What happened

Shares of Coty (NYSE:COTY) fell as much as 17.7% on Tuesday after the beauty product company reported its results for its fiscal fourth quarter of 2017. But the stock recovered some of its loss and finished the trading day down 9.4%.

For its fourth quarter, Coty reported revenue of $2.24 billion and a loss per share of $0.41. On an adjusted basis, earnings per share was about breakeven. Investor pessimism on Tuesday likely reflected the company's lower-than-expected adjusted loss per share. While Coty's $2.24 billion in revenue exceeded a consensus estimate for revenue of $2.16 billion, its adjusted EPS of about $0.00 was well below a consensus estimate for $0.09.

Chalkboard sketch of a chart showing a stock price falling.

Image source: Getty Images.

So what

Coty's worse-than-expected loss per share reflected rising marketing spend and higher-than-expected costs associated with its acquisition of a range of Procter & Gamble beauty products last year. A "higher combined company fixed cost base" weighed on profitability, management explained.

Now what

Management admitted that its cost base is "not where it should be." But it said in its fourth-quarter press release that it is rapidly addressing its high fixed cost base as part of its "synergy program and organic efficiency initiatives."

Going forward, Coty says it is prioritizing addressing its high fixed cost base in fiscal 2018.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.