Coty is facing a major beauty shake-up after full-year sales fell 5% to $5.8 billion, with the cosmetics giant warning that the year ahead will be a difficult 'transition year' as it restructures the business and prepares to lose the Gucci Beauty licence.
The disappointing results underline the scale of the challenge facing the company, which owns or operates a portfolio of major fragrance and beauty names. Coty's fourth-quarter like-for-like revenue also fell 1% to $1.3 billion, while the company declined to provide a full-year forecast for fiscal 2027. Its shares subsequently fell 7% in after-hours trading.
The figures come at a particularly sensitive moment. Coty is attempting to overhaul its operations under a new strategy while preparing for the early return of Gucci Beauty to its owner, Kering, a move that will affect sales and profits starting in fiscal 2028.
Sales Fall as Coty Begins Major Restructure
The latest figures show that Coty's weakness is not confined to one part of its business.
For the full year, prestige beauty revenue fell 4% to $3.8 billion, while consumer beauty declined 7% to $2 billion. In the fourth quarter alone, prestige revenue slipped 0.5% to $771.8 million and consumer beauty fell 3% to $497.4 million.
Regional performance was similarly uneven. Americas revenue dropped 3% over the full year, while Europe, the Middle East and Africa — Coty's weakest region — fell 8%. Asia-Pacific was flat.
The company has acknowledged that its sell-out performance, which reflects products actually being sold to consumers, remains below market levels in both its prestige and consumer beauty divisions.
That gap is now a key focus of Coty. Curated is the strategy being rolled out to simplify and reshape the company. The programme includes rightsizing its commercial organisation, as well as its consumer beauty research and development and global brand marketing functions.
There are signs that some individual launches are performing well. Boss Bottled Beyond, Cosmic by Kylie Jenner Intense and Calvin Klein Euphoria Elixirs were highlighted by Coty, while the online launch of Marc Jacobs Beauty makeup reportedly exceeded sell-out targets at Sephora.
But these successes have yet to reverse the broader decline.
Coty expects first-quarter fiscal 2027 revenue to fall by a low- to mid-single-digit percentage, giving a stark indication of the road ahead.
Gucci Beauty Exit Adds to the Pressure
The looming loss of Gucci Beauty makes Coty's turnaround even more complicated.
In July, Coty agreed to return the Gucci Beauty licence to Kering roughly a year earlier than originally planned. Coty will continue operating the brand until at least 30 June 2027, and will receive approximately $400 million as part of the agreement, including proceeds from the sale of sufficient inventory to support the transition.
The deal provides Coty with valuable cash at a time when it is restructuring. The company says the proceeds will support debt reduction, investment in core prestige fragrance and beauty brands and changes to its organisational structure.
But the financial benefit comes with a longer-term cost: Coty is preparing for the impact of Gucci Beauty's exit from its portfolio in fiscal 2028.
The company plans to offset that blow by accelerating its core brands and expanding newer additions, including Marc Jacobs Beauty makeup and fragrances from Swarovski, Etro and Marni. It is also targeting significant fixed-cost reductions.
Gucci is a particularly significant loss because Coty has spent years building its beauty business. The company acquired the Gucci Beauty licence in 2016 and says revenues from the brand have grown by more than 60% since 2019, driven by fragrances and beauty lines including Gucci Flora, Bloom, Guilty and Alchemist's Garden.
For now, Coty insists it has the brands and cash generation needed to rebuild. But with sales falling, consumer performance still trailing the market and Gucci Beauty set to depart, its promised turnaround will face a crucial test over the next two years.
The cosmetics giant is targeting renewed profit growth from fiscal 2029. Whether its streamlined strategy can deliver remains the biggest question hanging over Coty's next chapter.
