Coty revenues miss, hit by lower demand for CoverGirl and Rimmel

Coty Inc reported quarterly revenue that fell short of analysts expectations, hit by supply chain disruptions and lower demand for its mass market cosmetic brands such as CoverGirl and Rimmel, sending its shares down as much as 9 percent.

The company has been grappling with supply chain problems related to the streamlining of distribution centers in Europe and the U.S., since its acquisition of about 40 beauty brands from Procter & Gamble in 2016.

According to the company’s own estimates, the disruptions have reduced revenue by over $150 million so far this year.

Coty said it had largely resolved these issues and expected any disruptions to have a minimal impact in the current quarter.

To battle revenue loss, the company has been cutting costs, simplifying its line of products and streamlining manufacturing.

Overall, net revenue fell 10.4 percent to $1.99 billion, missing the average analysts’ estimate of $2.06 billion, according to IBES data from Refinitiv.

Sales in its luxury segment, which includes brands such as Gucci and Hugo Boss, fell for the first time in at least two years to 3.1 percent, while the consumer beauty segment sales were down 18 percent, hurt by increased competition.

“We continue to view consumer as most challenged, with little underlying improvement,” Stifel analyst Mark Astrachan said.

Even with sales down, the company narrowed its net loss to $12.1 million in the third quarter, from $77 million a year ago, as it kept a tight lid on costs.
Total expenses fell 14.4 percent to $1.07 billion.

Excluding items, Coty earned 13 cents per share, beating analysts’ estimates by a cent.

The company’s shares recouped some of their losses and were down 4 percent at $11.42 in morning trade. They have risen 86 percent so far this year.