Q4 2026 Coty Inc Pre-recorded Earnings Call Transcript
Key Points
- Coty Inc (COTY) delivered Q4 like-for-like sales down 1%, ahead of guidance of a mid-single-digit decline, with stronger-than-expected customer orders in the US in prestige fragrances and mass cosmetics.
- The company generated strong free cash flow of $348 million in fiscal 2026, up approximately $70 million year-over-year, driven by disciplined working capital management and lower cash bonuses.
- Coty Inc (COTY) reduced net debt by nearly $840 million year-over-year to $2.9 billion, with leverage at approximately 3.4 times, and continues to target around 2 times over time.
- The All in to Win program delivered over $250 million in productivity and fixed cost savings in fiscal 2026, ahead of target, contributing to a structurally leaner cost base.
- Prestige Cosmetics showed strong momentum with double-digit sales and sell-out growth, supported by Kylie, Burberry, and the early success of Marc Jacobs makeup launch.
- Sally Hansen returned to sales growth with improved sell-out momentum, and CoverGirl's sell-out trends are improving, narrowing the gap to the category.
- The early transition of the Gucci license to Caring secured $400 million in cash proceeds plus inventory proceeds, which will be used to reduce debt and invest in core brands.
- Coty Inc (COTY) is executing a focused innovation agenda with fewer, bigger launches, including Boss Bottle Beyond for Her and Marc Jacobs Beauty expansion, expected to drive incrementality and halo effects.
- The company is leveraging generative engine optimization (GEO) to improve brand visibility in AI-driven shopping, with early successes like Rimmel's visibility score rising from 7 to 4 in the UK.
- Coty Inc (COTY) maintains a robust core portfolio with 97% of brands under own-brand or long-term licenses, and remains the number three player in the prestige fragrance market even after Gucci exit.
- Coty Inc (COTY) reported a 5% like-for-like sales decline for fiscal 2026, with quarterly variability and continued below-market sell-out performance in both Prestige and Consumer Beauty divisions.
- Adjusted EBITDA declined 26% year-over-year in Q4 and 22% for fiscal 2026, reflecting top-line pressure, lower gross margins, and variable compensation headwinds.
- Adjusted gross margin decreased 190 basis points in fiscal 2026 to 63%, driven by cost absorption from lower volumes, elevated excess and obsolescence, and tariff impacts.
- Consumer Beauty adjusted EBITDA declined 67% in Q4, pressured by supply chain cost under absorption, higher excess and obsolescence, and tariff-related costs.
- The Middle East conflict negatively impacted Q4 sales by over 1%, and potential volatility in cost of goods due to oil prices could add $20-30 million in fiscal 2027.
- Fiscal 2027 is expected to be a transition year with Q1 like-for-like sales declining by a low to mid-single-digit percentage, and adjusted EBITDA declining by low 10s percentage.
- The company will not issue full-year fiscal 2027 guidance due to early implementation of Coty Curated and ongoing strategic review, creating uncertainty for investors.
- Gucci Beauty contributes a low double-digit percentage of total revenues, and its exit by fiscal 2028 will have a sizable mechanical impact on profit without interventions.
- Prestige Fragrance sell-out declined 1% in the second-half, with major launches not yet generating the desired halo across the core portfolio, and smaller flankers lacking differentiation.
- Consumer Beauty sell-out declined 2% in the second-half, still below market growth, with color cosmetics pressured and lifestyle fragrances challenged, though trends are improving.
Hello, everyone. This is Olga Levinson, Coty's Senior Vice President of Investor Relations. Thank you for joining us today for the prepared remarks portion of Coty's fourth quarter fiscal 2026 earnings. On Thursday, August 20, 2026, at approximately 8:00 AM Eastern Time or 2:00 PM Central European Time, we will hold a separate live Q&A session on our results, which you can access via our Investor Relations website.
Joining me for our presentation are Markus Strobel, Coty's Executive Chairman of the Board and Interim Chief Executive Officer; and Laurent Mercier. Coty's Chief Financial Officer. Before I hand the call over to Markus, I would like to remind you that many of the comments today may contain forward-looking statements.
Please refer to Coty's earnings release and the reports filed with the SEC where the company lists factors that could cause actual results to differ materially from these forward-looking statements. In addition, except where noted. The discussion of Coty's financial results and Coty's
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