Coty Posts 8% Revenue Drop in Fiscal Q4

Coty (COTY -0.92%), a leading global beauty company with a wide portfolio of fragrances, cosmetics, and skin care brands, released its Q4 FY2025 results on August 20, 2025. The key takeaway was that revenue for the quarter fell to $1,252.4 million, in line with management’s earlier signals for a weaker period as Coty reset inventories and scaled down shipments. Adjusted earnings per share (EPS) (non-GAAP) was $(0.05). Adjusted EPS of $(0.05) missed the $0.013465 estimate and declined from last year’s $(0.03). Free cash flow for FY25 fell sharply year over year, and margin pressures persisted, especially in mass market beauty segments. The quarter delivered results broadly as expected, providing a reset for Coty’s innovation plans heading into FY2026, though clear challenges remain in U.S. color cosmetics and Consumer Beauty division profitability.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q3 2025 earnings report.

Coty’s Business Model and Strategic Focus

Coty operates as a global beauty company with two core divisions: Prestige, which includes high-end fragrances and skincare, and Consumer Beauty, which covers mass-market cosmetics and personal care. Its brands include both proprietary and licensed lines, allowing Coty to compete in premium and value categories.

The company’s recent strategy centers on innovation, supply chain optimization, and balancing its diverse brand portfolio. It aims to grow its Prestige segment while digital and e-commerce expansion enable broader reach. Key factors for success are maintaining brand equity, regularly launching new products, and staying agile with trends in both the luxury and mass sectors.

Quarter in Review: Key Developments and Performance

The period saw Coty reported an 8% revenue decline for the quarter ended June 30, 2025. This was largely expected, as management had warned of a “reset baseline” to allow for future product launches and to clear excess inventory from the pipeline. The Consumer Beauty division reported a 12 % drop in sales for the quarter. The Prestige segment, which focuses on luxury fragrances and skincare, saw a 5% revenue decline on a reported basis. but remained the core source of profit for Coty.

The Consumer Beauty division suffered a significant blow from an asset impairment charge in Q3, particularly affecting its mass color cosmetics business lines such as Max Factor and CoverGirl. Operating income (Non-GAAP) was down 37% from the prior year, largely reflecting the ongoing challenges in this division. The impairment recognized—primarily a reduction in the value of trademarks—was prompted by tough conditions in the U.S. mass beauty market and similar trends in Europe, and was recorded in Q3.

Margins were pressured during the quarter. Although Coty achieved $140 million in productivity savings for FY2025, reported and adjusted gross margin fell by 190 basis points compared with the prior year period. Adjusted EBITDA, which removes non-cash and one-time charges to show core profitability, was $126.7 million, down 23 % year over year, with profit declines driven by Consumer Beauty and lower asset utilization due to sales softness.

Digital and e-commerce continued to be an area of strategic investment, with e-commerce revenue across Prestige and Consumer Beauty reaching $1 billion for FY2025. The company expanded partnerships such as the Amazon Premium Beauty Store and TikTok Shop, and cited accelerated use of artificial intelligence (AI) in demand planning and marketing. In innovation, a noteworthy launch was the Boss Bottled Beyond fragrance, which the company claims is exceeding benchmarks set by previous successful fragrance launches.

Inventory management was a core focus in the quarter, with Coty actively working to realign shipments to match real consumer demand. In the supply chain, the company also responded to tariff risks by increasing U.S. manufacturing, particularly for mass-market and entry-level fragrances, as disclosed in commentary for FY2025. While these mitigations helped limit cost pressures, full margin improvement from these efforts will not be apparent until the next fiscal year. On the sustainability front, Coty’s initiatives continued, gaining recognition on the CDP Supplier Engagement A List and securing a Gold rating from EcoVadis, placing Coty within the top 5% of assessed companies for sustainability performance.

Asset impairment totaled $212.8 million for FY2025, with $169.9 million (GAAP) was attributed to Consumer Beauty trademarks amid ongoing challenges in color cosmetics. The net loss attributable to common shareholders (GAAP) improved from the prior year, but this was primarily due to a lower mark-to-market loss on equity swaps rather than operational gains. Free cash flow for FY25 fell substantially year over year, influenced by lower operating cash flow and higher capital requirements.

Regionally, the U.S. was the largest drag on company performance, with Americas revenue was down 12%. Europe, Middle East, and Africa also declined, particularly due to inventory adjustments and Consumer Beauty weakness, while Asia Pacific sales remained weak, but better than expected outside of China.

Looking Ahead: Management Outlook and Trends to Watch

Management’s guidance for the next fiscal year is cautious. Coty expects a like-for-like revenue decline of 6% to 8% for Q1 FY2026 and a further decline in the second quarter. A return to top-line like-for-like (LFL) sales growth is expected in the second half of FY2026, supported by new prestige fragrance launches and an expanded innovation pipeline. Management projects a high single-digit to mid-teen percentage decline in 1H26 adjusted EPS to $0.33 to $0.36, while Free cash flow is guided to exceed $350 million in 1H FY2026. Targeted leverage is expected to steady at or below 3.5 times adjusted EBITDA (non-GAAP) by the end of CY2025, according to company statements.

Management highlighted upcoming launches of Prestige fragrances and ongoing digital transformation as potential drivers for a turnaround. Investors are advised to watch for early performance of these new products, progress on further cost-saving initiatives, and signs of stabilization in U.S. mass-market beauty channels.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.