Coty posts bigger-than-expected loss as lockdown dents beauty business

Cosmetics maker Coty Inc on Thursday posted a bigger-than-expected quarterly loss and a 56% slump in sales, as the coronavirus-induced closure of stores and parlors hammered demand for its beauty products.

Shares of Coty, a majority of which is owned by German conglomerate JAB Holding Co, were down 4% in premarket trade.

Cosmetics makers are battling the closure of other channels of sales, including duty-free shops at airports, and also contending with work-from-home customers focusing on hygiene and personal care products rather than makeup items.

New York-based Coty, saddled with debt, has been trying to reinvigorate its business and expand its reach by roping in former L’Oreal SA executive Sue Nabi as its chief executive officer and also investing in upstart brands, including that of reality TV star Kylie Jenner.

In a bid to become nimble, Coty is now planning to sell or shutter most of its factories and outsource more operations to deal with the fallout from the COVID-19 crisis, the Financial Times reported on Thursday, quoting Coty Chairman Peter Harf.

Coty did not immediately respond to Reuters’ request for a comment.

Sales at its consumer beauty segment that houses brands such as Cover Girl plunged about 55%, while its luxury unit plummeted 71% in the fourth quarter ended June 30.

Net revenue fell to $922.1 million, missing expectations of $1.34 billion. Excluding items, Coty lost 51 cents per share, bigger than estimates of 12 cents, as per IBES data from Refinitiv.

The Sally Hansen owner, however, expects a return to profit in the current quarter, after witnessing an improvement in its overall business in the last two months.

“We think it will be difficult to convince investors that Coty is on a better trajectory,” Barclays analyst Lauren Lieberman said.