COTY - Coty drops after Kim Kardashian news; Jefferies sees upside

2023-07-12 12:52:08 ET

Coty ( NYSE: COTY ) dropped 2.5% on Wednesday after reports Kim Kardashian wants to repurchase its stake in her beauty brand SKKN.

Jefferies, however, sees the move as a possible positive for Coty ( COTY ). The beauty company bought 20% of KKW Beauty, now SKKN, in 2021 for $200M, valuing the brand at $1B.

“Though the value of the brand is likely lower today, debt paydown is a priority for Coty and the repurchase could help accelerate deleveraging efforts,” Jefferies analysts led by Ashley Helgans wrote in a July 11 note.

That said, Jefferies estimated that brand sales today are a fraction of what they were in 2021 and the price for the 20% stake would be less than the $200M paid to Kim then. Google trend data also shows declining interest in KKW and SKKN.

“The challenge for celebrity brands is to convert trial and initial enthusiasm into longer duration loyalty, regimen consistency and replenishment purchases,” Jefferies said.

The firm notes that trade sources have said Kardashian wants to relaunch makeup and fragrance under the SKKN umbrella this year. Additionally, she reportedly filed four new trademarks for her daughter North West in March, including one for a new beauty brand.

More on Coty:

• Coty: Upping Price Target
• Coty rises as Kim Kardashian said to want SKKN stake back
• Coty shares move higher after revenue forecast bump; risks remain

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