Coty logo Key Points Interested in Coty? Here are five stocks we like better. Coty said it is trying to narrow the gap between sell-out and sell-in by shifting to a more retail-driven model, cutting smaller initiatives, and focusing innovation on fewer, bigger launches. Management believes this should improve execution, working capital, and reduce excess…
Interested in Coty? Here are five stocks we like better.
Coty said it is trying to narrow the gap between sell-out and sell-in by shifting to a more retail-driven model, cutting smaller initiatives, and focusing innovation on fewer, bigger launches. Management believes this should improve execution, working capital, and reduce excess inventory over time.
Management cited several headwinds weighing on results, including disruption in the Middle East, a highly promotional environment, inventory reductions by European retailers, and about $30 million of tariff impact this year. Coty also said oil-price volatility remains a risk, though it is protected against oil inflation roughly through calendar 2026.
In consumer beauty, Coty is repositioning COVERGIRL for Gen X consumers after earlier attempts to target Gen Z missed the mark. The company also denied rumors of a prestige divestiture, said it is exiting Orveda and some smaller markets, and remains focused on brands like Burberry, Hugo Boss, Sally Hansen, Rimmel, and Max Factor.
Coty (NYSE:COTY) executives said the beauty company is working to narrow the gap between retail sell-out and sell-in, sharpen its innovation pipeline and maintain discipline on promotions as it navigates headwinds from the Middle East, elevated competition and input-cost volatility.
On the company’s fiscal third-quarter 2026 question-and-answer call, Executive Chairman and Interim Chief Executive Officer Markus Strobel said Coty is “not where we want to be yet,” but said the quarter showed the company’s ability to protect profitability and cash flow while taking steps to improve execution.
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Strobel and Chief Financial Officer Laurent Mercier repeatedly pointed to the company’s “Coty. Curated.” framework, which is intended to reduce complexity, focus resources on larger initiatives and improve returns on marketing, innovation and working capital.
Sell-In Lagged Sell-Out in Prestige and Consumer Beauty
Strobel said Coty saw some sell-out growth in prestige, which he described as encouraging, but sell-in trailed for three main reasons. First, he said the Middle East disruption hit the business at the end of February, limiting March sales in a region that had been growing strongly and represents a “mid-teens” region for Coty’s prestige business. Second, the company continues to operate in a “highly promotional environment.” Third, some European retailers had stocked up ahead of the holiday period, but sell-out did not reach their expectations, leading them to reduce inventory in the third quarter.
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In consumer beauty, Strobel said Coty has narrowed the gap to the category, particularly for Sally Hansen and COVERGIRL in the U.S. He said both brands are now growing versus the market in unit volume and are catching up in value.
However, that improvement has not yet shown up in sell-in, he said, because Coty intentionally sold “much slimmer, much sharper bundles” in the quarter as part of a shift toward retail productivity and sell-out. Strobel said the company previously sold larger bundles that could later result in returns and obsolescence if products did not sell through.
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“We avoided it this time,” Strobel said. “We sold in less, we sold through much, much more.”
Company Pushes Cultural Shift Toward Sell-Out
Strobel said Coty is trying to change from a historically sell-in-focused organization to one driven by sell-out and market share. That includes asking more detailed questions in business reviews about retailer plans, sell-out plans and joint business planning, as well as incorporating metrics such as market share into performance evaluations.
He said the company expects fewer, bigger initiatives to make retailer execution more manageable. Coty has already identified its fiscal 2027 innovation priorities, cutting smaller projects and focusing on launches that complement brands and create a halo effect.
Strobel said some early consumer beauty innovations tied to reduced bundles are running well ahead of objectives, with certain items as much as three times ahead of plan. He said the company expects to see the effects over the next several quarters, though the cultural and operational shift will take time.
“When everything comes together, we believe we will finally be in a position that sell out and sell in kind of equate,” Strobel said.
