Coty (COTY 2.02%), a major beauty company known for its fragrance, cosmetics, and skincare products, released its fourth quarter results for fiscal 2025 on August 20, 2025. GAAP revenue was $1,252.4 million, topping analyst estimates of $1,208.07 million (GAAP) but down 8% from the same quarter last year. Non-GAAP earnings per share (EPS) was $(0.05), trailing the consensus forecast of $0.01 (non-GAAP) and representing a slight decline from the prior year’s adjusted EPS of $(0.03) for Q4 FY2024. Overall, the quarter showed that while Coty outperformed sales expectations, declining profits and lower free cash flow weighed on performance as the business continues to manage through category and macroeconomic pressures.

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

About Coty and Its Business Drivers

Coty’s core business spans cosmetics, fragrances, and skincare with a mix of prestige luxury brands and broad-use consumer products. It manages both owned brands and licenses, selling products worldwide and focusing especially on fragrance leadership. Its two main divisions are Prestige and Consumer Beauty, with each targeting different market segments and price points.

In recent years, Coty has focused on strengthening its brand portfolio, accelerating product innovation, and improving supply chain operations. Managing a diverse brand collection, Coty must adapt quickly to changing consumer tastes and retail trends. Success depends on new product launches, digital transformation, cost management, and optimizing sustainability practices to protect long-term brand value and meet evolving regulatory standards.

Key Developments During the Quarter

The quarter showed shrinking top-line sales across major divisions, though some results were anticipated by management as part of a “baseline clean-up” focused on clearing inventory. Prestige net revenue fell 5% on a reported basis compared to the prior year period, mainly hit by weaker results in the U.S. and reduction of retailer inventory. Adjusted EBITDA margin for Prestige also declined modestly to 13.5%, showing pressure on profitability even in the higher-end segment. Consumer Beauty, Coty’s division focused on more affordable mass-market brands for make-up and fragrance, saw reported revenue drop 12%, and its adjusted EBITDA margin slid sharply from 9.2% to 4.8%. Management attributed much of this to continued weakness in color cosmetics and a tough consumer outlook, particularly in the U.S.

Gross margin for the quarter compressed to 62.3%, a decrease of 190 basis points (a basis point is one one-hundredth of a percentage point) from the prior year reflecting an unusually strong result a year ago. Operating income on a Non-GAAP basis dropped to $67.7 million, and adjusted EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization, decreased 23% to $126.7 million. The reduction in profit margins reflects both lower sales and cost pressures that have not yet been fully offset by cost-cutting initiatives.

One notable item was the continued execution of cost-saving programs, which delivered $140 million in productivity gains for FY2025. The company continued shifting production of its mass and entry-level prestige fragrances to U.S. plants to counteract tariffs and control costs. Coty also flagged ongoing inventory normalization by retailers, particularly in the United States, as a factor restraining near-term sales -- a deliberate move to reset the company for future growth.

Digital initiatives remained in focus. E-commerce revenue surpassed $1 billion for FY2025, with Coty using platforms like Amazon and TikTok Shop to reach new customers. The company highlighted new product lines in fragrance, such as fragrance mists, and upcoming blockbuster launches, aiming to drive a return to growth in FY2026. Sustainability achievements also made progress, including recognition from EcoVadis and progress in packaging initiatives. These efforts reinforce Coty’s stated goal to remain a leader in responsible business practices within the beauty industry.

Looking Ahead: Management Outlook and Investor Focus

Management provided financial guidance for FY2026, projecting sequential improvement in core sales trends throughout the year. Leadership expects like-for-like sales to decline between 6% and 8% in Q1, and 3% to 5% in the second quarter, but anticipates a return to like-for-like (LFL) sales growth in the second half of FY2026 as new product launches reach shelves and inventory normalization completes. Gross margin may see continued pressure in the first half of FY2026, mainly due to lingering tariff effects, with improvement expected as more production shifts to U.S. facilities and cost controls continue.

Free cash flow for the first half of FY2026 is expected to exceed $350 million. The company plans to keep leverage at or below the current net debt/adjusted EBITDA ratio of about 3.5x as of the end of Q4 FY2025. Investors should monitor the rollout of new fragrance launches, progress in the mass fragrance and Consumer Beauty businesses, and signs of profit recovery as cost-saving and supply chain initiatives take effect in the coming quarters.

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