Coty’s net revenues fell 3% year-over-year to $1.03bn in the third quarter of fiscal year 2021 (the three months ended March 31). Like-for-like revenue dropped 6%.
Adjusted operating income was $95.6m compared to an adjusted operating loss of $68.2m in the same quarter the year prior.
Reported net loss came in at $1.2m compared to a net loss of $311m in the prior-year period. Adjusted net income was $2.3m compared to an adjusted net loss of $104.7m in the prior year.
Net revenues decreased 14% to $3.57bn in the nine months ended March 31 compared to the same period the year prior.
Coty CEO Sue Y. Nabi said: “From a results standpoint, in Q3 we saw a significant improvement in our sales trends even as we continued our efforts to strengthen the health of our business and brands by cutting sales in low quality channels. Importantly, the prestige sales returned to growth as the impact of the pandemic abated in many markets. We have seen strong momentum in several of our key markets, with China sales growing double-to-triple digits versus FY20 and FY19, and U.S. prestige sales up high single digits in the quarter and nearly flat in the fiscal year-to-date. While Europe sales remain under pressure, we are confident that the imminent lifting of COVID restrictions will drive improvement in this key region.”
She added: “Financially, we took a significant step forward in reshaping our profitability profile, with gross margins over 62% and EBITDA margins up 18 percentage points year-on-year, despite a lower topline. With our year-to-date adjusted EBITDA of $633 million reaching over 80% of our FY21 target of approximately $750 million, we have generated capacity to significantly increase our marketing investments in Q4 to support our strategic growth initiatives while at the same time delivering on our financial commitments. We are also progressing on our deleveraging objectives, driving leverage towards 5x exiting CY21, and the recent successful $900 million bond issuance has helped Coty’s maturity profile.”
Prestige net revenues rose 6.5% year-over-year to $600.6m in the third quarter (+2% on a like-for-like basis). Gucci, Burberry, Marc Jacobs and philosophy saw double digit revenue growth in the quarter.
In prestige cosmetics both Gucci Beauty and Burberry saw double- to triple-digit sell-out growth in the US and Asia Pacific.
Prestige e-commerce sales rose 20% and represented a low 20s penetration rate of prestige sales.
Mass net revenues fell 14% to $427.4m compared the same quarter last year (-15% on a like-for-like basis). The segment continued to be pressured due to reduced demand for color cosmetics. However, sell-out trends have started to improve more recently, Coty says.
The company said however, that it had seen market share gains at CoverGirl and at Rimmel in the UK and market share gains at Sally Hansen in the US.
Mass e-commerce sales increased 50% and represented a high-single-digit percent of mass sales.
Asia Pacific sees growth
Asia Pacific’s net revenues rose 28% year-over-year to $145.2m in the third quarter, driven by prestige brands, despite travel-retail continuing to face pressure from lower air travel.
In China, prestige beauty brands in both brick-and-mortar and e-commerce saw strong sell-out growth. Burberry and Gucci both had triple-digit-sell-out growth during the period. E-commerce increased at a triple-digit rate during the third quarter.
Meanwhile, the Americas’ net revenues dropped 6% to $409.6m compared to the same quarter last year. Softness in the color cosmetics market continues to weigh on the mass category’s performance. However, US prestige sales, excluding the travel retail channel, generated growth.
E-commerce sales in the region rose 50% in the third quarter and 60% fiscal year-to-date.
In EMEA, revenues fell 8% year-over-year to $473m. Sales for both mass and prestige continued to be impacted by the COVID-19 pandemic and related lockdowns across Western Europe during the quarter.
The company says that Chloe Signature is the number two female fragrance in Germany and that Gucci Beauty has risen in the ranks at Sephora both online and in-store, and is now in the top 10 make-up brands in the stores where it is present.
EMEA e-commerce sales grew 90% in the quarter.
Outlook
As reported last month, Coty expects to end the year with net revenues of $4.5bn to $4.6bn. The company plans to increase investment in the fourth quarter and continue to reduce costs, which are on track to reach $300m in fiscal year 2021 and total targeted savings of $600m in fiscal year 2023.