Coty Inc ( NYSE: COTY ) shares carried higher on Thursday after quarterly results reflected resilient demand despite inflationary pressures.
For its fiscal fourth quarter, the company matched Wall Street expectations on EPS while sales of $1.17B narrowly exceeded expectations. Adjusted gross margin of 62.1% for the quarter increased from 60.9% in the prior year period, bolstered largely by price increases. Despite the price hikes, demand for the company’s fragrances, cosmetics, and luxury brand offerings accelerated.
“While the external environment became increasingly complex through the year, Coty proved resilient through operational excellence that enabled us to surpass our guidance and deliver double-digit sales and EBITDA growth,” CEO Sue Y. Nabi said. “We have generated sales growth in both Q4 and FY22 that is well above the underlying beauty market and among the best in our competitive set. While macro concerns continue to dominate headlines, it's important to remember that beauty is amongst the most resilient discretionary categories.”
For Coty, Nabi said that the consumer beauty segment in particular continues to gain market share as its CoverGirl, Rimmel, and Max Factor brands grow in popularity. Fragrance sales were also cited as “nicely above pre-pandemic levels.”
Nabi also said that the company grew substantially in China despite the impact of lockdowns, bucking the industry trend. Estee Lauder ( EL ), for example, cited slowing sales in China as a major headwind impacting recent results.
The company is targeting adjusted EBITDA of $955-965M for fiscal year 2023, above estimates of $951.8M, and adjusted EPS growth in the mid-teens.
“Our virtuous cycle will only further strengthen the Company, allowing for continued above-market sales growth and gross margin expansion, resulting in fuel for brand reinvestment, profit improvement, and further deleveraging,” Nabi concluded. “We remain committed to growing Coty's position as a true beauty powerhouse."
Shares of the Franco-American beauty company rose 3.11% in premarket hours.
Elsewhere, the company noted that a Q4 financial leverage ratio of 4.7x reflected a significant improvement from the prior year, helping the company garner credit rating upgrades from both S&P and Moody’s. The company is targeting leverage towards 4x by the close of the calendar year with progress toward 2x by the end of 2025.
Read more on the details of the quarter .
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Coty shares gain on strong sales, lightened debt load