Coty has announced its preliminary Q1 results while reiterating its full-year profit target.
 
Cory’s Q1 sales grew approximately 4-5% LFL, despite the very elevated comparison of the prior year, though moderately below its prior Q1 estimated growth of 6% LFL. 
 
Factoring in the ongoing retailer caution and incrementally slower U.S. market, Coty anticipates Q2 LFL sales to grow moderately.
 
The global beauty market has maintained solid but slightly lower global growth. The prestige fragrance category continues to outperform, supported by expansion in both volumes and price/mix, while mass beauty continues to experience slower growth trends fueled entirely by unit demand. 
 
While beauty growth remains resilient in many parts of the world, the U.S. market growth has slowed in the second half of Q1. Tight order and inventory management by retailers has resulted in Coty’s sell-in tracking well below sell-out in many markets, including in the U.S., Australia, China, and Travel Retail Asia, each of which accounts for only a low single-digit percentage of the company’s business. 
 
Coty’s revenue growth across other key markets has remained robust, growing by a mid-single-digit to a double-digit percentage. 
 
In anticipation of a more uncertain demand backdrop, including cautious retailer behavior and a complex macroeconomic environment, Coty is re-accelerating its cost reduction efforts across all parts of the P&L to deliver savings well above the initial FY25 target of approximately $75 million.
 
Through the combination of continued sales growth, continuous gross margin expansion, and increased cost savings for FY25 and beyond, Coty continues to expect FY25 adjusted EBITDA to grow +9-11% YoY, consistent with prior guidance, including resumed adjusted EBITDA growth in Q2. 
 
This adjusted EBITDA growth target, combined with continued though more moderate revenue growth, reflects an even stronger adjusted EBITDA margin expansion in FY25, following the 30-bps adjusted EBITDA margin expansion in FY24. 
 
Coty continues to target leverage close to 2.5x exiting CY24, though the tight inventory management by retailers is adding some variability on cash inflow timing. 

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