Coty Inc. has encountered a significant setback as its shares dropped sharply. This comes after the mass-market beauty company decided to abandon its fiscal 2026 outlook while warning about a weaker-than-expected third quarter.
Headquartered in New York, Coty is well-known for its popular brands, including CoverGirl and Sally Hansen. The company has withdrawn its previous fiscal guidance for EBITDA and free cash flow, citing a challenging leadership transition along with a “complex beauty market backdrop.” In November, Coty aimed for an adjusted EBITDA of $1 billion for the fiscal year and projected free cash flow of $350 million for the first half.
In the second quarter, like-for-like sales dropped by 3 percent, a slightly less severe decline than the 3.5 percent fall anticipated by analysts. The decrease was attributed to a more competitive promotional landscape and weaknesses in Coty’s consumer beauty segment, particularly within the US and European markets.
“Coty possesses exceptional assets and capabilities, yet we have not achieved the performance we should,” interim CEO Markus Strobel stated.
The company now anticipates like-for-like revenues to decrease by a mid-single-digit percentage in the third quarter, which was unexpected as analysts had forecasted stability in that category.
Strobel, who took on the leadership role last month, indicated that Coty will continue to assess its portfolio with the aim of “identifying opportunities to enhance shareholder value.”
Recently, the company sold its remaining stake in the haircare brand Wella to KKR & Co. and plans to apply the proceeds towards reducing debt.
Coty’s shares, which had more than halved in value over the past year, plummeted by 14 percent in after-hours trading on Thursday at 4:50 p.m. New York time.
Meanwhile, US-listed competitor Estée Lauder Cos. also witnessed a decline in its shares after announcing a disappointing outlook.
