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How Coty is slowly recovering from the consequences of the pandemic

How Coty is slowly recovering from the consequences of the pandemic

The American cosmetics group has suffered heavily from the health crisis this year, particularly its prestige division. But despite these obstacles, Coty has maintained its actions in strong progression because the company has been able to review its investment priorities to better face the crisis.

 

The Coty Group’s sales have fallen sharply this year : a 25% drop to 4.7 billion dollars has been recorded for the year 2020. These figures are representative of the consequences of the health crisis.

 

At the end of March 2020, the company had estimated a 20% drop in its quarterly revenues due to the coronavirus. In September, the fourth quarter saw a 62.8% drop in sales to $560.4 million. Coty’s prestige division, along with its Burberry and Gucci beauty brands, suffered the most from the containment and store closure measures, with sales declining 70% to $219.4 million, compared to 55% for the consumer division with sales of $340.7 million.

 

As a result, Coty closed its year in a complicated manner in June 2020 but entered its first quarter of FY 2021 in a more glorious manner. Although revenues increased incrementally due to store re-openings and better industry trends, they declined year-over-year due to the pandemic. Net revenues for Coty’s mass merchandising division decreased by 20.6% to $479.8 million in the first quarter.

 

However, at the beginning of fiscal year 2021, Coty’s strategies adopted to deal with the crisis appear to be bearing fruit, including new alliances, lucrative buyouts, innovations, cost-cutting actions and the strength of e-commerce.

 

As a result, Coty’s shares have jumped a massive 148.3% in the last three months, far exceeding the industry average growth of 21%.

 

One of the most important and growing factors is e-commerce, which has enabled Coty’s market share to grow impressively. In the first quarter of FY 2021, e-commerce doubled to 13% of total sales. This phenomenon particularly affected the Americas and EMEA regions, and more specifically the prestige and mass categories. For example, Amazon was a significant player in electronic distribution for the mass division.

 

In addition, on October 7, Coty unveiled the launch of Kylie Skin‘s flagship direct-to-consumer websites in the United Kingdom, Australia, Germany and France.

 

Innovation and performance in its prestige and mass divisions are among the priority objectives of the cosmetics giant, and these objectives were clearly achieved: once again, the development of e-commerce was a key factor, and the skincare category was significantly improved and reinvented, notably with the recent launches of Marc Jacobs Perfect, Gucci’s Bloom Profumo di Fiori, Sally Hansen’s good.kind.pure and Clean Fresh.

 

The company also took steps to reinvigorate its brand portfolio and invested in January 2020 in Kylie Jenner’s popular Kylie Cosmetics brand. The alliance was also intended to strengthen Kylie’s beauty business, which includes Kylie Skin and Kylie Cosmetics. Sales of Kylie Skin Care tripled year-on-year in the first quarter of fiscal year 2021.

 

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On June 29, Coty also established a partnership with Kim Kardashian West, which is expected to be concluded in the third quarter of fiscal year 2021. The company will acquire a 20% interest in the iconic woman’s beauty business. The purpose of this partnership is to introduce new categories of beauty products.

 

Finally, Coty had implemented a strategy to reduce overall costs, in terms of marketing costs, but also personnel and non-personnel related costs.

 

As a result, the company achieved fixed cost savings of nearly $80 million in the first quarter and is on track to achieve savings of more than $200 million in fiscal 2021. Adjusted operating income from continuing operations was $81.1 million, an increase of 24% over the previous year. In addition, the adjusted operating margin from continuing operations increased by 260 basis points to 7.2%.

 

We therefore hope that the cosmetics giant will maintain this increase in terms of market valuation and sales for the current year.

 

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Featured Photo : © Coty

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