Coty Q4 FY2026 Earnings: Sales Return to Growth as Margins Contract

Coty Inc. (NYSE: COTY) reported fiscal Q4 2026 revenue of $1.2692 billion, up 1% year over year, while diluted GAAP loss per share widened to $0.16 from $0.08. Adjusted loss per share improved to $0.02 from $0.05, but adjusted EBITDA fell 26% as lower gross profit pressured operating performance. For the quarter ended June 30, 2026, reported sales stabilized and cash generation improved, although underlying revenue remained lower.

Core Financial Results

Reported revenue growth included a 3% foreign-exchange benefit. On a like-for-like basis, revenue fell 1%, including an estimated 1% headwind from the conflict in the Middle East.

Profitability weakened because reduced volumes lowered cost absorption, while excess and obsolescence charges and tariffs added pressure. The adjusted net loss narrowed despite weaker operating results, partly because the negative mark-to-market impact from Coty’s equity swap decreased to $10.0 million from $59.6 million.

Adjusted results and free cash flow are non-GAAP measures defined by Coty. Parentheses indicate losses.

Business and Regional Performance

Both Prestige and Consumer Beauty produced 1% reported revenue growth, but foreign exchange masked declines on a like-for-like basis. Regionally, growth in the Americas and Asia Pacific offset lower sales in EMEA.

Prestige, which represented 61% of quarterly sales, benefited from higher prestige cosmetics and fragrance revenue, partly offset by lower skincare sales. Its adjusted operating income fell 19% to $60.2 million, while adjusted EBITDA declined 17% to $85.8 million. Lower fragrance shipments, tariffs, volume-related cost absorption, and higher fixed costs weighed on profitability.

Consumer Beauty generated 39% of sales. Growth in mass body and skincare was partly offset by lower mass color cosmetics revenue. The segment’s adjusted operating loss widened to $20.7 million from $7.0 million, while adjusted EBITDA fell 67% to $7.8 million. Coty attributed the pressure to supply-chain under-absorption, excess and obsolete inventory charges, and tariffs.

The Americas benefited from higher sales in the U.S., Brazil, and regional travel retail. Asia Pacific growth reflected China, Southeast Asia, Australia and New Zealand, and travel retail. EMEA was affected by lower sales in the Middle East, Germany, and Central and Eastern Europe.

Profitability, Cash Flow, and the Balance Sheet

The 140-basis-point gross-margin contraction flowed through to adjusted operating margin, which decreased 230 basis points to 3.1%. Adjusted EBITDA margin fell 270 basis points to 7.4%. Reported operating margin moved from a positive 1.2% to negative 3.4%.

Cash flow moved in the opposite direction. Quarterly operating cash flow rose to $116.0 million, and free cash flow more than doubled to $72.6 million. For the full fiscal year—not the quarter—operating cash flow increased to $537.8 million from $492.6 million, while free cash flow rose to $348.2 million from $277.6 million.

Total debt declined to $3.0882 billion at June 30 from $3.2162 billion at March 31. Financial net debt decreased to $2.9121 billion from $2.9591 billion over the same period, producing a net-debt-to-adjusted-EBITDA ratio of 3.4 times.

The Gucci Beauty Exit Simplifies the Portfolio but Creates an FY2028 Gap

After the quarter ended, Coty announced an agreement to return the Gucci Beauty license to Kering about one year before its scheduled expiration. Coty received $250 million at signing and is due another $150 million no later than September 30, 2027, although up to $30 million of that amount is contingent on specified criteria. Coty will also sell inventory to support the transition and continue operating Gucci Beauty through at least June 30, 2027.

Management said the proceeds would support debt reduction, investment in core prestige fragrance and beauty brands, and organizational changes. The transaction advances Coty’s portfolio simplification, but management expects the license exit to reduce sales and profit in FY2028.

Coty plans to moderate that impact by accelerating core brands, expanding newer portfolio additions such as Marc Jacobs Beauty makeup and fragrances under Swarovski, Etro, and Marni, and implementing a significant fixed-cost reduction program. The financial size of the anticipated FY2028 decline was not provided.

Fiscal 2027 Guidance

Coty is providing quantitative guidance for fiscal Q1 2027 and first-half free cash flow rather than a broader full-year outlook. The company expects underlying revenue and profitability to remain under pressure at the start of the year, with performance improving progressively as cost actions and product initiatives develop.

The expected gross-margin decline reflects cost-absorption pressure from lower shipments, partly offset by productivity and procurement actions. Management described FY2027 as a transition year and plans to provide a broader outlook after completing its strategic review, expected by the end of calendar 2026.

Management’s View

Management said the gap between sell-in and sell-out narrowed during the quarter, but sell-out performance remained below market growth in both divisions. Closing that market-share gap is a central objective under the Coty.Curated strategic framework.

Actions already underway include resizing the commercial organization and parts of Consumer Beauty R&D and global brand marketing. Coty is also reducing the number of color-cosmetics launches and SKUs, directing resources toward fewer major launches and established products, and adding market-share targets to its incentive program.

For Prestige, Coty plans to build on brands including Boss, Burberry, Calvin Klein, Marc Jacobs, Chloé, and Kylie Cosmetics. In Consumer Beauty, the company highlighted early U.S. sell-out progress for Sally Hansen and a narrowing performance gap for CoverGirl, although those improvements have not yet prevented the division’s quarterly profit deterioration.

Risks Investors Need to Watch

• Underlying sales remain soft: Reported revenue rose, but LFL sales declined in both Prestige and Consumer Beauty. Management also expects a low- to mid-single-digit LFL decline in fiscal Q1 2027.
• Margin pressure may continue: Lower shipment volumes, tariffs, and inventory-related charges hurt Q4 margins, and Coty expects another 50–100 basis points of adjusted gross-margin contraction in Q1.
• Consumer Beauty remains a profitability drag: The division’s adjusted operating loss widened, and its strategic review will not be completed until the end of calendar 2026.
• EMEA and geopolitical exposure: EMEA LFL revenue fell 10%, while the Middle East conflict created an estimated 1% headwind to total quarterly sales.
• Portfolio transition carries execution risk: The Gucci Beauty exit will create an FY2028 sales and profit gap, making the performance of core brands, new licenses, and planned fixed-cost reductions increasingly important.

Summary

Coty ended fiscal 2026 with improved reported sales momentum, stronger cash flow, and lower debt, but foreign exchange masked an underlying revenue decline and operating margins deteriorated. Fiscal 2027 begins as a transition period, with near-term sales and gross-margin pressure expected while Coty restructures its portfolio and organization. Progress in Consumer Beauty, sell-out market share, cost savings, and preparations for the Gucci Beauty exit will be the main indicators of whether stabilization can develop into a sustained operating recovery.