NEW YORK — Coty posted a decline in net revenues during the first quarter, driven by a slowdown in the mass nail and fragrance markets, and consequently reduced low orders and trade destocking particularly in the U.S. mass channel.
“In the first quarter we faced a significant market slowdown in the fragrance and nail categories, particularly in the United States. This triggered heavy trade destocking and a slower order pace that meaningfully affected our U.S. mass market and overall business,” stated Michele Scannavini, CEO of Coty. “On the other hand, we are very pleased with our growth in the prestige channel and in the emerging markets, areas we had targeted for accelerated development.”
Net revenues during the quarter ended Sept. 30 totaled $1.2 billion, down 2.6% like-for-like and 2.9% as reported from the prior year. The company noted that the like-for-like decline was driven by the Americas, which experienced a 10% drop largely due to consumption slowdown in the mass nail and fragrance markets.
Net income increased to $93.5 million from $86.7 million in the year-ago period.
The decline in revenues was concentrated in color cosmetics, particularly Sally Hansen, which was impacted by the sudden and sharp trend inversion in the U.S. nail market, as well as increased competitiveness in the category.
Meanwhile, Rimmel continued to grow during the quarter. Over the last 12 months, Rimmel has been the fastest growing color cosmetics brand within the top 10 in the U.S. mass market, the company stated.
Fragrances grew 1% like-for-like, led by power brands Calvin Klein, Chloe and Davidoff. Segment growth also was driven by the strengthening of the Roberto Cavalli brand through new launches Just Cavalli for Him and Just Cavalli for Her, and the new launch of Katy Perry’s Killer Queen. Overall growth, however, was mitigated by the decline in certain celebrity fragrances and by expired licenses, including Kenneth Cole.
In the skin and body care segment, net revenues slipped 2% on a like-for-like basis, due in part to declines in the TJoy brand, mostly because of distribution network reorganization.
Looking ahead, the company stated that it expects to see the challenges coming from the market slowdown and trade destocking in the United States, and from the highly promotional environment in Europe, to continue in the next quarter. In the second half, Coty is looking to return to top-line growth in line with or better than the markets where the company competes, fueled by further acceleration of its growth in emerging markets, innovation and investment plans supporting its power brands.