Coty Inc. (COTY, Financial) has announced the next phase of its strategic "All-in to Win" program, aimed at significantly enhancing its operational model and efficiency. This initiative will streamline Coty's organizational structure across key markets, minimizing complexity and enhancing focus on core innovations and market priorities. The company plans to consolidate its operations into a more agile regional framework, empowering leaders to accelerate decision-making processes.
A key component of this strategy involves the consolidation of demand planning into a single hub, backed by an AI-driven system. Slated for implementation through the first half of FY27, the program is expected to yield substantial cost savings. Coty anticipates around $130 million in annual fixed cost savings before taxes, with $80 million projected for FY26 and $50 million for FY27. The one-time cash costs associated with the initiative are estimated at $80 million, distributed evenly over FY26 and FY27.
The restructuring will impact approximately 700 positions, adhering to all regulatory requirements. Alongside this, Coty will continue its productivity enhancement program, with FY25 savings on track to meet the original target of about $120 million, predominantly in supply chain and procurement. The company aims to sustain these productivity savings into FY26 and beyond.
Overall, the combination of cost reduction efforts and productivity improvements is projected to deliver close to $500 million in savings from FY25 to FY27, reinforcing Coty's commitment to operational excellence and financial stability.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 20 analysts, the average target price for Coty Inc (COTY, Financial) is $7.84 with a high estimate of $13.50 and a low estimate of $4.50. The average target implies an upside of 59.03% from the current price of $4.93. More detailed estimate data can be found on the Coty Inc (COTY) Forecast page.
Based on the consensus recommendation from 21 brokerage firms, Coty Inc's (COTY, Financial) average brokerage recommendation is currently 2.4, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Coty Inc (COTY, Financial) in one year is $10.02, suggesting a upside of 103.25% from the current price of $4.93. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Coty Inc (COTY) Summary page.
COTY Key Business Developments
Release Date: February 11, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coty Inc (COTY, Financial) reported a healthy gross margin expansion in the first half of fiscal 2025, reaching close to 67%, indicating strong financial discipline.
- The company continues to see robust performance in its Prestige Fragrances segment, which is holding up well due to its unique offerings and high entry barriers.
- Coty Inc (COTY) is experiencing strong growth in its e-commerce channels, particularly with brands like CoverGirl outperforming the market in online sales.
- The company is planning significant product launches in fiscal 2026, which are expected to drive sales growth and market share expansion.
- Coty Inc (COTY) has successfully reduced its leverage ratio to below three times, marking the first time in eight years, which positions the company well for potential shareholder returns.
Negative Points
- Coty Inc (COTY) is facing challenges in its Consumer Beauty segment, particularly in the US, due to structural issues and competitive pressures.
- The company is experiencing low replenishment from retailers, who are managing their inventories cautiously, impacting sell-in figures.
- Coty Inc (COTY) is seeing disruptions in its business in China, Travel Retail Asia, and Australia, which are affecting its Prestige business by approximately three points.
- The US color cosmetics market is facing structural challenges, with new brands unable to compensate for the market decline.
- Coty Inc (COTY) has flagged ongoing pressures in Asia travel retail, particularly in the Prestige color cosmetics category, due to regulatory restrictions between Korea and China.
