Coty posts Q2 results, looks to top-line growth in second half
NEW YORK — Coty faced a challenging second quarter as revenues declined, partially due to U.S. market softness in the mass fragrance and nail categories. Despite the challenges, company executives expressed optimism during Friday morning’s conference call, and looks to return to top-line growth in the second half.
“The key market trends and business dynamic that impacted our first quarter results continued into the second quarter. This was largely anticipated, and the quarterly results came generally in-line with our expectations,” Michele Scannavini, CEO of Coty Inc., told analysts.
Net revenues during the quarter ended Dec. 31 totaled $1.32 billion, down 4% on a like-for-like basis and as reported relative to the prior-year period.
Net income decreased to $82.5 million from $123.2 million in the year-ago period. The company attributed the decrease primarily to lower operating income partially offset by lower tax expense.
Scannavini said that the fragrance market in the United States reported negative growth in the quarter, with a high-single digit decline in the mass channel. In fragrance, revenues declined 2% on a like-for-like basis, reflecting the timing of new launch activity, the impact of expired licenses and high promotional activity during the holiday season, especially in the mass channel.
The mass color cosmetics market also faced a decline, driven by a decline in nail. In the United States, the nail category at mass declined 6% in the quarter following a 4% decline in the first quarter.
“As a reaction to this consumption slowdown, retailers have rapidly adjusted their inventory level. This destocking continued into the second quarter, however, to a lower extent compared with the first quarter. Now, we believe a big part of the inventory reduction should be over,” Scannavini said.
Scannavini added: “As we have previously discussed, much of the growth in the nail category in the last couple of years was driven by the special effects subcategory — a new fashionable trend that pushed the whole category consumption up strong double digits month after month. … Now, the wow effect of this trend is progressively fading and the category is declining at a fast rate. … Going forward, we are focusing most of our future innovation on enhancing the performance of our core main products.”
Looking ahead, the company will remain focused on restoring growth in its color cosmetics segment, stemming the decline in nail and fully leveraging the strength of its Rimmel brand. Furthermore, in its Sally Hansen brand the company is implementing a 360-degree program to increase competitiveness and bolster market share gains. This program will include a modernization of the brand image through a new advertising campaign and in-store fixturing, Scannavini said.
In OPI, the company is targeting robust growth in the second half. As part of the effort, it is working on a special collection developed in partnership with Coca-Cola, which will be supported by a digital plan. The brand also is expected to benefit from new distribution with Sally Beauty in the United States.
In mass fragrance, Coty is currently launching a new perfume from Beyoncé, called Beyoncé Rise. It also recently partnered with singer and songwriter Enrique Iglesias to develop his own line of signature fragrances. The partnership with Iglesias is expected to expand its fragrance business, particularly in Brazil and to the Latin population, which is gaining an increasing share of total fragrance consumption in the United States, Scannavini told analysts.
In skin and body care, the company is targeting growth in the second half as it expects Adidas to progressively gain momentum with the launch of a World Cup-inspired line, as well progressive expansion in emerging markets, he noted.
“Market conditions will remain challenging in several markets around the globe, particularly in the mass channel. Despite this uncertainty, we keep targeting to return to top line growth in the second half thanks to a competitive innovation plan, the increasing impact of our new structure in the emerging markets and continued marketing investment to support our power brands,” Scannavini said.
Kao USA announces agency change
CINCINNATI — Beauty brand Kao USA — whose portfolio includes Jergens, Curel and Biore — announced on Friday that it is separating from agency KBS+P.
Kao, who said the decision was mutual, is conducting a closed review for its global creative account for the following brands: John Frieda, Jergens, Biore and Curel. KBS+P, Kao’s agency for the past 10 years, will not participate. The review does not affect other Kao USA agencies for media and digital in Kao’s key markets.
Dave Muenz, regional executive officer for Kao’s Mass business, said, "We are deeply grateful to KBS+P and their partnership for the past 10 years. We have had a good run and look forward to selecting a new agency partner."
Lori Senecal, CEO of KBS+P, added: "We have worked with the Kao Company for 10 years and shared many successes in developing their impressive portfolio of brands. We have reached a natural inflection point and, having examined how our respective organizations have evolved during this time, we jointly decided to pursue other partners and opportunities."
Kao USA has retained Joanne Davis Consulting/SCAN International to assist in the review that is expected to conclude by May.
Alberto V05 introduces new Men’s 3-in-1
STAMFORD, Conn. — The Alberto VO5 brand, which is owned by High Ridge Brands, has introduced its new VO5 Men’s 3-in-1, combining VO5 shampoo, conditioner and body wash.
VO5 Men’s 3-in-1 represents another first, in extending the brand’s proprietary five-essential-vitamin formula beyond hair care to body care. It is available in such masculine scents as Ocean Surge and Fresh Energy. The suggested retail price is 99 cents for 12.5 fl. oz.
"Consumers love the superior performance and value that VO5 hair care products deliver, and we saw an opportunity to extend VO5’s secret five-vitamin formula to the male segment," stated Nina Riley, VP marketing at High Ridge Brands. "VO5’s Men’s 3-in-1 is a phenomenal product that satisfies men’s need for a time-saving, head-to-toe shower experience."