Coty is the latest beauty conglomerate to report a slump in demand, despite a “seemingly strong” holiday period. The group’s net revenue declined 3 per cent on a reported basis (and by 1 per cent on a like-for-like basis) to $1.7 billion in the second quarter, ending 31 December 2024, as the challenges it has been facing in markets like China intensified.
“The pressure in pockets of our business, which we discussed at length on the last earnings call — namely China, travel retail Asia, Australia and consumer beauty US — impacted us even more significantly in Q2,” said Coty CEO Sue Nabi in a statement. “And in our core markets, despite a seemingly strong holiday period, where beauty performed strongly and consumers engaged with the category, this did not translate into improved replenishment orders for Coty as retailers managed their inventory very tightly. As a result of these factors, our Q2 like-for-like sales trends were below our expectations.”
Coty’s competitors have also been hit by the headwinds in China, as well as the travel retail downturn across Asia. Estée Lauder Companies said sales were down 6 per cent to $4 billion in Q2, while L’Oréal Group’s 2.5 per cent rise to €11.08 billion missed expectations. Puig was the outlier, recording a 14.3 per cent rise in its fourth quarter to €1.36 billion (even so, CEO Marc Puig noted that the Chinese market remains subdued).
Coty said net revenue from Asia-Pacific declined 11 per cent on both a reported and like-for-like basis in Q2. “China is no longer a key short-term growth for beauty,” said Nabi. Unlike its competitors, Coty blamed a slump in demand for makeup in China, rather than skincare.
The US — which accounts for 40 per cent of Coty’s sales — slumped 7 per cent to $638.6 million in Q2. Nabi said President Donald Trump’s tariffs were top of mind; she said the situation “remains quite fluid, further adding to broader uncertainty”. The CEO remains bullish, explaining that Coty’s sourcing from China, Canada and Mexico into the US is minimal. “Our teams have been planning for several different scenarios to minimise the potential impact,” said Nabi. “In the meantime, we are already making adjustments to our product flows and sourcing, including having some extra inventory on hand in the US and shifting more of our mass fragrance production to our North Carolina plant.”
Net revenue from Europe, the Middle East and Africa (EMEA) increased 2 per cent on a reported and like-for-like basis to $839.8 million. Nabi said the group will be doubling down on efforts in South Africa, Mexico, Saudi Arabia and South East Asia to fuel growth.
Sales across Coty’s prestige category (a portfolio of brands including Burberry Perfume, Hugo Boss and Marc Jacobs Beauty) slipped 1 per cent to $1.1 billion (making up 67 per cent of Coty’s sales) on a reported and like-for-like basis in the second quarter, driven by the downturn in Asia-Pacific and headwinds from selling the Lacoste fragrance licence.
Consumer beauty (made up of brands like Covergirl, Max Factor and Rimmel) was down 4 per cent on a like-for-like to $553.8 million, due to a slump in demand for colour cosmetics, which was only partially offset by growth in the mass fragrance and skincare categories, the company said. The plan is to invest more into innovation across colour cosmetics to spur excitement among consumers, while deterring cheaper dupes, said Nabi.
Fragrance was a bright spot. “Fragrances of all price points continue to outperform most other beauty categories, which strongly benefits Coty’s business as fragrance accounts for over 60 per cent of our revenues and an even bigger portion of our profits,” the CEO added. During the call, she referenced double-digit year-on-year growth of 20 to 30 per cent from Burberry, driven by the Burberry Goddess scent, as well as a strong performance from Hugo Boss fragrances and Marc Jacobs’s Daisy. Coty’s mass fragrance brands (like Adidas) grew by mid-single digits in the second quarter, supported by the launch of the Adidas Vibes fragrance collection in September last year.
Looking ahead, Nabi teased big innovation launches and upcoming brand licences from Swarovski, Marni, Etro and Marc Jacobs. “While we are prudently assuming these patterns will continue into the second half as well, the strong sell-out growth of our fragrances brands gives us confidence that these headwinds are temporary and we should return to stronger sales growth as we enter fiscal 2026,” Nabi concluded.
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