Coty results beat strong beauty demand, more in-store price hikes

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Nov 8 (Reuters) – Coty Inc’s perfumes and cosmetics (COTY.N) benefited from strong demand in the first quarter, helping it beat Wall Street targets despite pressure from a strong U.S. dollar and the exit of the company from Russia.

Consumers going out more after the shutdowns are indulging in small luxuries such as makeup and fragrances, even as they put off larger purchases due to rising inflation and recession risks.

Perfumer Hugo Boss will also raise prices, to a mid-figure around winter, as it battles rising transport and labor costs.

Coty’s prestige division, home to cosmetics and fragrances from Calvin Klein and Gucci brands, saw its revenue drop 1% due to macroeconomic headwinds. But chief executive Sue Nabi told Reuters the company “sees no slowdown or decline in trading in the prestige division”.

In fact, consumers are switching from inexpensive beauty brands to prestige, she said.

“Coty is seeing strong consumer demand and could remain strong in the coming months…as beauty products tend to be a friendlier way to build trust,” said Kunal Sawhney, CEO of the research firm. Kalkine Group shares.

Its European counterpart L’Oréal (OREP.PA) had also recorded strong sales growth in the third quarter. China’s zero-COVID policy impacted Estee Lauder (EL.N), prompting it to cut its annual forecast, but Coty’s lower exposure to that market helped protect it.

The beauty category is “more resilient than ever,” Nabi said, as Coty also reiterated its full-year profit forecast.

Supply constraints, however, prevent it from meeting strong demand, particularly in the fragrance segment, the company said. Shares were flat at $6.98.

Excluding items, Coty earned 15 cents per share in the quarter ended Sept. 30, beating estimates of 11 cents, according to IBES data from Refinitiv.

Net revenue rose 1% to $1.39 billion, slightly above estimates.

Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Devika Syamnath

Our standards: The Thomson Reuters Trust Principles.

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