Coty forecasts fall in quarterly sales, to raise premium fragrance prices

By Juveria Tabassum and Anuja Bharat Mistry

Aug 20 (Reuters) - Coty COTY.N on Wednesday forecast a drop in current-quarter sales as weak spending in the U.S. sapped demand for beauty products, and said it would raise prices for its premium fragrances to mitigate tariff costs.

The company's shares were down 16% in extended trading after it also posted a surprise fourth-quarter loss.

Coty will raise prices in its premium fragrances unit in the U.S. and onshore some production to cushion the impact of the 15% duties on imports from Europe under U.S. President Donald Trump's tariffs policy, executives said.

Retailers in the U.S. are increasingly cautious due to tariffs and are destocking inventories as cost-conscious consumers tighten spending on some beauty and skincare products.

Coty expects first-quarter like-for-like sales to decline 6% to 8%, compared with 4.5% growth a year ago and said product launches should drive sales growth in the second half.

"Our analysis of cosmetics category weakness points to value-seeking behavior, some fatigue with innovation as consumers circle back to basics and less frequent usage, particularly with Gen-Z migrating to fragrances," finance chief Laurent Mercier said in a statement.

Changes in the immigration policy under the Trump administration has also contributed to the slowdown in the country, Mercier added.

Coty also said it has invested disproportionately in its U.S. mass beauty business at the expense of more profitable fragrances unit.

The company would reallocate investment in fragrances instead of mass beauty, which has struggled of late due to intense competition from cheaper products online.

Coty reported an adjusted quarterly loss of 5 cents per share, compared with analysts' estimates of a profit of 2 cents per share, according to data compiled by LSEG.

The loss included a negative impact from an equity swap mark-to-market of $0.07 due to the stock price decline in the quarter, the company said.

Beauty retailer Estee Lauder EL.N also gave a weak annual profit forecast on Wednesday.

The company's fourth-quarter revenue fell 8% to $1.25 billion, but beat estimates of $1.20 billion.