Coty Inc. has announced its results for the third quarter of fiscal year 2022, ended March 31, 2022.
 
In Q3, Coty's sales increased 15% as reported and 19% on an LFL basis to $1,186.2 million, ahead of its prior guidance of mid-teens LFL growth. Sales were driven by strong results in both Prestige and Consumer Beauty, with overall revenue growth inline with sell-out performance.
 
Geographically, revenue growth was fueled by the continued recovery in many EMEA markets, a strong rebound in Travel Retail, and continued momentum in the U.S. E-commerce maintained its momentum, with double digits e-commerce sales growth in Q3 and YTD, supporting high teens e-commerce penetration, even as stores re-opened.
 
"Our Q3 earnings mark the seventh consecutive quarter of Coty reporting results inline to ahead of expectations,” commented Sue Y. Nabi, Coty’s CEO. “I am extremely proud of the organization for delivering these results, and outperforming the overall beauty market, in an increasingly volatile environment. This confirms that Coty has the brands and the people to win in the beauty market, guided by our strategic priorities of delivering above-market sales growth and expanding gross margin, allowing for brand reinvestment, profit expansion and continued deleveraging.

Prestige

In 3Q22, Prestige net revenues of $726.4 million or 61% of Coty sales, increased by 21% versus the prior year. On a LFL basis, Prestige net revenues delivered robust growth of 25%, driven by strength across all regions including continued recovery in most EMEA markets, Travel Retail, and the U.S.
 
Prestige fragrance sales continued to accelerate, increasing over 20% in Q3, with particularly strong growth from Gucci Beauty, Chloe, Burberry, and Hugo Boss. This was driven by the continued in-market success of Coty's Q1 fragrance innovations, Gucci Flora Gorgeous Gardenia and Burberry Hero, combined with the success of Q3 launches of Hugo Boss The Scent Le Parfum and Burberry Her EDT. The two strong female fragrance launches this fiscal year demonstrate clear progress on Coty's strategy to further elevate its position in the large female fragrance market. Prestige cosmetics nearly doubled YoY in both Q3 and fiscal year-to-date, led by the continued momentum of Gucci Beauty, as well as solid performances by both Burberry and Kylie Cosmetics.

Consumer Beauty

Consumer Beauty net revenues of $459.8 million, or 39% of Coty sales, increased by 8% versus the prior year. On a LFL basis, Consumer Beauty net revenues rose 10%, with strong performance across color cosmetics, mass fragrances, and body care. Encouragingly, all regions generated LFL growth in the quarter.
 
 
While the global mass beauty market was moderately positive in the quarter, Coty continued to outperform the market and grow share on a global basis for the past 5 consecutive months. Rimmel delivered market share gains across its key geographies, driven by the success of the Kind & Free cosmetics range. Max Factor, Sally Hansen and CoverGirl also recorded share gains, although temporary supply constraints on CoverGirl’s Clean mascara have weighed on the brands more recent share performance. In addition, the recent re-positioning of Bourjois in its home market, France, has seen strong initial success, with the brand's growth outpacing the category by ~4x in March, and becoming the #1 mascara in the very competitive French market.

Outlook

Taking into account the expected impact in Q4 from Coty's decision to exit operations in Russia including local Travel Retail, which accounts for approximately 3% of total revenues, as well as the near-term COVID lockdowns in China, the company continues to expect FY22 LFL sales will be at the upper end of its guidance range of low-to-mid teens percentage growth. Based on current FX rates, Coty expects a headwind of ~4%-5% to its reported sales in Q4.