Coty in a Nutshell
Coty owns more than 70 international brands and has fragrance license agreements with the luxury fashion brands Burberry, Dolce & Gabbana, Gucci, Tiffany & Co., and others.
In 2013, Coty was listed on the New York Stock Exchange. In 2016, under the leadership of Peter Harf, Coty acquired 41 beauty brands from Procter & Gamble in a deal worth more than £9 billion.
In 2016, Coty’s share price was close to $18. In September 2020 it has fallen below $4 a share. Its market capitalisation is less than £2.26 billion ($3 billion). Compare that to what Coty paid for the brands purchased from Procter & Gamble.
Gen Z Acquisitions
Coty aimed to rekindle its operations by appealing to Gen Z shoppers. In November 2019, it acquired a 51% stake in Kylie Jenner’s brand Kylie Cosmetics for the sum of £450 million. Was this too high a price for a four-year-old brand whose long-term consumer staying power and allure is questionable?
Rapid Decline of Kylie Cosmetics?
Online sales of Kylie Cosmetics declined 62% through the end of May 2019 from its peak in 2016, according to a Rakuten Intelligence analysis of the receipts of online shoppers in the United States. Moreover, three-fifths of Kylie Cosmetic shoppers only bought the label once. Does this suggest that the brand has failed to establish consumer loyalty?
Even More Powerful
Coty’s CFO Pierre-André Terisse thinks not. She claims that by expanding the makeup brand’s offering to include skincare and fragrances and reaching international markets, Kylie Cosmetics will become “even more powerful”.
Longer-term growth is likely tied to Kylie’s ability to maintain relevance as an influencer and Coty’s commitment to sustainably grow Kylie Cosmetics.
Keeping it in the Family
Coty seemed to have Kardashian fever! In February 2020, it bought 20% stake in KKW Beauty, Kim Kardashian West’s beauty line, forking out more than £150 million. The investment came at a time when industry-wide cosmetics sales were on the decline as consumers prioritised essential products over than makeup items due to the coronavirus pandemic.
Impact of COVID-19
As a result of the pandemic, cosmetics manufacturers and retailers have faced the temporary closure of many sales channels, including department stores and duty-free shops. In a bid to deal with the trials of the COVID-19 crisis, Coty is planning to sell or shutter most of its factories and outsource even more operations.
Desperate Times Call for Desperate Measures
Coty’s net loss in 2019 was almost £3 billion – £2,866 million to be precise. Given the magnitude of this loss, it shouldn’t come as a surprise that, in May 2020, announced that it was selling a majority stake in its beauty and retail hair businesses to investment firm KKR for £3.3 billion. The divestment, which included the Wella and Clairol brands, saw an approximate £2.3 billion cash gain for Coty.
Profits in the Future?
Coty said it anticipates being back in the black this quarter, citing an improvement in its overall business performance in the last two months. But will it be easy for Coty to convince its investors that it is on a trajectory to profitability? That said, Coty faces stiff competition in the 2020s in the form of L’Oréal and Estée Lauder.
In July 2020, Coty announced that from September, Sue Youcef Nabi would become its CEO, replacing Harf. She would be the company’s 5th CEO in 5 years. Nabi has been an executive of the much larger L’Oréal brand for 20 years and was also the president of both L’Oréal Paris and Lancôme. Harf said of his successor:
Post written by Holly Marshall
