Image source: Coty Inc.

What happened

Shares of Coty Inc (NYSE:COTY) fell more than 10% by the end of the trading day Wednesday, following the company's poor performance in the fiscal first quarter, on which the company reported before the market opened.

So what 

For the fiscal Q1 2017, ended Sept. 30, Coty posted sales of $1.08 billion, down 3% year over year, and zero profit, down from a net income of $125.7 million, or $0.34 per share a year ago. Adjusted for one-time costs, earnings per share were $0.23, still down 64% year over year. 

Coty announced in July 2015 that it would acquire 44 beauty brands from Procter & Gamble (NYSE:PG). Management updated investors during the release that the deal officially closed on Oct. 1, and Coty has paid $11.6 billion, including $1.9 billion in assumed debt, "a savings of $1 billion from the announced July 2015 acquisition price."

Now what

Coty management seems to be blaming the poor performance this quarter on the "distraction" of getting the deal finished. Bart Becht, chairman of the board, said in the release:

As expected, the extensive work over the last 15 months on closing the transaction and merging the two businesses has come at a cost. As discussed prior to the closing, the resources which normally work on the business, have also been working on closing the transaction and setting up and preparing for the future of the combined company. The resulting distraction as well as the recent change in management teams in our headquarters, regions and countries, have contributed to a decline in Coty standalone revenues and profits in Q1.

Management noted that Q2 is likely to be similar in terms of low profitability but are maintaining a bullish long-term outlook. Thanks to increased sales with similar costs once all of the brands are fully merged, Coty forecasts EPS of $1.53 for fiscal 2020.

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