Coty Inc (NYSE:COTY) Stock Plummets 11.5% After Q4 Loss Widens, Missing EPS Estimates

Coty Inc (NYSE:COTY) reported mixed fiscal fourth-quarter results that surpassed analyst revenue expectations but delivered a wider-than-anticipated loss, triggering a sharp negative market response with shares declining approximately 11.5% in after-hours trading. The beauty conglomerate posted $1.25 billion in Q4 revenue, exceeding the $1.22 billion consensus estimate, though this represented an 8.1% decline compared to the same period last year. More significantly, the company reported an adjusted loss of $0.05 per share, substantially missing analyst expectations of a $0.018 profit.

Financial Performance Analysis

The quarterly results revealed a tale of two segments within Coty's portfolio. The prestige fragrance division, representing 61% of total sales, demonstrated relative resilience with a 5% revenue decline to $760.6 million, while the consumer beauty segment faced more pronounced challenges with a 12% drop to $491.8 million. The company's gross margin contracted by 190 basis points to 62.3%, reflecting normalization from elevated levels in the prior year period and ongoing pressure in the mass color cosmetics market, particularly in the United States.

Adjusted EBITDA declined 23% year-over-year to $126.7 million, with margin compression of 200 basis points to 10.1%. The company attributed these results to strategic interventions aimed at resetting its operational baseline, including rightsizing retailer inventory levels to align with current demand trends and addressing underperformance in the key U.S. prestige market.

Strategic Initiatives and Market Position

Despite the quarterly challenges, Coty emphasized its strengthened market position in fragrance categories across price segments. The company reported like-for-like sales growth in fiscal 2025 of 9% in ultra-premium fragrances, 2% in prestige fragrances, and 8% in consumer beauty fragrances. CEO Sue Nabi highlighted the company's unique positioning as "the only global fragrance player actively targeting both the high and low price tiers," capitalizing on the growing "treatonomics" trend where consumers seek affordable luxuries amid economic uncertainty.

The company has initiated a multi-pronged transformation plan including organizational restructuring, fixed cost reductions totaling $140 million in productivity savings, and enhanced digital integration that supported $1 billion in e-commerce revenue. Manufacturing operations are being transferred to U.S. facilities to mitigate tariff impacts and strengthen competitive advantages.

Forward Guidance and Analyst Expectations

Coty provided detailed guidance for fiscal 2026, expecting sequential improvement throughout the year with a return to growth in the second half. The company anticipates like-for-like sales declines of 6-8% in Q1 and 3-5% in Q2, followed by positive growth in the latter half of the fiscal year. This outlook contrasts with analyst expectations for the full fiscal year 2026, which project revenue of approximately $6.04 billion.

The company expects first-half adjusted EPS between $0.33-$0.36, representing a high-single-digit to mid-teen percentage decline, with growth returning in the second half. Free cash flow is projected to exceed $350 million in the first half, supporting continued deleveraging efforts toward an investment-grade profile.

Market Reaction and Investment Perspective

The significant after-hours selloff suggests investor concern over the pace of recovery and the wider-than-expected quarterly loss, despite revenue exceeding estimates. Market participants appear focused on the near-term profitability challenges and the extended timeline for returning to sustainable growth, particularly given the guided declines through the first half of fiscal 2026.

The company's strategic positioning in the growing fragrance category and its cost transformation initiatives provide potential catalysts for recovery, but execution risks remain elevated amid a complex market backdrop characterized by cautious retailer ordering and promotional competitive environments.

For detailed earnings estimates and future projections, investors can review additional information through Coty's earnings and estimates portal.

Disclaimer: This article provides financial analysis for informational purposes only and should not be considered investment advice. Readers should conduct their own research and consult with financial professionals before making investment decisions.