Coty ‘Advantaged’ In FY 2023 With Consumer Biz Momentum, Unflagging Luxury Fragrance Demand

Coty leadership says it has not seen any slowdown in fragrance “premiumization” trends, which bodes well for its booming Prestige business. Strong momentum in Consumer Beauty and a robust innovation pipeline across both divisions have the firm targeting 6%-8% like-for-like growth in fiscal 2023.

Coty, Inc. finished fiscal 2022 ahead of expectations with 15% reported net sales growth to roughly $5.3bn, and the firm is optimistic about the new year despite continuing macroeconomic and inflationary pressures.

“Coty is navigating this environment from a relatively advantaged position,” said CEO Sue Nabi in a 25 August call with analysts to discuss results for the fourth-quarter and full-year ended 30 June.

“We operate in a category, beauty, which is simultaneously a staple in consumers' daily routines, a personal and affordable indulgence, and an emotional category where brand positioning and product quality are paramount. All of this means that beauty demand will continue to outperform the broader economic cycles and limit the risk of consumers' trade-downs,” Nabi said.

Confident in its presence in mass and prestige beauty tiers, its geographic footprint, and “substantial” white-space opportunities in skin care, digital, China and travel retail, Coty is targeting organic growth in the range of 6%-8% in fiscal 2023.

“It’s quite evident that our couture brands have the right to play and win in Prestige cosmetics." – Sue Nabi

While there has been concern about trade-down in some consumer product categories, Nabi said the latest data indicate that “premiumization” in fragrances “shows no sign of slowing, with ultra-premium and premium-plus fragrances outperforming the overall Prestige fragrance market across all key countries in June.” (Also see "Coty’s China Momentum Reflects Consumer ‘Obsession’ With Prestige; Q3 Sales Up 15%" - HBW Insight, 9 May, 2022.)

Sales in Coty’s Prestige unit, which accounts for around 60% of its total business, climbed 22% in fiscal 2022 on an organic basis, driving the company’s 16% organic growth overall. Fourth-quarter trends were largely consistent with the full year.

Nabi cited Boss Bottled Marine by Hugo Boss, Burberry Hero, and Gucci Flora Gorgeous Gardenia, which relaunched in July 2021 with a campaign fronted by Miley Cyrus, among outstanding performers for Prestige fragrance.

Meanwhile, Coty has made significant strides with its Prestige makeup business, which ballooned more than 70% for the year, accounting for approximately 4% of total net sales versus 3% in 2021.

“It’s quite evident that our couture brands have the right to play and win in Prestige cosmetics, as Prestige makeup now accounts for roughly half of Burberry’s sales in China in key channels, and within Asia travel retail Prestige makeup is now over 40% of our overall business,” Nabi said.

She pointed specifically to the success of Burberry Matte Glow Cushion Foundation in China and Kylie Cosmetics in travel retail channels.

Consumer Beauty Transformation Affirmed

Coty’s revitalized Consumer Business also continues to deliver. Nabi remarked, “This marks the eighth consecutive month of market share gains for our Consumer Beauty business, both in color cosmetics and overall mass beauty. This is a truly phenomenal outcome, exemplifying the speed, the agility and capability of the Coty organization to truly transform a business which had been in consistent decline for many years prior.”

Rimmel’s restaging, and its launch of Kind & Free “clean and vegan” makeup earlier this year – which followed a similar shift in positioning from CoverGirl to embrace the clean beauty movement – have been big parts of the Consumer division’s success. (Also see "Coty Extends Winning CoverGirl ‘Clean’ Strategy To Rimmel Makeup, Debuting Now" - HBW Insight, 9 Feb, 2022.)

Overall, Consumer Beauty sales advanced 8% organically for the year.

Nabi used the occasion to highlight green shoots in skin care, a relatively new game for Coty in a global market where skin care has been driving the results of competitors. In 2022, Coty’s focus was on repositioning Lancaster in China, which led to double-digit growth for the brand for the year.

Stateside the firm is working on a reboot of its philosophy brand and exploring opportunities for ultra-premium Orveda, which Nabi said is now fully integrated into Coty’s business after a deal announced in November. (Also see "Coty’s FY 2023 Will Be ‘Year Of Skin Care’; Reinstated ‘Powerhouse’ Says Growth Engines Are Fired" - HBW Insight, 22 Nov, 2021.)

The company also has high hopes for SKKN by Kim (Kardashian), which launched in June.

“We are now two months into the launch, and I'm very pleased with the initial results,” Nabi said. “The brand has quickly garnered 5.5 million followers on Instagram, ahead of most other personality-driven beauty and skincare brands, with the launch activations garnering over 7 billion total impressions. In only two months, we've already reached over 20% of our sales target for fiscal 2023.”

The CEO noted that the full nine-piece SKKN collection, priced at $575, sold out on the first day of launch and remains “by far” the biggest seller at skknbykim.com where the line is exclusively available.

Such highlights, along with Coty’s growing presence in China and e-commerce, position the company favorable for the year ahead.

“While we see no signs of demand slowing on a global level or of consumers losing the appetite for premium beauty in this volatile macro environment, we are remaining vigilant in monitoring external signals and having in place the necessary resilience plans to react should the demand backdrop weaken,” Nabi said.

The firm has additional pricing actions planned for the new year and a “robust” launch calendar for the first half, including new entries from Hugo Boss, Gucci, Burberry, CoverGirl, and Rimmel.