Coty raises annual core sales outlook as fragrances, cosmetics drive demand

FILE PHOTO: Covergirl makeup, owned by Coty Inc, is seen for sale in Manhattan, New York City

By Ananya Mariam Rajesh

(Reuters) - Coty on Tuesday raised its annual core sales forecast on the back of higher pricing and strong demand from customers who snapped up the CoverGirl parent's new makeup and fragrance launches.

The beauty market's post-pandemic growth has thrived as customers prioritize spending on "affordable luxuries" at a time when sticky inflation has impacted consumption patterns and pushed many customers to put off big-ticket purchases in the United States and Europe.

Coty's efforts to launch key products such as Burberry Goddess in its high-end "prestige" category and CoverGirl's Yummy Gloss in the consumer beauty category drove a double-digit increase in these segments.

"We are not seeing any depressed category ... prestige fragrance in U.S. keeps growing very fast," CFO Laurent Mercier told Reuters, adding that Gen Z was active and driving growth in the consumer beauty segment.

The company now expects fiscal 2024 core like-for-like sales growth between 9% and 11%, compared with its previous outlook of an 8% to 10% rise.

Coty's first-quarter net revenue rose 18% to $1.64 billion, beating estimates of $1.58 billion, according to LSEG data.

"Even the consumer at the low end is hanging in there. These are affordable luxuries and the fact that they have pricing power and unit growth ... is very constructive outlook moving forward," said Thomas Hayes, chairman of hedge fund Great Hill Capital.

Coty's shares, which rose as much as 3% after the results, were last down marginally in extended trading.

The company swung to a first-quarter reported net loss, hurt by the impact of an equity swap, a change in the Swiss statutory tax rate and higher costs.

On an adjusted basis, Coty earned 12 cents per share, compared with analysts' estimates of 17 cents.

The company also reaffirmed its full-year adjusted per-share profit forecast between 44 cents and 47 cents.

(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Shounak Dasgupta)