Coty Inc. — First Quarter Fiscal 2027 Earnings Summary

Financial Performance

• Net revenues were $1,555.2 million, a 1% decrease on a reported basis and a 2% decrease on a like-for-like (LFL) basis compared to the prior year.
• Prestige net revenue was $1,058.4 million (68% of total sales), declining 1% on both reported and LFL bases.
• Consumer Beauty net revenue was $496.8 million (32% of total sales), decreasing 2% on a reported basis and 3% on an LFL basis.
• Reported operating income was $170.4 million, an 8% decrease year-over-year; reported operating margin was 11.0% versus 11.7% in the prior year.
• Adjusted operating income was $220.5 million, an 8% decrease year-over-year; adjusted operating margin was 14.2%, down 100 basis points.
• Reported net income attributable to common shareholders was $106.2 million, a 64% increase year-over-year; reported net income margin was 6.8% versus 4.1%.
• Adjusted net income attributable to common shareholders was $146.1 million, a 38% increase year-over-year; adjusted net income margin was 9.4% versus 6.7%.
• Adjusted EBITDA was $274.2 million, a 7% decrease year-over-year; adjusted EBITDA margin was 17.6%, down 120 basis points.
• Reported earnings per share (diluted) was $0.12, a 71% increase year-over-year; adjusted EPS (diluted) was $0.16, a 33% increase year-over-year.
• Cash flow from operations was $130.4 million, up from $65.2 million in the prior year.
• Free cash flow was $84.6 million, up from $11.2 million in the prior year.
• Total debt was $2,787.0 million as of September 30, 2026, down from $3,088.2 million as of June 30, 2026.
• Financial net debt was $2,576.4 million as of September 30, 2026, down from $2,912.1 million as of June 30, 2026.
• Financial leverage ratio (net debt to adjusted EBITDA) was 3.1x.
• Gross margin (reported and adjusted) was 63.3%, down 120 basis points year-over-year due to higher freight, material costs from the Middle East conflict, and elevated excess and obsolescence.

Guidance and Future Outlook

• Coty expects Q2 FY27 LFL revenue to decline by a low-single-digit percentage, consistent with the previous two quarters.
• Coty anticipates continued LFL sales growth in its Top 6 core Prestige brands in Q2.
• On a reported basis, Coty expects a low-single-digit percentage headwind to Q2 revenues from foreign exchange.
• Coty anticipates Q2 adjusted EBITDA to decline by a high-single-digit percentage, consistent with Q1 trends.
• Coty expects adjusted EPS, excluding the equity swap, to be between $0.16 and $0.18 per share for Q2.
• Coty expects free cash flow for the first half of FY27 to be over $300 million.
• FY27 is characterized as a transition year while the strategic review is completed and the Coty.Curated framework is implemented.
• Broader outlook for the full year will be provided following the expected completion of the strategic review by the end of calendar 2026.

Business Segments and Product Lines

• Top 6 Core Prestige Brands (Hugo Boss, Burberry, Calvin Klein, Marc Jacobs, Chloé, and Kylie Cosmetics) returned to growth with 5% LFL growth in Q1, up from a 6% LFL decline in the first half of fiscal 2026.
• Five of the six Top 6 Core Prestige brands grew, and combined sell-out returned to growth.
• First half launches including BOSS Bottled Beyond for Her, Burberry Goddess Amber Vanilla, Mood Stones by Kylie Jenner, and Marc Jacobs Beauty makeup are tracking ahead of plan.
• In Consumer Beauty, LFL decline narrowed to 3% from 8% in the first half of fiscal 2026.
• Sally Hansen regained the number-one position among U.S. mass nail brands in the overall nail category.
• CoverGirl and Rimmel are narrowing their retail sales gap to their respective categories in the U.S. and U.K.
• Prestige segment reported operating income was $211.0 million (up 1% YoY), driven by lower advertising and promotional costs offsetting lower gross margin.
• Consumer Beauty segment reported operating loss was $(24.1) million (worsening from $(7.7) million), driven by lower gross margin and higher SG&A.
• Americas net revenue increased 1% reported and 0% LFL, driven by higher sales in Brazil.
• EMEA net revenue decreased 6% reported and 5% LFL, driven by lower sales in the Middle East and Europe.
• Asia Pacific net revenue increased 11% reported and 8% LFL, driven by higher sales in China, Southeast Asia, and Asia Travel Retail.
• Pipeline plans include amplifying Burberry's fragrance and makeup momentum, building Marc Jacobs Beauty into a multi-category brand, and fueling growth in Kylie Cosmetics.
• Consumer Beauty plans focus on fewer, higher-impact launches and scaling adidas fragrances globally.

Market and Competitive Landscape

• Prestige and mass beauty markets continue to grow despite macroeconomic uncertainty.
• Coty's overall sell-out still trails the market in both the prestige and mass divisions.
• Coty's priority is to translate investment into stronger sell-out and market share gains.
• The extension of the Marc Jacobs license reinforces Coty's position as a partner of choice for leading luxury fashion brands.

Risks and Challenges

• Gross margin pressure from higher freight and material costs related to the Middle East conflict.
• Higher excess and obsolescence reflecting elevated demand forecasts.
• Macroeconomic uncertainty affecting consumer demand.
• The need to translate "green shoots" into a broad-based recovery.
• Execution risks associated with the strategic review and implementation of the Coty.Curated framework.
• Forward-looking statements are subject to risks including geopolitical conflicts (Ukraine, Middle East), inflationary pressures, currency exchange volatility, supply chain disruptions, and regulatory changes.

Management Commentary and Tone

• Markus Strobel, Executive Chairman and Interim CEO, stated results were ahead of expectations on sales, adjusted EBITDA, and EPS, with significant improvement in free cash flow.
• Strobel noted the like-for-like sales decline narrowed to 2%, a clear improvement from the 6% and 4% declines in the first and second halves of fiscal 2026.
• Strobel emphasized that while progress is encouraging, more work is needed to translate green shoots into a broad-based recovery.
• Soraya Benchikh, CFO, highlighted clear priorities to deliver quality growth, improve productivity, and strengthen cash generation.
• Benchikh noted that sustainable improvement will take time but the first quarter showed encouraging early progress.
• Management expressed commitment to completing the strategic review by the end of calendar 2026 and designing an organization to improve execution.
• The tone reflects cautious optimism, acknowledging the transition year nature of FY27 while emphasizing disciplined execution and value creation.

Other Key Points

• Coty extended the Marc Jacobs license with a 40-year duration, reaffirming the partnership that began in 2003.
• Marc Jacobs fragrances now rank among the Top 10 to 15 prestige female fragrances across the U.S., U.K., Canada, and Australia.
• Free cash flow of $85 million, combined with $250 million in initial Gucci Beauty proceeds, reduced net debt by over $300 million since June.
• Coty released its Fiscal Year 2026 Sustainability Report under its "Beauty That Lasts" strategy, validating its Net Zero 2050 target.
• The company is designing the organization and cost structure to prioritize reinvestment behind brands.
• Coty suspended dividend payments on common stock and continues to pay dividends on preferred stock.
• The company is conducting a strategic review of its consumer beauty business, including mass color cosmetics and its Brazil business.
• Coty expects to provide a broader outlook following the completion of the strategic review in CY26.