Coty (COTY) Shares Glow On Ambitious Skincare Projections And Raised FY23 Sales Guidance
2:18 pm Wednesday, September 21st, 2022
Coty (COTY), which owns numerous beauty product brands, including CoverGirl and Tiffany & Co., is seeing plenty of green today following its raised FY23 (Jun) like-for-like (LFL) sales forecast to +8-9% from +6-8%, as well as its strategy to double skincare sales by FY25. Even though COTY’s skincare products comprised just 5% of total revenue in FY22, the category has seen sales stall over the past couple of years. As such, doubling skincare sales to $500-600 mln in under three years will be no small feat. The company also expects further acceleration in the category in FY26 and beyond.
To achieve its skincare goal, COTY will lean on its competitive technological advantages and its Prestige brands, primarily sold through retailers, such as Walmart (WMT), which accounted for around 6% of COTY’s total revs. The company will also focus on North America and the Asia Pacific, which comprise over 80% of the Prestige skincare market. COTY’s Consumer brands will also play a role, albeit much minor.
COTY is also amid powerful tailwinds, which have grown stronger since the pandemic.
Further evidence of sturdy demand stems from solid quarterly beauty sales by many retailers. For instance, within relatively dim JulQ results from Target (TGT), its beauty sales glowed, reflecting notable strength in Ulta (ULTA) at Target, along with skincare and bath categories. Speaking of which, ULTA’s JulQ numbers shined brightly, seeing double-digit comps across all categories.
Meanwhile, with China, a meaningful region for COTY, easing lockdowns recently, the company should continue seeing demand recover in the area over the next few quarters. In late August, COTY noted that thus far into Q1 (Sep), it already saw double-digit growth in China.
Overall, COTY’s skincare sales target is ambitious, but with demand for beauty products only growing stronger, we think it is achievable. COTY is also confident that this robust demand is unlikely to fade over the near term, evidenced by its raised FY23 LFL revenue forecast and reaffirmed FY23 earnings outlook.
