Coty forecasts sales growth for years ahead as beauty industry rebounds

CoverGirl cosmetics owned by Coty Brands are shown for sale in a retail store in Encinitas, California, U.S., November 8, 2017. REUTERS/Mike Blake/File Photo

Nov 18 (Reuters) – Coty Inc (COTY.N) on Thursday forecast revenue growth for the next several years, after a long streak of declines, as it benefits from improving U.S. and China beauty markets and a sales rebound in airport duty-free stores.

The company has been focusing more on high-end fragrances, skincare products and other categories that picked up pace last year, while demand for makeup products waned following the pandemic outbreak that forced people to venture out less.

The Hugo Boss fragrance maker has also been trying to revive its CoverGirl, Rimmel and Max Factor brands through new launches, collaborations with celebrities such as Priyanka Chopra and America Ferrera, and spending more on advertising.

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“The beauty market has been consistently growing at 3% to 5% rate and we expect to overperform this,” Coty Chief Executive Officer Sue Nabi said.

Coty forecast net revenue growth of 6% to 8% for each of the next three financial years through 2025, with plans to grow it further in the following years.

“The company made a bold proclamation by laying out a target (at) a level that rivals peer & partner algorithms,” Jefferies analyst Stephanie Wissink said.

Earlier this month, Coty forecast fiscal 2022 like-for-like sales to increase in the low-to-mid teens percentage.

Coty also said doubling down on its online business and higher-end brands would help it approach core earnings of $1 billion in calendar year 2022. Analysts expect $987.5 million, per Refinitiv IBES.

It forecast adjusted core earnings to increase 9% to 11% annually through fiscal 2025 and beyond.

It said it would divest its remaining 26% stake in professional beauty business Wella by fiscal 2025 to further simplify its capital structure, having offloaded the rest since December last year.

Shares of the company were down 1.8% even as Coty raised its fiscal 2022 earnings forecast.

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Reporting by Praveen Paramasivam in Bengaluru; Editing by Shinjini Ganguli

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