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Coty tops estimates on prestige brands boost amid turnaround

By Reuters News

By Sanskriti Shekhar and Alexander Marrow

Nov 4 (Reuters) - Coty COTY.N beat first-quarter sales and profit estimates on Wednesday, driven by strength in key prestige brands including Marc Jacobs, Hugo Boss and Burberry, as the CoverGirl owner presses ahead with efforts to revitalize its business.

Under interim CEO Markus Strobel, the company has launched "Coty.Curated" to revive growth and profitability by focusing on its biggest brands, cost-cutting and cash generation.

Shares of the company were up about 3% in extended market trading.

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"We're not quite there. We still have a lot of work to do," Chief Financial Officer Soraya Benchikh, who assumed charge in September, told Reuters, referring to the turnaround.

However, the beauty products maker forecast second-quarter profit largely below estimates, reflecting persistent pressure from higher material and shipping costs tied to the prolonged conflict in the Middle East.

Coty said it expects adjusted earnings per share of 16 cents to 18 cents in the current quarter, compared with estimates of 16 cents, according to data compiled by LSEG.

The prolonged conflict in the Middle East has forced companies to contend with higher costs of materials such as plastics, metal and packaging as well as shipping delays.

"We have built in continued impact from the Middle East. We don't see this easing off anytime soon," said Benchikh, adding that the company had incorporated the impact of the regional conflict into its outlook, as it withheld its annual forecasts last quarter.

Marc Jacobs, one of Coty's key focus brands, delivered double-digit growth, supported by continued strength in its Daisy fragrance line and a strong rollout of its makeup range at Sephora stores, the company said.

Demand for premium fragrances and skincare products has remained resilient, driven by a willingness among affluent consumers and younger shoppers to spend on prestige beauty items, a trend that also benefited peer Estee Lauder EL.N.

Coty reported first-quarter sales of $1.56 billion, compared with estimates of $1.52 billion. Its quarterly adjusted earnings came in at 16 cents per share, above estimates of 12 cents.

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