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Coty lifts profit forecast as luxury shoppers seek cosmetics, fragrances

2023-05-09 18:55
By Ananya Mariam Rajesh and Deborah Mary Sophia Coty Inc on Tuesday raised its annual profit forecast for
Coty lifts profit forecast as luxury shoppers seek cosmetics, fragrances

By Ananya Mariam Rajesh and Deborah Mary Sophia

Coty Inc on Tuesday raised its annual profit forecast for the second time and beat third-quarter revenue estimates, buoyed by the CoverGirl parent's price hikes and steady demand for its high-end and affordable cosmetics and fragrances.

The results buttress a recent trend of luxury shoppers indulging in lipsticks and fragrances even as they shun high-end purchases amid rising interest rates and product prices.

Coty signaled that retailers were restocking after plumping for leaner inventory in the previous quarters.

"Our retailers are now rebuilding and reordering. At the end of third quarter, level of inventory was very healthy," Chief Financial Officer Laurent Mercier told Reuters.

Coty said a post-pandemic recovery in travel retail extended into the quarter. The segment is an area of focus for luxury companies where customers snap-up products from duty-free stores at airports and major shopping districts like Hainan in China.

The company's prestige division, which houses cosmetics and fragrances from the Hugo Boss, Gucci and Burberry brands, reported an over 30% jump in global travel retail sales across all regions.

In contrast, peer Estee Lauder last week forecast weaker sales and profit, blaming slow recovery in travel retail, especially in Asia.

Coty is also seeing sturdy demand from Gen Z consumers, who are splurging on both luxury brands, as well as relatively more affordable products like Rimmel cosmetics, Mercier said.

The company has been increasing prices of its products to ease the pressure on margins from sky-high commodity and shipping costs.

Coty raised its 2023 adjusted per-share profit expectations to between 38 cents and 39 cents, from 35 cents to 36 cents earlier.

Third-quarter revenue rose 9% to $1.29 billion, topping estimates of $1.22 billion.

The company posted adjusted profit of 19 cents per share. Analysts on average had estimated a profit of 3 cents per share, according to Refinitiv data.

(Reporting by Ananya Mariam Rajesh and Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila)