Coty set to unveil “game-changing blockbusters” to stimulate key Prestige sector

Coty CEO Sue Y. Nabi yesterday spelled out the challenges facing the US beauty group’s business during the balance of what she termed a “pivotal and transitional” fiscal 25 but promised a wave of innovation in fiscal 2026 to drive growth.

Speaking on a post-Q3 earnings call, Nabi said the consumer and retail environment of the past few quarters became even more challenging in the quarter. As a result the company took several proactive measures to clean up the baseline of its business to prepare for a healthier FY26.

Nabi outlined how Coty is navigating this challenging context, saying the company had multiple levers to fuel improved trends into next year and beyond, including a highly ambitious launch programme.

She pointed out the high fiscal 24 comparison base for the key Prestige sector, an “exceptional” year which had seen several Coty “blockbuster” launches (including Burberry Goddess, Marc Jacobs Daisy Wild and Cosmic Kylie Jenner) at a time when the prestige fragrance market was growing double digits.

“The combination in FY25 of a slowing prestige fragrance market, our launch calendar this year dominated by extensions rather than major innovations, and the need to deplete elevated inventory at the retailers, has driven a triple negative effect on our business, which we are fully focused on correcting by end of this fiscal year,” Nabi commented.

“In the challenging macroeconomic and beauty landscape, we remain laser focused on protecting our profitability, driving free cash flow and deleveraging,” she added.

Overall beauty growth has decelerated from the first half of FY25 driven by softer consumer demand due to macroeconomic uncertainty and recessionary concerns, Nabi pointed out

Tariff mitigation

Addressing the issue of tariffs in the context of the current US-driven market uncertainty, Coty CFO Laurent Mercier said, “As evidenced in the last several months, the global geopolitical and tariff situation remains quite fluid, further adding to the broader uncertainty and decline in consumer sentiment.”

He said Coty is relatively better positioned tariff-wise than many consumer companies. Approximately 30% of group sales are in North America, including approximately 13% in Consumer Beauty and approximately 17% in Prestige.

Laurent noted, “For Consumer Beauty, our products are primarily manufactured locally in the US. On the other hand, our Prestige fragrances are manufactured primarily in Europe, where we have the world’s largest fragrance manufacturing facility.

“This is consistent with our beauty peers, who also produce fragrances primarily in Europe. Our finished goods sourcing from China is negligible aside from local sales.

“Having said that, our teams have been planning for several different scenarios with action plans to minimise the potential impact on Coty and we are actively planning mitigation actions to address the impacts of tariffs on our business.

“Under the current tariff framework, the biggest areas of potential headwinds for us are first, prestige fragrances shipped to the US from our Barcelona plant, and second, sourcing various components and marketing materials from China.”

Laurent said Coty had built up sufficient inventory in the US to carry it through at least to the end of FY25 but added, “If it becomes more definitive that these tariffs will stay in place for the long term, we’ll consider transferring some production to the US to mitigate the impacts of tariffs on imports from Europe, which would carry lower investment than building a new site.”

On Chinese production, he said: “While our sourcing of finished goods from China is negligible, we do source some components and marketing materials from the country

“Therefore, as part of our mitigation efforts, we will resource suppliers in other countries over time to broaden our supplier base in each component and have already begun this process of bringing new suppliers online.”

Laurent concluded, “Combined, based on the current anticipated tariff landings, we see a gross headwind from tariffs in the low US$100 million level, with minimal impact this quarter due to our proactive inventory build, and an impact step up in FY26.”

Summing up prospects, Nabi said, “It’s important to remind everyone that beauty has always been – and will remain – a highly resilient category. Across economic cycles, beauty has remained resilient.

“In fact, even in periods of macroeconomic slowdown or regular challenges, global beauty demand has grown +3% to +4% most years over the past decade and a half. Despite the current backdrop, this reinforces our confidence in the category.”

All-in to win

Nabi said the company has entered the next phase of ‘All-In To Win’, a strategic initiative to establish a simplified and scaled operating model, reduce complexity across functions and markets, and sharpen o focus on top innovation and market priorities.

“We’re streamlining our organisational structure across key markets to unlock operational efficiencies, reduce duplication and better align with the consolidation in the local and regional retail landscape.

“These market organisations will be part of a more scaled and agile regional set-up, with the new regional leaders empowered to accelerate decision-making and faster execution, in keeping with the rapid evolution in today’s global beauty markets.”

“Game-changing blockbusters”

The next year won’t just be about defensive measures, Nabi pointed out. The company is on track to launch Marc Jacobs makeup – “with a truly distinctive and craveable assortment” – in calendar year 2026, among several other big initiatives.

“In the first half of fiscal 26 and the full fiscal 26, we are back to the fiscal 2023 and 2024 recipe of success, which is to put in place these game-changing blockbusters. It’s probably going to be the best type of innovations in the last five years.”

She explained, “While much of our FY25 innovations were extensions providing a modest contribution to net revenues, entering FY26, we’re reigniting our pipeline of blockbuster launches and market expansion.

“In FY26, we have exciting launch and distribution initiatives planned, which we anticipate will improve sales trends even if the current complex macro and retailer backdrop holds.

“We will have a major launch under a top Prestige brand in the first half of FY26, and another major launch under another top Prestige brand in the second half.”

Concluding her prepared remarks, Nabi stated, “With our brand desirability and equity at the highest level in years, a pipeline of initiatives which is the strongest in five years, and our margins, profit, debt and leverage all significantly improved versus four years ago, we have the levers to protect our profitability and cash flow in a variety of macroeconomic scenarios.

“Coty remains well positioned to succeed and outperform in the coming years.”