Why Coty Stock Lost 19% in July

Investors panned the company's updated turnaround plan.

Demitrios Kalogeropoulos
Demitrios Kalogeropoulos
Aug 5, 2019 at 12:29PM
Consumer Goods

What happened

Leading beauty product retailer Coty (NYSE:COTY) trailed the market last month by shedding 19% compared to a 1% uptick in the S&P 500, according to S&P Global Market Intelligence. That drop still left shareholders looking at significant short-term gains, with the stock up over 50% so far in 2019 compared to a 14% increase in the broader market.

A woman applies makeup.

Image source: Getty Images.

So what

July's slump came following a lukewarm reception on Wall Street for Coty's updated financial targets. On July 1, the company laid out a turnaround plan that calls for improving profitability and reduced debt. However, several pieces of this plan concerned investors, including its projection of essentially no sales growth between now and 2023. Coty also suggested that it may take impairment charges of at least $3 billion in connection with its restructuring initiatives.


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Now what

Investors will have to wait for the results of Coty's asset review before learning the exact size of its impairment charges, which are partly tied to a massive acquisition that hasn't panned out as investors had hoped it would. But botched buyouts aside, the company's outlook makes it clear that management isn't expecting a quick return to growth ahead. Investors will get more details on both short-term and long-term goals when Coty reports earnings results on Aug. 28.