Mercier said the strategy should also help working capital by reducing the long tail of SKUs, improving forecast accuracy, lowering inventory and reducing excess and obsolescence. He said excess and obsolescence hurt gross margin in both prestige and consumer beauty in the third quarter, but should ease as the company streamlines its product bundles and exits less profitable markets.
COVERGIRL Strategy Centers on Gen X Consumers
Asked about COVERGIRL’s progress, Strobel said Coty had previously made unsuccessful efforts to position the brand in ways that did not fit, including attempting to make it “the ultimate Gen Z brand.” He said retailers in the U.S. and Europe have asked for more beauty offerings aimed at Gen X consumers.
Strobel said Coty is repositioning COVERGIRL as a stronger Gen X brand, supported by a mix of advocacy, traditional media and innovation around established franchises such as Simply Ageless and LashBlast. He said the model could also be applied outside the U.S., including to Rimmel in the U.K. and brands such as Bourjois and Max Factor in Europe.
In consumer beauty, Strobel identified Coty’s priorities as winning with COVERGIRL, Rimmel, Sally Hansen and Max Factor. He said the first priority is North America, followed by Rimmel in the U.K. and the rest of the company’s European portfolio.
Middle East, Oil Prices and Tariffs Remain Headwinds
Mercier said the Middle East represents a mid-single-digit percentage of Coty’s total net revenue and is a strong fragrance market. He said the biggest impact has been in travel retail, which has been “drastically reduced,” while markets such as Saudi Arabia have been more protected.
On oil prices, Mercier said a $1 move in oil prices has a roughly $2 million impact on Coty’s profit before mitigation efforts such as productivity, sourcing changes or pricing. He said Coty is protected against oil inflation roughly through the end of calendar 2026 due to component inventories and supplier hedging policies.
Mercier said freight, glass and plastic components are among the areas affected by oil prices, and said procurement teams are working to optimize sourcing while maintaining product quality.
He also said tariffs are expected to impact Coty’s profit and loss statement by roughly $30 million this year. The company is monitoring possible refund opportunities depending on how the situation evolves, he said.
Strobel said Coty began transitioning out of Orveda in February and had reserved for related costs in the second quarter. He said the company expects to be “more or less completely” out of the business by the end of the fiscal year, around June, July or August, and plans to reallocate some spending to core fine fragrance brands. Coty does not break out individual brand revenue, but Strobel said Orveda was “not huge.”
The company has also exited some smaller consumer beauty markets, particularly in color cosmetics in Southeast Asia and Mexico, where Strobel said Coty lacked scale, profitability or acceptable returns.
Strobel categorically denied rumors that Coty plans to divest parts of its prestige portfolio. He said the company is happy with its prestige brands, specifically calling Burberry and Hugo Boss global brands that Coty will continue to build.
Regarding Gucci, Strobel said Coty remains open to “everything,” including an early exit, if it creates value for the company and shareholders. He said there was nothing to report at this time.
Looking ahead to fiscal 2027, Mercier said Coty’s goal is to improve sell-out, narrow the gap with category growth and improve the trajectory of EBITDA year over year. At the same time, he noted that the company must manage volatility from geopolitics, oil-related inflation and the absence of some short-term benefits that will become headwinds next year.
About Coty (NYSE:COTY)
Coty Inc is a multinational beauty company specializing in the development, manufacturing and marketing of fragrances, color cosmetics and skin and body care products. Established in 1904 by François Coty in Paris, the company has grown through a blend of organic innovation and strategic acquisitions to become one of the leading players in the global beauty industry. Coty’s portfolio encompasses a broad range of consumer and luxury brands, reflecting its commitment to catering to diverse consumer preferences and market segments.
The company’s product offerings span three main divisions: Coty Luxury, Coty Consumer Beauty and Coty Professional Beauty.
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The article “Coty Q3 Earnings Call Highlights” was originally published by MarketBeat.
