Coty shares slide after fiscal 4Q revenue miss on P&G brand integration

Consolidating warehouses in North America and Europe and streamlining back office processes as part of integrating 43 P&G brands played a part in holding back revenues

A woman applying make up on her cheek
The consumer beauty division has been a drag since the US$12.5bn acquisition of P&G’s 43 beauty brands in 2015

Coty Inc (NYSE:COTY) stock fell Tuesday after the New York cosmetics giant with brands like Covergirl and Max Factor posted weaker-than-expected revenue for its fiscal fourth quarter as disruption from its acquisition of brands from Procter & Gamble Co (NYSE:PG) remained a drag.

Coty said it had a quarterly net loss of US$181.3mln, or US$0.24 a share, compared to a loss of US$304.8mln, or US$0.41 a share, in the year-earlier period. Adjusted per-share earnings, however, came to US$0.14, a penny ahead of the consensus estimate of US$0.13.

Revenue rose to US$2.3bn from US$2.2bn, below the consensus estimate of US$2.32bn. Same-store sales growth in the final quarter was below the full year average, at 0.3% compared to the average of 0.4%.

That saw Coty shares fall 10.2% to US$11.14.

The consumer beauty division has been a drag since the US$12.5bn acquisition of P&G’s 43 beauty brands in 2015, with integration proving a challenge.

“Transformation after an immensely complex merger takes time,” said Coty Inc CEO Camillo Pane, while adding that the company is streamlining back-office processes and systems after the P&G deal.

It will book restructuring charges of US$1.3bn, of which US$1.15bn has been accrued. Short term “supply chain disruptions” caused by consolidating warehouses and other facilities in North America and Europe as part of the P&G integration played a part in holding back revenues.

“We are building and streamlining back-office processes, upgrading systems, optimizing our manufacturing and logistics, and overall, simplifying our operations,” said Pane.

The CEO expected the full turnaround of “the new Coty” to be largely completed by the end of fiscal 2019.

Coty’s luxury business was a standout over the year, while its professional beauty division, which includes brands like OPI and Wella, has delivered solid performance.

Coty on Thursday also said CFO Patrice de Talhouët is leaving the company to “pursue other opportunities”. Ayesha Zafar, the company’s senior vice-president and group controller, will serve as interim finance chief.

Contact Uttara Choudhury at uttara@proactiveinvestors.com

Follow her on Twitter@UttaraProactive 

Quick facts: Coty

Price: 7.82 USD

Market: NYSE
Market Cap: $6 billion

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