As reported during its most recent earnings call, Coty’s total revenue declined by 1% in 1H25 compared to last year, which the company mainly attributed to currency fluctuations and the sale of its Lacoste fragrance license. However, company executives noted that sales grew by 2% when adjusting for these factors.
The strongest performers were Coty’s prestige, mass fragrances, and mass skin care, while cosmetics and body care sales declined.
For Q2, reported sales dropped by 3%, with Coty noting the most significant challenges came from a weaker mass beauty market, particularly in color cosmetics. The Asia-Pacific (APAC) region, including China, Travel Retail Asia, and Australia, also weighed on the results.
Prestige fragrances continue to lead
Prestige fragrances remain a bright spot for Coty, accounting for 67% of total sales. The company reported revenue from prestige brands increased by 2% in the first half of the year, with growth seen in Europe, the Middle East, and Latin America.
However, sales in China, Australia, and Asia Travel Retail faced challenges. When adjusting for currency fluctuations, prestige revenue increased by 4%.
In Q2, prestige fragrance revenue declined slightly by 1% on a reported basis but increased by 1% when adjusting for currency. Coty confirmed that strong consumer demand helped its prestige fragrance brands achieve high single-digit percentage growth in sell-out.
However, sell-in was slightly lower due to retailer inventory controls.
During the company’s earnings call, CEO Sue Nabi emphasized the resilience of prestige fragrances. “I believe that Prestige Fragrances are holding much better because they are not easily replaceable,” she stated, adding that “when you like a scent, you’re going to buy this scent” as “anything closer is not exactly the scent that you like.”
Prestige segment profits were also strong, Coty reported, with operating income reaching $463.8 million in 1H25, up from $422.2 million last year. The company confirmed adjusted EBITDA increased to $595.8 million, with margins expanding to 26.7%.
Consumer beauty faces headwinds
Consumer Beauty, which represents 33% of Coty’s sales, saw revenue decline by 6% in 1H25. A large part of this drop came from currency fluctuations, while sales of color cosmetics and body care also weakened.
Mass fragrance and skin care helped offset some of the declines, but overall, the mass cosmetics market was relatively flat.
In Q2, Consumer Beauty revenue decreased by 8%, with color cosmetics and body care driving most of the decline, while mass fragrances remained a favorable area for the company.
The Consumer Beauty segment’s profitability was mixed. Operating income for 1H25 declined slightly to $78.1 million, while adjusted EBITDA was $155.0 million, Coty confirmed. However, margins showed improvement in Q2, with operating income reaching $64.1 million and adjusted EBITDA increasing to $102.5 million.
Regional performance
In the Americas, sales declined by 5% in 1H25 on a reported basis, mainly due to currency effects. However, adjusted for these factors, sales grew by 1%, with substantial contributions from Argentina.
In Q2, sales in the region fell by 7% on a reported basis and 1% on an adjusted basis. The company noted that the main challenge was lower demand for color cosmetics in the US and body care in Brazil.
Recent developments and strategic moves
Coty continues to expand its brand portfolio and strengthen its financial position. In December 2024, it announced a long-term beauty license agreement with Swarovski.
As previously reported by CosmeticsDesign, under this deal, Coty will develop, produce, and distribute a new line of fragrances, with the first launch expected in 2026.
The company is also making progress on its financial goals. In November 2024, Coty launched a tender offer to repurchase up to $300 million of its outstanding 5.000% Senior Secured Notes due in 2026.
This move aligns with Coty’s strategy to reduce its debt burden and improve financial flexibility.
Financial outlook
In a company press release, CEO Sue Nabi described fiscal year 2025 as a “pivotal year.” She explained, “The global beauty market continues to grow at a healthy pace, even if growth has moderated off of the elevated levels of the last few years.”
She also highlighted Coty’s success in fragrances: “Fragrances of all price points continue to outperform most other beauty categories, which strongly benefits Coty’s business as fragrances account for over 60% of our revenues and an even bigger portion of our profits.”
Looking ahead to the year’s second half, Coty expects like-for-like sales trends to remain in line with Q2, with a decline of around 1% to 2%. The strong US dollar is expected to create additional challenges, with full-year reported sales likely to decline in the low single-digit percentage range.
Despite near-term pressures, Nabi remains optimistic and noted, “While we are prudently assuming these patterns will continue into the second half as well, the strong sell-out growth of our fragrance brands gives us confidence that these headwinds are temporary and we should return to stronger sales growth as we enter FY26.”
She also pointed to Coty’s innovation strategy. She highlighted, “We are working on creating high-entry-barrier innovation—something difficult to copy, something worth the price that you’re putting on it, and something that will grow back the market by reattracting consumers.”
Coty confirmed that it is focusing on cost savings and operational efficiency to navigate this environment. The company is on track to achieve over $120 million in savings in fiscal 2025 and expects further efficiencies in fiscal 2026 and beyond.
Gross margins are projected to expand further, helping Coty maintain strong investment levels in marketing and innovation.
The company also reported it expects adjusted EBITDA margins to improve by 70 to 90 basis points in the second half of 2025, leading to a full-year adjusted EBITDA of $1,115 million to $1,125 million, which includes some negative impact from foreign exchange rates.
Coty is also reducing its debt burden, with interest expenses expected to decline significantly in fiscal 2025. As reported in its earnings call, adjusted earnings per share (excluding equity swap effects) are projected to be in the range of $0.50 to $0.52, representing mid-to-high single-digit growth, and free cash flow is expected to grow by approximately 10% to $400 million.
By the end of 2025, Coty confirmed that it aims to reduce its leverage ratio to below 2.5x, with a long-term goal of getting closer to 2x. Additional funds from the potential sale of its Wella stake could further accelerate debt reduction and return more value to shareholders.
Nabi concluded, “The power of our brands and the strength of our teams, together with our leading innovation and commercialization capabilities, have underpinned our strong strategic and financial progress over the past four years and will support our growth in the years to come.”
