Coty Joins Competitors in Warning of Beauty Sales Slowdown
Cosmetics company says retailers are tightening their inventories as mass beauty sales continue to see slow growth trends, particularly in the U.S.
Coty warned investors of an expected sales slowdown in the second quarter, joining its competitors in sounding the alarm on a global slowdown in the growth of the beauty market.
The cosmetics company, whose brands include Max Factor, Covergirl and Lancaster, said on Monday retailers are tightening their inventories due to weaker beauty product sales and demand trends, especially in the U.S.
The stock was down 6.8% to $8.55 in post-market trading. Through Monday’s close shares have fallen 26% this year.
Overall, Coty expects store sales to rise 4% to 5% in the fiscal first quarter ending Sept. 30, and sales in the second quarter to grow moderately. During the height of the pandemic demand exploded for beauty products across regions, especially for fragrances and skincare products, even as inflation weighed on consumers. Coty, with a large portfolio of fragrances, was one of the main winners in the industry, and saw annual sales jump to $6.12 billion in fiscal 2024 from $4.72 billion in fiscal 2020.
The company is now facing tougher competition from smaller brands, as well as a challenging consumer backdrop. In August, the company said it swung to a loss in its fiscal fourth quarter, and reported revenue growth of 1%.
Coty said sales to retailers are well below final sales to consumers in key markets such as the U.S., Australia, Travel Retail Asia and China, even if its exposure to the Asian giant is limited.
In the second half of the year, Coty forecasts some growth acceleration supported by easier prior-year comparisons, launch initiatives and distribution expansions.
Big competitors including L’Oréal and Estée Lauder have in recent months also signaled weakening trends in the beauty industry, especially in China and the U.S. On the cosmetics retail side, Chicago-based company Ulta Beauty is expected to update the market on the health of the industry on Wednesday, coinciding with its first analyst day in three years.
“The operating environment remains dynamic, and the low end of our range implies incremental pressure on consumer spending,” Ulta’s finance chief Paula Oyibo said during the company’s latest earnings call with analysts. “We have taken a more cautious view for the year.”