Coty (NYSE:COTY) said its fourth-quarter fiscal 2026 results exceeded its expectations, although the beauty company continued to report lower sales and profitability as it prepares for a transition year centered on portfolio simplification, cost reductions and investment behind core brands.
Executive Chairman and Interim Chief Executive Officer Markus Strobel said the company’s fourth-quarter performance was “an encouraging step” toward more consistent execution, while acknowledging that the business remains below its targeted performance level. Coty plans to use fiscal 2027 to strengthen core franchises, streamline its organization and prepare for the exit of the Gucci Beauty license in fiscal 2028.
Fourth-Quarter Sales Improve Sequentially
The Middle East conflict reduced fourth-quarter total sales by slightly more than 1%, compared with Coty’s prior estimate of a 2% to 3% impact. For the full fiscal year, like-for-like sales fell 5%.
Prestige like-for-like revenue declined 0.5% in the fourth quarter, while prestige fragrance revenue fell 1%. Prestige cosmetics posted double-digit sales and sellout growth, supported by Kylie, Burberry and the early contribution from Marc Jacobs makeup. Coty cited momentum from launches including Boss Bottled Beyond, Cosmic Kylie Jenner Intense and Calvin Klein Euphoria Elixir.
Consumer Beauty like-for-like sales declined 3% in the fourth quarter, but the company said trends improved sequentially. Sally Hansen returned to sales growth, while COVERGIRL’s sellout trends improved and Rimmel gained volume market share in the U.K. during the latest three-month period. Lifestyle fragrances remained pressured, though sales trends improved from earlier quarters.
Mercier said Coty’s sellout performance remained below broader beauty-market growth in both divisions during the second half of fiscal 2026. The prestige market grew approximately 6% in that period, while mass beauty grew about 5%. Coty’s prestige sellout declined 1% and Consumer Beauty sellout fell 2%.
Margins and Profitability Remain Under Pressure
Adjusted gross margin was 60.9% in the fourth quarter, down 140 basis points year over year. For fiscal 2026, adjusted gross margin was 63%, down 190 basis points. Coty attributed the decline to lower-volume cost absorption, elevated excess and obsolescence in both divisions, and tariffs.
Adjusted EBITDA fell 26% year over year in the fourth quarter and declined 22% for the full year. The company said top-line pressure, lower gross margins and the year-over-year effect of variable compensation weighed on earnings. Adjusted earnings per share, excluding the equity swap, were breakeven in the fourth quarter and $0.34 for the full fiscal year.
Prestige adjusted EBITDA declined 17% in the quarter and 12% for the full year, though the division maintained a 20.5% adjusted EBITDA margin for fiscal 2026. Consumer Beauty adjusted EBITDA fell 67% year over year in the fourth quarter, reflecting lower sales, supply-chain cost under-absorption, excess and obsolescence, and tariff costs. However, Consumer Beauty EBITDA improved by $32 million sequentially from the third quarter.
Coty’s All-in to Win program generated more than $250 million in productivity and fixed-cost savings during fiscal 2026, ahead of its target. Underlying fixed costs fell 4% year over year despite inflation, the company said. Coty expects to accelerate savings initiatives in fiscal 2027 as it further rightsizes its cost structure.
Cash Flow Supports Debt Reduction
Despite a decline of more than $200 million in fiscal 2026 EBITDA, Coty generated $348 million in free cash flow, up roughly $70 million from the prior year and above its guidance. The company attributed the result to working-capital discipline, lower cash bonuses, a $34 million reduction in cash interest paid and $25 million lower capital expenditures.
Net debt stood at $2.9 billion at the end of fiscal 2026, down nearly $840 million year over year. That balance did not include the first tranche of proceeds from Coty’s Gucci agreement received in July. The company exited the year with leverage of about 3.4 times and continues to target leverage of roughly two times over time.
Fiscal 2027 Outlook and Gucci Transition
For the first quarter of fiscal 2027, Coty expects like-for-like revenue to decline by a low- to mid-single-digit percentage. Foreign exchange is expected to be neutral. The company forecast an adjusted gross-margin decline of approximately 50 to 100 basis points and an adjusted EBITDA decline in the low-teens percentage range. Adjusted EPS, excluding the equity swap, is expected to be $0.11 to $0.13 per share.
Coty expects more than $300 million in free cash flow during the first half of fiscal 2027. The company did not provide full-year guidance, citing the early stage of its Coty.Curated strategy, uneven quarterly performance and its ongoing strategic review.
Strobel said Coty is planning for Gucci Beauty to leave its portfolio by fiscal 2028. Under its agreement with Kering, Coty received $250 million at signing and expects another $150 million by Sept. 30, 2027, in addition to inventory proceeds. Gucci Beauty represents a low-double-digit percentage of Coty’s total revenue and has profitability broadly in line with the Prestige division, according to the company.
Coty intends to use the proceeds to reduce debt, invest in core prestige brands and fund organizational optimization. It is developing a fixed-cost savings program expected to begin in the second half of fiscal 2027, targeting its go-to-market structure, manufacturing and distribution footprint, organizational layers and central functions.
The company is also planning larger innovation efforts around brands including Burberry, Hugo Boss, Calvin Klein, Marc Jacobs, Chloé and Kylie, alongside launches in Etro, Swarovski and Marni fragrances. Coty said its objective is to return the underlying portfolio excluding Gucci to growth in fiscal 2028, moderate the mechanical EBITDA decline associated with the Gucci exit, and resume profit recovery in fiscal 2029 and beyond.
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.
