Published : 1 month ago, on 07/11/2024

(Reuters) – Coty on Wednesday said it expects annual profit to come in at the low end of its forecast, as weak demand for beauty products in major markets such as the United States and Australia offset gains in the fragrance segment.

The beauty industry, mainly in the United States, is witnessing a slowdown in demand even for mass market makeup and cosmetics as lower- and middle-income consumers continue to prioritize essential daily need products over beauty items known as “affordable luxuries.

Coty is also facing tight inventory management by retailers globally, while in the United States the company is grappling with soft sales at drug stores and pharmacy chains.

“Mass beauty is now growing in the low single digits, with flattish performance in the mass cosmetics category,” Coty said, adding that slower consumer demand and significant channel shifts in U.S. mass beauty and in Asia are continuing to weigh on order levels into second quarter.

The company now expects annual adjusted per-share profit to be at the low end of its forecast of 54 cents to 57 cents.

Coty also expects like-for-like sales in the first half of 2025 to grow 3% to 4%, compared with its previous forecast of 6% to 8%.

However, Coty’s prestige fragrance segment reported a 9% rise in like-for-like sales, benefiting from new launches such as Burberry Goddess and Marc Jacobs Daisy Wild fragrances.

Larger rivals Estee Lauder and L’Oreal have also noted growth in fragrances but flagged a decelerating demand trend for the beauty category.

Coty’s first-quarter adjusted net income rose to $128.1 million, or 15 cents per share, from $74.1 million, or 9 cents per share, a year earlier.

Its quarterly net revenue rose nearly 2% to $1.67 billion, compared to estimates of $1.68 billion, according to data compiled by LSEG.

(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Maju Samuel)