(Boursier.com) — Coty Inc announces its results for the second quarter of fiscal 2024, ended December 31, 2023. The company’s strong sales growth in the upstream beauty market, higher profits and expansion of operating margin and of EBITDA in the second quarter marked the 14th consecutive quarter of results in line with expectations…
Coty’s strong second quarter sales growth of 13% reported and 11% LFL, with reported sales growth of 16% and 14% LFL growth in the first half, exceeded forecasts by + 11 to 13% at LFL for the first half.
These strong first half results once again reflect the company’s focus on balanced growth, with strong like-for-like growth in the Prestige and Consumer Beauty sectors; robust like-for-like growth in the Americas, EMEA and APAC; and LFL’s expansion into each of its core fragrance, cosmetics and skincare categories.
At the same time, Coty achieved a healthy growth mix with low single-digit volume growth percentage, high single-digit estimated price contribution and low-single digit estimated profit from the mix and others.
Prestige revenue growth remained robust, with growth of 17% reported and 15% like-for-like in the second quarter, and 20% reported and 18% like-for-like in the first half. Even accounting for several year-over-year positives from the recovery in fragrance service level, Coty’s low teen sales percentage growth in Prestige outpaced the underlying market, which increased closer to 10%.
Burberry Goddess continued to set new records, becoming the No.1 fragrance launch in multiple markets and, along with Burberry’s other heroic icons, Hero and Her, propelled strong market share gains and an improvement in the rankings. Burberry brand on a global scale. Continued momentum in the prestige fragrance market and strong execution from Coty fueled double-digit like-for-like revenue growth across the company’s leading prestige fragrance brands, including Hugo Boss, Calvin Klein, Gucci , Chloé, Marc Jacobs and Davidoff in the first half of FY24. Due to strong consumer demand, retailers left the holidays with healthy inventory levels. In the second quarter, Coty also saw double-digit like-for-like revenue growth in prestige cosmetics, with strong momentum in Kylie, Burberry and Gucci. And, in prestige skincare, flagship brands Lancaster and Philosophy have continued their positive momentum since the spring CY23 relaunch.
Coty Consumer Beauty revenue in the second quarter increased 7% as reported and 5% like-for-like, in line with the global mass beauty market. In the first half, Consumer Beauty revenue grew 8% as reported and 7% like-for-like. During the quarter, the Company saw strong growth in its sales of color cosmetics, mass fragrances and skin and body care. The company continued to build on its social media strategy, resulting in improved earned media value and propelling viral launches such as CoverGirl Yummy Gloss and Rimmel Thrill Seeker mascara.
E-commerce was a remarkable growth driver in the first half of fiscal 2024, with e-commerce revenue growth of over 20% for Prestige and Consumer Beauty, driving e-commerce penetration in low 20 percentages. This represents a large increase in penetration of approximately 180 basis points compared to last year.
During the quarter, Coty gained e-commerce market share in the Prestige and Consumer Beauty sectors, driven by strong improvements in e-commerce fundamentals and service levels, social media activations and close collaboration with online retail partners.
Geographically, all regions delivered double-digit like-for-like revenue growth in the quarter and year to date. Sales in EMEA increased 16% as reported and 10% like-for-like in the second quarter, driven by double-digit growth in most markets and Travel Retail. Sales in America rose 10% as reported and 11% like-for-like in the second quarter, driven by strong momentum in most markets and Travel Retail. Sales in Asia-Pacific increased 15% as reported and 16% like-for-like in the second quarter, with growth in most Asian countries and in Travel Retail.
Strong dynamics
Strong sales momentum in the second quarter fueled significant operating and EBITDA growth as well as margin expansion. While gross margins declined as expected, Coty’s reported second quarter operating profit of $236.7 million increased 19% year-over-year and adjusted operating profit of $309.3 million grew 18% year-over-year, resulting in a 70 basis point increase in adjusted operating margin to 17.9%. Adjusted EBITDA of $366.4 million increased 15%, with adjusted EBITDA margin up 40 basis points to 21.2%.
In the second quarter, Coty’s free cash flow totaled $363 million. The combination of the company’s strong 1H24 free cash flow of approximately $487 million and proceeds of approximately $340 million from the issuance of shares in its Paris dual listing resulted in reduction in financial results.