What happened

Share of makeup and perfume maker Coty (COTY -1.88%) fell as much as 15% in the first hour of trading on Tuesday. As of 11:14 a.m. EST, the stock remained down by 14.5%. The main news here was the consumer discretionary company's fiscal second-quarter 2021 earnings release. Investors weren't pleased, but the picture was mixed.

So what

For the period, which ended Dec. 31, Coty reported adjusted earnings of $0.17 per share, helped by a 40% increase in online sales. That easily beat the $0.07 per share that analysts had been expecting. Normally a beat like that would get investors excited and the stock in question would rise. However, Coty's top line was slightly behind Wall Street's consensus expectation. Year over year, its sales decline amounted to around 16%, with particular weakness in Europe and Asia, during a key selling period. Investors were clearly displeased.  

A woman standing at a makeup display.

Image source: Getty Images.

In the face of the coronavirus pandemic, with so many people working from home and socially distancing, demand for Coty's products has understandably waned. Relatively weak sales in the fiscal second quarter appear to confirm that customers are still not feeling as much need for beauty products. Given the recent spike in cases and the new coronavirus variants starting to move around the world, that demand weakness might stick around for longer than some had previously hoped. 

Now what

These earnings and, more importantly, revenue numbers have to be juxtaposed against the over 150% increase in Coty's stock price since October. While shares are still trading below their pre-pandemic levels, a lot of good news was priced into the stock in a short period of time (helped along by the disposition of 60% of its Wella business in November, which is a net positive for the company). Thus, it isn't surprising that a revenue miss, which might hint that the company's sales recovery will take longer than anticipated, would put investors in a dour mood.