Coty cuts annual profit forecast, posts quarterly revenue drop as cosmetics demand slows

By Ananya Mariam Rajesh

(Reuters) - Coty on Monday cut its annual profit forecast and posted a surprise drop in quarterly revenue, as it faces slowing demand for cosmetics from consumers who have reined in spending because of inflationary worries.

Shares of the CoverGirl parent fell 2% in extended trading.

Demand weakness in the Asia travel retail business, particularly at airports and travel destinations in Asia including Korea and China, has hurt sales of Coty and larger peer Estee Lauder.

Coty is also seeing a hit from the closure of some major drug stores as well as from retailers cutting back on their beauty inventory to limit a hit from slowing demand for cosmetics.

Rivals Elf Beauty and L'Oreal have also flagged softer growth in the mass beauty market in the United States.

"The consumers who buy those products (mass market) tend to be more price conscious. So they might be cutting back in general on discretionary purchases as they still face the impacts of inflation," said Sky Canaves, principal analyst at Emarketer.

Canaves added that consumers are becoming even more cautious as U.S. President Donald Trump's tariff war may lead to a spike in inflation.

Coty CFO Laurent Mercier said sourcing from China, Canada and Mexico into the U.S. was fairly minimal but the company was making adjustments to product flows and shifting more of the mass fragrance production to its North Carolina plant.

The company now expects annual adjusted per-share profit to be between 50 cents and 52 cents, compared with its prior forecast of between 54 cents and 57 cents.

Coty's quarterly net revenue fell 3.34% to $1.67 billion, its first drop in eight quarters, missed analyst estimates of $1.72 billion, according to data compiled by LSEG.

Its adjusted profit came in at 11 cents per share, compared with the expectations of 21 cents.

(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Anil D'Silva)