth.

The upbeat forecast comes even as peer Estee Lauder Cos Inc cut its sales expectations for the year.

Coty's first-quarter net revenue from continuing operations rose 22% on a reported basis to $1.37 billion.

"Investors should view the F1Q result as evidence the latest turnaround is on track," Stifel analysts said.

Separately, the CoverGirl parent said it would sell a 4.7% stake in professional beauty-business Wella to KKR in a $215.7 million deal. Coty will have a 25.9% stake upon close.

(Reporting by Praveen Paramasivam and Aditi Sebastian in Bengaluru; Editing by Krishna Chandra Eluri)

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting