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  Title	Coty : Second Quarter 2025 Press Release
  ID	6766951
  External ID	7539757529
  Author	Unknown
  Published Date	Feb. 10, 2025, 3:21 p.m.
  Summary	Coty Reports Solid 1H25 Financial Performance, With Strong Margin Expansion and Cash Generation in an Uncertain Market Environment Robust Gross Margin Expansion And Sustained Brand Investments Re
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  URL	https://www.marketscreener.com/quote/stock/coty-inc-13396702/news/coty-second-quarter-2025-press-release-49012280/
  Sentiment	Negative: 0.90922    Neutral: 0.02044    Positive: 0.07034
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  Content ID	4206270
  Key	fa6e1c6c-af03-4e90-bf82-0d2ab4cca325
  Content	Coty Reports Solid 1H25 Financial Performance, With Strong Margin Expansion and Cash Generation in an Uncertain Market Environment Robust Gross Margin Expansion And Sustained Brand Investments Reaches Coty's Lowest Leverage in Over 8 Years APAC Region and FX Headwinds Weigh on Q2 Sales On Track for Continued FY25 Margin Expansion and EPS Growth NEW YORK - February 10, 2025-- Coty Inc. (NYSE: COTY) (Paris: COTY) ("Coty" or "the Company") today announced its results for the first half and second quarter of fiscal year 2025, ended December 31, 2024. Across both periods, the Company delivered strong gross and operating margin expansion, while continuing to invest behind its brands and execute across its strategic growth pillars. In 1H25, Coty's reported net revenue decreased 1% year-over-year and included a 2% negative impact from FX and a 1% headwind from the divestiture of the Lacoste license. Coty's LFL net revenue grew 2% despite elevated comparisons in the prior year when LFL revenues grew 14%. The 1H25 reported and LFL revenues were supported by growth in both prestige and mass fragrances, as well as mass skin care partially offset by declines in cosmetics and body care. In 2Q25, Coty's reported net revenue declined 3% on a reported basis and included a 2% headwind from FX. Coty's Q2 net revenue declined 1% on a LFL basis. The Q2 reported sales reflected the further slowing of the mass beauty market, particularly color cosmetics, together with continued headwinds in the APAC region, particularly China, Travel Retail Asia and Australia. At the same time, the global fragrance market remained robust, and estimated sell-out for Coty's prestige fragrance portfolio grew at a high single digit percentage in the first half. In both 1H25 and Q2, LFL revenue growth on a company-wide basis includes a contribution of 1% from Argentina, which experienced hyperinflation. In 1H25, Prestige net revenue grew 2% on a reported basis, which included a 1% negative impact from FX and a 1% headwind from the divestiture of the Lacoste license. On a LFL basis, Prestige net revenue grew 4% in the first half, despite lapping 18% LFL growth in the prior year. Prestige reported net revenue in the first half was supported by solid growth in the underlying fragrance category and Coty's brands' performance partially offset by lower cosmetics sales largely as a result of headwinds in the APAC region. The majority of Coty's leading prestige fragrance brands grew by a mid-single-digit to double-digit percentage year-over-year, with solid growth in prestige fragrance volumes in 1H25. In Q2, Prestige net revenue decreased 1% on a reported basis, which included a 1% headwind from FX and a 1% negative impact from the divestiture of the Lacoste license. On a LFL basis, net revenue increased 1% supported by growth in Coty's prestige fragrance category partially offset by prestige cosmetics. Despite strong sell-out in Coty's prestige fragrances, Coty's Prestige reported net revenue was impacted by broader headwinds in China and Travel Retail Asia, coupled with continued tight inventory management and lower than anticipated replenishment orders by retailers in the U.S., Europe, and Australia. In 1H25, Consumer Beauty net revenue declined 6% on a reported basis, which included a 4% negative impact from FX. Consumer Beauty reported net revenue declined in body care and mass color cosmetics partially offset by reported net revenue growth in mass fragrance and mass skin care. 1H25 Consumer Beauty net revenue declined 2% on a LFL basis. In Q2, Consumer Beauty net revenue declined 8% on a reported basis and were impacted by a 4% headwind from FX, with LFL sales declining 4%. In 2Q25, Consumer Beauty reported net revenue declines in color cosmetics and body care were partially offset by growth in mass fragrance. Coty's Consumer Beauty sell-out was below the broader mass beauty market due to the Company's greater exposure to the more pressured mass color cosmetics category. In addition, Coty's sell-in continued to track below sell-out driven by pressure on U.S. mass retailers due ongoing channel shifts, tight inventory management at retailers in Australia and parts of Europe, and higher trade investments. By geography, EMEA net revenue increased 4% on a reported basis and 5% on a LFL basis in the first half and increased 2% on both a reported basis and LFL basis in Q2. The reported net revenue growth in EMEA in each of these periods was supported by growth across several European markets, including the U.K., Ireland, Spain and Portugal, coupled with strong growth in Africa and the addition of a new export distributor. In the first half, Americas net revenue decreased 5% on a reported basis, but grew 1% on a LFL basis. In 2Q25, Americas net revenue declined 7% on a reported basis and by 1% on a LFL basis. The Americas region was impacted by the softness in the color cosmetics market in the U.S. and lower body care revenue in Brazil. In both Q2 and 1H25, Americas LFL net revenue included a 3% contribution from Argentina, which experienced hyperinflation. In 1H25, Asia Pacific net revenue decreased 8% on a reported and LFL basis. In Q2, Asia Pacific net revenue declined 11% on both a reported and LFL basis. The reported net revenue in each of these periods was lower year-over-year due to the challenging dynamics impacting the market in the Chinese mainland and the regional Travel Retail channel, further exacerbated by significant retailer inventory reduction. Coty delivered continued very strong gross margin expansion both in the first half and second quarter. In the first half, reported and adjusted gross margin of 66.1% increase d 180 basis points year-over-year. 2Q25 reported gross margin of 66.7% increased 160 basis points year-over-year, while adjusted gross margin of 66.8% increased by 170 basis points year-over-year. Coty's reported gross margin improvement in both periods was fueled by supply chain savings including procurement savings and productivity gains, excess & obsolescence reduction, a net benefit from pricing, and strong discipline with regard to promotional activity. In the first half, Coty generated reported operating income of $506.0 million, up 17% year-over-year, with a reported operating margin of 15.1%, reflecting 220 basis points of margin expansion year-over-year. In 1H25, Coty's adjusted operating income of $637.3 million increased by 4% year-over-year, while the adjusted operating margin of 19.1% reflected 90 basis points of margin expansion. In Q2, Coty generated reported operating income of $268.2 million, up 13% year-over-year, resulting in 240 basis points of reported operating margin expansion to 16.1%. Coty's Q2 adjusted operating income of $333.7 million grew 8% year over year, resulting in an adjusted operating margin of 20.0%, which expanded by 210 basis points year-over-year. The higher reported and adjusted operating margin reflected strong gross margin expansion and a reduction in fixed costs, while the A&CP percentage moderately increased as Coty continued to invest behind its brands. In the first half, Coty's reported net income of $100.0 million decreased from a net income of $175.9 million in the prior year, resulting in a reported net income margin of 3.0%, down 220 basis points year-over-year. In the first half, reported and adjusted net income included a $129 million negative impact from the equity swap mark-to-market in the first half, compared to a negligible net impact in the prior year period. Q2 reported net income of $20.4 million declined from a net income of $177.6 million in the prior year. Adjusted net income of $98.8 million decreased from $229.1 million. The decrease in both reported and adjusted net income in Q2 reflects a $97 million negative impact from the equity swap mark-to-market, compared with a $55 million benefit from the mark-to-market on the equity swap in the prior year. In the first half, Coty's adjusted EBITDA totaled $750.8 million, up 3% year over year, resulting in an adjusted EBITDA margin of 22.5%, which reflected a strong 90 basis points of margin expansion. In Q2, adjusted EBITDA of $390.7 million increased 7% year-over-year driving an adjusted EBITDA margin of 23.4%, expanding significantly by 220 basis points year-over-year. In the first half, cash from operating activities was $531.9 million and free cash flow was $411.1 million. In Q2, cash flow from operating activities was $464.5 million and free cash flow totaled $419.0 million. Total debt at the end of the second quarter totaled $3,459.0 million, while financial net debt was $3,209.4 million. This drove the total debt to net income ratio to 100.3x and the financial leverage ratio (net debt to adjusted EBITDA) to 2.9x, a reduction of 0.2x versus a year ago and consistent with recent guidance to end CY24 with leverage below 3x. Coty's retained 25.8% Wella stake was valued at $1,053.0 million at quarter-end, supporting economic net debt of $2,156.4 million. Updates on Strategic Pillars The prestige fragrance category continues to outperform the overall beauty market growing by a high- single-digit percentage in Q2. In Q2, sell-out for Coty's prestige fragrance portfolio grew at an estimated high single digit percentage level off the high baseline of the prior year which included major fragrance launches, while sell-in was several points lower as the Company continued to be impacted by a significant gap between sell-in and sell-out. This gap was most prevalent in the Chinese mainland due to continued pressure on the overall beauty market, and in the U.S., Europe and Australia, as key retailers continued to tightly manage their inventory levels. During the quarter, Coty continued to grow the Burberry Goddess franchise, which contributed to the brand's strong double-digit percentage reported net revenue growth. In CY24, Burberry's sell-out grew over 30%, outperforming the market by 3x and highlighting Coty's strong position as a leader in fragrance. Continued momentum in Hugo Boss drove the brand to become the #2 male fragrance brand in Europe, increasing by one spot from the prior year. In the U.K., Marc Jacobs Daisy Wild was the #1 launch in CY24, supporting the brand's mid-single-digit percentage growth in 1H25. Prestige cosmetics revenues declined in Q2 and 1H25 primarily driven by the continued weakness in the Chinese mainland and Asia Travel Retail channel. Coty continued to expand its brand portfolio with the signing of a new beauty license with world-renowned crystal house Swarovski. Under this agreement, Coty will develop, produce and distribute a new vision of fragrances. Swarovski Crystal Business is represented in over 140 countries worldwide with 2,300 Swarovski boutiques complemented by selected multi-brand partners. The first offering is anticipated to launch in 2026. The global mass beauty market growth continued to slow to a low-single-digit pace, below the peak ~10% growth level experienced in FY24, which benefited from inflation-related pricing. The mass fragrance category, which grew at a mid-single-digit percentage in Q2, continued to outperform the broader mass beauty market. This outperformance reaffirms that consumers continue to prioritize fragrances in their spending habits across price points. Coty continues to prioritize the expansion of its mass fragrance offerings to strengthen its position and capture more market share in this growing category. The successful launch of the adidas Vibes fragrance collection marked the biggest launch for Coty's Consumer Beauty business in the last 10 years, fueling strong growth in adidas fragrance and driving market share gains. Sales in Coty's mass color cosmetics business were lower while the broader mass color cosmetics category was flat in the quarter, as U.S. mass beauty retailers continued to be pressured by ongoing channel shits and retailers in Australia and Europe continued to tightly managing their inventory levels, resulting in a continued gap between sell-in and sell-out. At the same time, the combination of Coty's social media advocacy strategy and on trend innovation supported strong online market share gains for CoverGirl and Rimmel. Coty continued to invest in its skincare strategy. Lancaster delivered double-digit percentage net revenue growth in Q2 supported by the launch of its Golden Lift skincare range and the brand's unique positioning as the photo-aging prevention and repair expert. Philosophy continues to lean into its social media advocacy strategy, engaging with dermatologists and influencers, which drove an over 4x increase in the brand's earned media value year-over-year. Orveda continued to expand its footprint with the opening of the La Maison Orveda in New York City and in Paris, the next step in its steady brand building and distribution expansion. Coty saw strong consumer demand in its e-commerce business, which accounts for approximately 20% of the Company's sales. Coty's e-commerce sell-out in both the Prestige and Consumer Beauty businesses grew by a double digits percentage in both Q2 and 1H25. This was well ahead of the underlying e- commerce market growth in the first half, as Coty gained market share across many brands including Burberry and Marc Jacobs in Prestige, and CoverGirl, Sally Hansen and Nautica in Consumer Beauty, reaffirming Coty's strong digital capabilities and the relevance of its brands. At the same time, the Company's e-commerce sell-in declined, significantly lagging sell-out growth in both Prestige and Consumer Beauty due to tight order management by e-retailers. Coty's growth engine markets net revenue, which accounted for approximately 21% of total sales in the first half, declined 2% as reported and grew by 9% on a LFL basis, led by strength in LATAM, Brazil, Africa, Southeast Asia, including India, and North Asia. LFL growth in 1H25 in Coty's growth engine markets includes a 5% contribution from Argentina, which experienced hyperinflation. Coty continued to make progress on its sustainability agenda. Last week, CDP raised Coty's Climate score to A- from the previous score of B, putting Coty in towards the top of thousands of disclosing companies. This strong ranking and improvement recognizes Coty's continued progress in measuring our climate impact, setting ambitious yet achievable targets and progressing on our sustainability agenda. Additionally, this marked the first year in which Coty made submissions to CDP Water and Forests. Commenting on the operating results, Sue Nabi, Coty's CEO, said: "As we are now midway through our fiscal year, it is clear that FY25 is shaping up to be a pivotal year. On the one hand, the global beauty market continues to grow at a healthy pace, even if growth has moderated off of the elevated levels of the last few years, which benefited from more material pricing increases. And in this backdrop, fragrances of all price points continue to outperform most other beauty categories, which strongly benefits Coty's business as fragrances account for over 60% of our revenues and an even bigger portion of our profits. In fact, the performance of our fragrance portfolio remained robust, including volume growth for both our prestige and mass fragrances in 1H25. The sell-out of our Prestige fragrances grew by a high single digit percentage in the first half, well ahead of our Prestige sell-in, fueled by momentum in Hugo Boss, Burberry, Chloe and Marc Jacobs. We continued to reach new milestones with our brands, whether its Hugo Boss becoming the #2 male fragrance in Europe, Marc Jacobs Daisy becoming the #1 franchise in the UK, and Coty overall becoming the #1 prestige fragrance player in South Africa. At the same time, sales for our mass fragrance brands grew by a low-double-digit percentage LFL in the first half and a mid-single-digit percentage LFL in Q2, supported by the success of the adidas Vibes collection with strong market share gains in several European markets, strong growth in Nautica, and new agile fragrance launches. On the other hand, the pressure in pockets of our business which we discussed at length on the last earnings call, namely in China, Travel Retail Asia, Australia and in Consumer Beauty U.S., impacted us even more significantly in Q2. And in our core markets, despite a seemingly strong holiday period, where beauty performed strongly and consumers engaged with the category, this did not translate into improved replenishment orders for Coty as retailers managed their inventory very tightly. As a result of these factors, our Q2 LFL sales trends were below our expectations. While we are prudently assuming these patterns will continue into the second half as well, the strong sell-out growth of our fragrance brands gives us confidence that these headwinds are temporary and we should return to stronger sales growth as we enter FY26. Against this complex backdrop, our teams acted with agility, activating strong savings initiatives and protecting our cash flow. The results of these efforts can be seen in our Q2 financial performance. In the quarter, our adjusted gross margin expanded by 170 basis points year on year, reflecting not only strong supply chain savings but also our disciplined approach to promotional activity at a time when many beauty players stepped up promotions and discounts. At the same time, we maintained strong marketing support, EBITDA expanded by 7%, and our EPS excluding the equity swap impact grew by 16%. And on the balance sheet side, we reached a key milestone exiting CY24, as for the first time in over 8 years, our leverage was below 3x. The beauty market has changed significantly since we first laid out our strategy and ambitions over 3 years ago. From a category perspective, fragrances have accelerated significantly supported by structural consumer behavior shifts, while color cosmetics is challenged by evolving channel preferences and new business models. At a market level, China is no longer a key short term growth driver for beauty, while the U.S. market remains very dynamic. With this backdrop, FY25 is shaping up to be a pivotal year for Coty, as we evaluate our operations to fuel Coty's long term success. While the uncertain market environment may weigh on trends in the near term, our financial equation is now stronger than it has been in the last four years and we will see outsized benefit from our healthier leverage levels and cash generation, which will fuel EPS growth and our Total Shareholder Return. As we look to the exciting brand initiatives and distribution opportunities on track for FY26 and beyond, coupled with the initial launches in the next couple of year of products under our new and expanded licenses including Swarovski, Marni, Etro, and Marc Jacobs Makeup, we remain confident in Coty's ability to accelerate sales growth and outperform the beauty industry over the coming years, all while steadily expanding margins and cash flow, and significantly growing EPS. We look forward to sharing a deeper dive on our strategy and outlook as part of our CAGNY presentation on February 19 th The power of our brands and the strength of our teams, together with our leading innovation and commercialization capabilities, have underpinned our strong strategic and financial progress over the past four years and will support our growth in the years to come." *Adjusted financial metrics used in this release are non-GAAP. See reconciliations of GAAP results to Adjusted results in the accompanying tables. E-commerce penetration and contribution based on countries where e-com info is available covering approx. 86% of total Coty. Sources: Circana (Prestige) and Nielsen (CB) December 2024. Additionally, the data includes estimated data for Brick and Click sales, which is subject to change. ***Prestige sell-out data is sourced from third-party market research firms, including but not limited to Circana, as well as retailer data, and supplemented by Coty's internal estimates for markets where external data is unavailable. While efforts are made to ensure accuracy, reported figures may be subject to revisions based on updated market insights and methodological adjustments. RESULTS AT A GLANCE LFL results for the three and six months ended December 31, 2024 include 1% help from Argentina resulting from significant price increases due to hyperinflation. * These measures, as well as "free cash flow," "adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA)," "financial net debt," and "economic net debt" are Non-GAAP Financial Measures. Refer to "Non-GAAP Financial Measures" for discussion of these measures. Reconciliations from reported to adjusted results can be found at the end of this release. ** Net income for Coty Inc. is net of the Convertible Series B Preferred Stock dividends. Outlook Fiscal year-to-date, the beauty market has continued to grow at a healthy pace, though growth has moderated from the outsized levels of the last few years, which were amplified by industry price increases. Prestige fragrances remain an outperforming category in beauty, even with moderation in the category growth from low double digit percentage growth in FY24 to high single digit percentage growth in Q2. Mass beauty has moderated from high single digit percentage growth in FY24 to low single digits in Q2, including flat performance in the mass cosmetics category. Within this market backdrop, the APAC region remains pressured due to ongoing headwinds in China and Travel Retail Asia, and at the same time, key retailers around the globe continue to tightly manage orders and inventory levels, further exacerbated by significant channel shifts in U.S. mass beauty. As a result of these factors, Coty expects LFL sales trends in 2H25 which are broadly consistent with its Q2 LFL sales trend at -1% to -2%. The significant strengthening of the U.S. dollar is expected to drive a more material FX headwind in 2H25 of approximately 3%, resulting in FY25 reported sales declining in the low single digits percentage. Given the complex retail demand environment, Coty now assumes a broadly similar market environment entering FY26. However, several key brand initiatives and distribution opportunities planned for FY26 should support some gradual improvement in Coty's LFL sales growth. In this uncertain beauty market environment, Coty continues to act with agility, activating strong cost savings initiatives, maintaining promotional discipline, and protecting its cash flow. Coty continues to expect FY25 savings of over $120 million, with these and additional projects expected to deliver further savings in FY26 and beyond. Coty continues to expect solid gross margin expansion in FY25, fueled by the strong gross margin improvement delivered in 1H25. These levers will support ongoing strong investment behind its brands, with A&CP expected to remain in the high 20s percentage. Through the combination of gross margin expansion, ongoing brand support, short-term cost containment efforts and structural cost savings programs, Coty targets adjusted EBITDA margin expansion of 70-90bps both in 2H25 and FY25, an acceleration from the 30 bps adjusted EBITDA margin expansion in FY24. This implies adjusted EBITDA growing in the low single digits to $1,115-1,125M, which includes a low-to-mid single digit headwind from FX. Coty's steady debt reduction is now translating to an anticipated sizeable reduction YoY in the FY25 interest expense. As a result, Coty now expects FY25 adjusted EPS excluding the equity swap of $0.50-0.52, reflecting mid- to-high single digit percentage growth, which includes approximately 4% negative impact from the discrete tax benefits recognized last year. Finally, Coty expects FY25 free cash flow to grow roughly 10% YoY to approximately $400M. In light of the more uncertain environment for the next couple of quarters, further pressured by FX headwinds, Coty is targeting a year- over-year reduction in leverage exiting CY25 of 0.5x or more, resulting in leverage below 2.5x with the goal to reach closer to 2x, which factors in the cash true-up payment related to Coty's equity swap. This does not take into account proceeds from the Wella divestiture, which would further accelerate both deleveraging and shareholder returns. Financial Results* Refer to "Non-GAAP Financial Measures" for discussion of the non-GAAP financial measures used in this release; reconciliations from reported to adjusted results can be found at the end of this release. Revenues: Year-to-date reported net revenue of $3,341.4 million decreased 1% year-over-year driven by a 6% decrease in Consumer Beauty reported net revenue, a 2% negative impact from FX and a 1% headwind from the divestiture of the Lacoste license partially offset by a 2% increase in Prestige reported net revenue. On a LFL basis, net revenue grew 2% driven by a 4% increase in Prestige LFL net revenue partially offset by a 2% decrease in Consumer Beauty net revenue. 2Q25 reported net revenue of $1,669.9 million decreased 3% year-over-year, which reflected a 1% decrease in Prestige reported net revenue as well as an 8% decrease in Consumer Beauty reported net revenue and a 2% headwind from FX. On a LFL basis, net revenue declined 1% reflecting a 1% increase in Prestige and a 4% decline in Consumer Beauty. Gross Margin: Year-to-date reported gross margin of 66.1% increase d 180 basis points year-over-year. The improvement in reported gross margin was mainly driven by supply chain savings, the benefit from premiumization, pricing actions, easing inflation and excess & obsolescence reduction. Year-to-date adjusted gross margin of 66.1% increased by 180 basis points from 64.3% in the prior year. 2Q25 reported gross margin of 66.7% increased 160 basis points year-over-year. The improvement in reported gross margin was mainly driven by supply chain savings, pricing actions and excess & obsolescence reduction. 2Q25 adjusted gross margin of 66.8% increased by 170 basis points from 65.1% in the prior year. Reported Profit: Year-to-date reported operating income of $506.0 million increased by 17% from $434.2 million in the prior year driven by higher gross profit and lower restructuring costs. Year-to-date reported operating margin was 15.1%, reflecting 220 basis points of margin expansion year-over-year. The improvement in reported operating margin was driven by strong year-to-date gross margin expansion and lower stock compensation, with moderately higher marketing investments. 2Q25 reported operating income of $268.2 million increased by 13% from $236.7 million the prior year. 2Q25 reported operating margin was 16.1%, reflecting 240 basis points of margin expansion year-over- year. The improvement in reported operating margin was driven by strong gross margin expansion, short term cost initiatives and structural fixed cost reductions, and lower stock compensation. Year-to-date reported net income of $100.0 million decreased from net income of $175.9 million in the prior year. Reported net income included a $129 million negative impact from the mark-to-market on the equity swap, compared with a negligible impact in the prior year. Year-to-date reported net income margin of 3.0% decreased 220 basis points year-over-year. 2Q25 reported net income of $20.4 million decreased from net income of $177.6 million in the prior year. Reported net income included a $97 million negative impact from the mark-to-market on the equity swap, compared with a $55 million benefit from the mark-to-market on the equity swap in the prior year quarter. 2Q25 reported net income margin of 1.2% decreased by 910 basis points year-over-year. Year-to-date reported EPS of $0.11 declined from $0.20 in the prior year. Year-to-date reported EPS was lower year-over-year primarily due to a negative impact from the equity swap mark-to-market of $0.15, compared with no net contribution from the equity swap mark-to-market in the prior year. 2Q25 reported EPS of $0.02 decreased from $0.20 in the prior year. 2Q25 reported EPS was lower year- over-year due to a negative impact from the equity swap mark-to-market of $0.11, compared with a $0.06 benefit from equity swap mark-to-market in the prior year quarter. Adjusted Profit: Year-to-date adjusted operating income of $637.3 million increased by 4% from $611.5 million in the prior year. Year-to-date adjusted operating margin of 19.1% was 90 basis points higher year-over-year compared with 18.2% in the prior year. The improvement in adjusted operating margin was driven by strong year-to- date gross margin expansion with moderately higher marketing investments. 2Q25 adjusted operating income of $333.7 million increased 8% from $309.3 million in the prior year. 2Q25 adjusted operating margin of 20.0% was 210 basis points higher year-over-year compared with 17.9% fueled by higher gross margin. Year-to-date adjusted EBITDA of $750.8 million increased 3% from $726.7 million in the prior year. Adjusted EBITDA margin of 22.5% increased by 90 basis points supported by the very strong year-to-date gross margin expansion. 2Q25 adjusted EBITDA of $390.7 million increased 7% from $366.4 million in the prior year. Adjusted EBITDA margin of 23.4% increased by 220 basis points, supported by the very strong gross margin expansion in the quarter. Year-to-date adjusted net income of $226.9 million decreased from $303.2 million in the prior year, reflecting a $129 million negative impact from the equity swap mark-to-market compared with no net impact in the prior year. Year-to-date adjusted net income margin of 6.8% decreased from 9.0% in the prior year. 2Q25 adjusted net income of $98.8 million decreased from $229.1 million in the prior year, reflecting a $152 million reversal in the benefit from the mark-to-market on the equity swap in the prior year. 2Q25 adjusted net income margin of 5.9% increased from 13.3% in the prior year. Year-to-date adjusted EPS of $0.26 decreased from adjusted EPS of $0.34 in the prior year. Year-to-date adjusted EPS was lower year-over-year primarily due to a negative impact from the equity swap mark-to- market of $0.15, compared with no net contribution from the equity swap mark-to-market in the prior year, partially offset by a $0.03 discrete tax expense in the prior year, which did not repeat this year. 2Q25 adjusted EPS of $0.11 decreased from adjusted EPS of $0.25 in the prior year. 2Q25 adjusted EPS was lower year-over-year due to a negative impact from the equity swap mark-to-market of $0.11, compared with a $0.06 benefit from equity swap mark-to-market in the prior year quarter. Operating Cash Flow: Year-to-date cash from operations was $531.9 million decreased from $608.1 million during the same period in the prior year as tight order and cash management by key retailers impacted the timing of cash inflows. 2Q25 cash from operations totaling $464.5 million increased from $421.9 million during the same period in the prior year reflecting higher profits and working capital phasing. Year-to-date free cash flow of $411.1 million decreased from free cash flow of $487.0 million in the prior year driven by a $76.2 million decrease in operating cash flow. 2Q25 free cash flow of $419.0 million increased from free cash flow of $363.0 million in the prior year driven by a $42.6 million increase in operating cash flow and a $13.4 million decrease in capex. Financial Net Debt: Total debt of $3,459.0 million on December 31, 2024 decreased from $4,002.2 million on September 30, 2024. This resulted in a total debt to net income ratio of 100.3x. Financial net debt of $3,209.4 million on December 31, 2024 decreased from $3,718.6 million on September 30, 2024. This resulted in financial leverage of 2.9x, down from 3.4x at the end of the prior quarter. The value of Coty's retained 25.8% Wella stake totaled $1,053.0 million at quarter-end, supporting Coty's economic net debt of $2,156.4 million. Second Quarter Business Review by Segment* Prestige In 1H25, Prestige net revenue of $2,230.2 million or 67% of Coty sales, grew 2% on a reported basis. This growth was driven by Europe, the Middle East and Latin America, and was partially offset by weakness in the Chinese mainland, Australia, and the Asia Travel Retail channel, as well as a 1% negative impact from FX and a 1% headwind from the divestiture of the Lacoste license. 1H25 Prestige net revenue grew 4% on a LFL basis. In 2Q25, Prestige net revenue of $1,116.1 million or 67% of Coty sales decreased by 1% on a reported basis and increased by 1% on a LFL basis. On a reported basis, the decline in net revenue was driven by lower net revenue year-over- year in the Asia Pacific region, especially in the Chinese mainland and the Asia Travel Retail channel, a 1% headwind from FX and a 1% headwind from the divestiture of the Lacoste license partially offset by growth in Europe and the Middle East. Sell-out for Coty's Prestige fragrances grew by a high single digit percentage in the first half, even as sell-in was several points lower due to retailer inventory management. In 1H25, the Prestige segment generated reported operating income of $463.8 million, up from $422.2 million in the prior year. 1H25 reported operating margin was 20.8%, up 150 basis points year-over-year. Adjusted operating income was $539.7 million in 1H25, up from $499.3 million in the prior year, with an adjusted operating margin of 24.2%, up 140 basis points year-over-year. Adjusted EBITDA rose to $595.8 million from $553.8 million in the prior year, with a margin of 26.7%, which expanded by 140 basis points year-over-year. In 2Q25, the Prestige segment generated reported operating income of $222.3 million, compared to $200.6 million in the prior year. 2Q25 reported operating margin was 19.9%, up 200 basis points year-over-year. Adjusted operating income was $260.0 million in 2Q25, up from $239.0 million in the prior year, with an adjusted operating margin of 23.3%, which increased 200 basis points year-over-year. Adjusted EBITDA increased to $288.2 million from $266.2 million in the prior year. As a result, adjusted EBITDA margin of 25.8% was 210 basis points higher year-over-year. Consumer Beauty In 1H25, Consumer Beauty net revenue of $1,111.2 million or 33% of Coty sales declined 6% on a reported basis, which included a 4% negative impact from FX. Within Consumer Beauty, 1H25 reported net revenue declined in body care and color cosmetics, which was partially offset by growth in mass fragrance and mass skin care. The global mass cosmetics market was flattish during this period, including declines in the U.S., with Coty's mass cosmetics sales further impacted by pressure on key retailers resulting in the Company's sell-in trending below sell- out. 1H25 Consumer Beauty net revenue declined 2% on a LFL basis. In 2Q25, Consumer Beauty net revenue of $553.8 million, or 33% of Coty sales, decreased by 8% on a reported basis. The decline in Q2 reported net revenue was driven by declines in color cosmetics and body care coupled with a negative impact from FX of 4%. These declines were partially offset by growth in mass fragrance. In 1H25, the Consumer Beauty segment generated reported operating income of $78.1 million, compared to $92.4 million in the prior year. The 1H25 reported operating margin was 7.0%, down 80 basis points year-over-year. Adjusted operating income was $97.6 million in 1H25, compared with $112.2 million in the prior year, with an adjusted operating margin of 8.8%, which decreased 70 basis points year-over-year. Adjusted EBITDA of $155.0 million declined from $172.9 million in the prior year, with a margin of 13.9%, down 70 basis points year-over-year. In 2Q25, the Consumer Beauty segment generated reported operating income of $64.1 million, up from $60.4 million in the prior year, with a reported operating margin of 11.6%, increasing from 10.0% in the prior year. 2Q25 adjusted operating income of $73.7 million increased from $70.3 million in the prior year, with an adjusted operating margin of 13.3%, improving from 11.6% in the prior year quarter. 2Q25 adjusted EBITDA of $102.5 million increased slightly from $100.2 million in the prior year. As a result, adjusted EBITDA margin of 18.5% was 190 basis points higher year-over-year. Second Quarter Fiscal 2025 Business Review by Region* Americas In 1H25, Americas net revenue of $1,332.1 million, or 40% of Coty sales, decreased 5% on a reported basis, which included a 5% negative impact from FX. On a LFL basis, Americas net revenue increased by 1% in the first half and included a 3% contribution from Argentina, which experienced hyperinflation. In 2Q25, Americas net revenue of $638.6 million decreased 7% on a reported basis driven by a 6% negative impact from FX coupled with lower Consumer Beauty revenue in the U.S., which was impacted by the softness in the color cosmetics market and lower body care revenue in Brazil. On a LFL basis, Americas net revenue decreased by 1% in the second quarter and included a 3% contribution from Argentina, which experienced hyperinflation. EMEA In 1H25, EMEA net revenue of $1,627.6 million, or 49% of Coty sales, increased 4% on a reported basis, which included a 1% benefit from FX and a 1% headwind from the divestiture of the Lacoste license. On a LFL basis, EMEA net revenue increased by 5% in the first half. 1H25 reported and LFL net revenue growth was supported by broad-based mid-single-digit growth across most European markets, coupled with strong growth in Africa. In 2Q25, EMEA net revenue of $839.8 million increased 2% on a reported basis, driven by solid reported net revenue growth in Prestige partially offset by lower reported net revenue in Consumer Beauty. The regional performance in Q2 was supported by reported net revenue growth in the U.K., Ireland, Spain, Portugal and Africa coupled with the addition of a new export distributor. On a LFL basis, EMEA net revenue increased by 2% in the second quarter. Asia Pacific In 1H25, Asia Pacific net revenue of $381.7 million, or 11% of Coty sales, decreased 8% on both a reported basis and LFL basis due to the challenging dynamics impacting the market in the Chinese mainland and the regional Travel Retail channel, which impacted Prestige. However, these impacts were partially offset by growth in South East Asia and Hong Kong SAR. In 2Q25, Asia Pacific net revenue of $191.5 million, decreased 11% on a reported basis largely driven by declines in Prestige net revenue in the Chinese mainland and the Asia Travel Retail channel. On a LFL basis, Asia Pacific net revenue decreased 11% in the second quarter. Noteworthy Company Developments Other noteworthy company developments include: On December 5, 2024, Coty announced a long-term beauty license agreement with world-renowned crystal house Swarovski. Under this agreement, Coty will develop, produce and distribute a new vision of fragrances. Swarovski Crystal Business is represented in over 140 countries worldwide with 2,300 Swarovski boutiques complemented by selected multi-brand partners. The first offering is anticipated to launch in 2026. The collaboration comes as Coty continues to elevate and diversify its portfolio, continuously bringing new products, brands, and innovations to the forefront. This agreement reinforces Coty's reputation as the go-to partner for global brands looking to create or elevate their beauty portfolios. On November 20, 2024, Coty announced the early results of its previously announced tender offer to purchase for cash up to $300 million of its outstanding 5.000% Senior Secured Notes due 2026. The purpose of the Tender Offer was to purchase a portion of the Notes, subject to the Notes Cap, in order to reduce the Company's total outstanding public debt consistent with the Company's previously announced deleveraging strategy. Conference Call Coty Inc. will issue pre-recorded remarks on February 10, 2025 at approximately 4:45 PM (ET) / 10:45 PM (CET) and will hold a live question and answer session on February 11, 2025 beginning at 8:00 AM (ET) / 2:00 PM (CET). The pre-recorded remarks and live question and answer session will be available at http://investors.coty.com . The dial-in number for the live question and answer session is 1-800-445-7795 in the U.S. or 1-785-424-1699 internationally (conference passcode number: COTY2Q25). For more information: Investor Relations Olga Levinzon , +1 212 389-7733 olga_levinzon@cotyinc.com Media Attachments Original document Permalink Disclaimer Coty Inc. published this content on February 10, 2025 , and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on February 10, 2025 at
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