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Coty Continues to Ride Fragrance Boom

The fragrance effect continued to drive sales for Coty in its third quarter, although profits came in below Wall Street forecasts.

The beauty company, which holds licenses for the likes of Burberry, Gucci, Marc Jacobs and Davidoff, saw net revenues rise 8 percent to $1.38 billion in the third quarter of its fiscal year ended March 31. Analysts polled by FactSet forecasted $1.37 billion.

Within that, prestige net revenues increased 8 percent and consumer beauty revenues rose 6 percent.

Coty’s prestige fragrance revenues grew about 7 percent. Burberry Goddess, the group’s biggest launch ever, continued to be a big growth factor which, coupled with strong performances in other Burberry franchises, drove over 50 percent expansion in that brand’s total net revenues in the third quarter. Elsewhere, Marc Jacobs Daisy Wild and Cosmic Kylie Jenner are ranking as the top two fragrance launches in the U.S. in the year-to-date, according to the company. 

“The fragrance market in the U.S. is accelerating in Q3, which was not expected because everyone was thinking that there would be a slowdown, but you see that the penetration is continuing to grow,” said chief executive officer Sue Nabi in an interview.

She added that Infiniment Coty Paris, the company’s recently launched fragrance brand, is off to a “fantastic start.” The line of 14 fragrances ranges from intimate scents, which can be sensed only by people close to the wearer, to fragrances noticeable by others nearby to those leaving a strong wake.

“In DTC we are selling something like three times more than what we expected. At Liberty London, it’s the number-one Coty line among what we have on the niche floor….This is redefining what it is to create a haute perfumery line,” said Nabi.

Recently, Coty made some fragrance licensing announcements in both its prestige and consumer divisions. They included inking a licensing deal with Italian fashion house Marni, and extended agreements with Mexx and Bruno Banani. At the same time, the Miu Miu license came to an end, with the brand teaming with L’Oréal.

There was growth in other prestige sectors, too, in the third quarter. Coty’s prestige cosmetics business reported net revenue growth of over 25 percent in the quarter, led by its three prestige cosmetics brands Burberry, Kylie and Gucci.

As previously reported, Coty is working on a Marc Jacobs prestige beauty line, which will be ready in around roughly two to three years.

In Coty’s consumer beauty division, strong momentum in mass fragrance, skin and body care and mass color cosmetics in most countries offset softness in the mass color cosmetics category in the U.S. 

Net income was $500,000, down from $105.1 million in the prior year, driven by a large benefit in the prior year from the mark-to-market on the equity swap. Adjusted EPS totaled 5 cents. Analysts forecast 6 cents.

The company now expects full year like-for-like revenue growth to be at the high end of its prior guidance range of plus 9 to 11 percent. Coty now expects adjusted EPS to be at the high end of the prior guidance range, excluding the equity swap, of 44 cents to 47 cents.

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