Coty Considers Sale or Spinoff of CoverGirl
In reorganization, beauty giant leans into higher-end beauty brands and mass-market fragrances
- Coty is reviewing its mass-market beauty brands, including CoverGirl, considering options like selling or spinning them off.
- Coty’s share price dropped about 40% this year, with mass-market beauty sales declining 12% in the latest quarter.
- Coty plans to merge its high-end beauty brands and mass-market fragrances into one unit; the brands in the new division account for 69% of sales.
Cosmetics giant Coty is conducting a strategic review of CoverGirl and its other mass-market beauty brands, and will consider options including selling or spinning them off.
Coty’s share price has dropped about 40% since the beginning of the year. In the latest quarter, Coty reported a sales drop fueled by a 12% decline in the company’s mass-market beauty business unit, which includes drugstore brands such as Sally Hansen, Max Factor and Rimmel. Coty has cited headwinds including locked shelves in stores, immigration policy changes, and the ever-tightening squeeze on low-income consumers.
Sales growth has been slowing across the U.S. mass-market cosmetics industry and legacy brands like CoverGirl have been facing stiff competition from newer entrants like e.l.f. Beauty.
Coty plans to lean into its higher-end beauty brands as well as its mass-market fragrances, and merge them into a single business unit, according to a company announcement reviewed by The Wall Street Journal. Two executives from Coty’s mass-market beauty unit will leave the company.
Coty has hired Citi to advise on the strategic review, according to the announcement.
Fragrance sales in recent years have outperformed sales in other beauty product categories. Coty in August said it was making a big push into fragrance mists, which are lighter than traditional perfumes and gaining popularity as consumers layer scents and look for lower-priced treats.
Coty’s newly combined prestige and consumer beauty fragrance division—which will include fragrance brands like Gucci, Calvin Klein, Hugo Boss, Vera Wang and David Beckham—accounts for 69% of Coty’s sales.
Coty in 2020 sold a majority stake in its professional-beauty and hair-care businesses—including the Wella, Clairol and OPI brands—to private-equity firm KKR. Coty used much of the $2.5 billion cash proceeds to pay down debt.