Executive Summary
Coty reported a challenging QQ3 2025 with a negative bottom-line result despite a relatively stable gross margin. Revenue declined YoY and QoQ, driven by pressure in the Consumer Beauty division, notably Color Cosmetics, while Prestige Fragrance remained the bright spot with mid-single-digit growth when adjusted for Easter timing. Management underscored a strategic pivot toward higher-margin, growth-oriented categories—primarily Mass Fragrance—while taking decisive actions to improve profitability through a multi-year cost-reduction program and a reallocation of marketing and investment toward the most profitable pillars. The company reiterated its FY26 phasing: anticipate some H1 weakness but an improving trajectory as the year progresses, aided by marquee product launches and controlled pricing in Prestige.
Management emphasized structural organizational changes (regionalization in the U.S.), inventory discipline at retailers, and active portfolio optimization (including potential exits such as SKKN) as levers to restore growth and margin. The near-term risk is embedded in tariff headwinds, macro consumer softness, and execution risk around the blockbusters and pricing programs. The plan centers on a path back to mid- to high-single-digit growth in Prestige and a rebalanced investment approach to protect gross margin while funding the most profitable innovations. Investors should monitor the trajectory of sell-in vs. sell-out normalization, the timing and success of the H1 FY26 blockbuster launches, the evolution of tariff-related costs, and progress on the $370 million cost-savings program (with ongoing productivity and new initiatives) as the company works to restore EBITDA margin and cash flow generation.
Key Performance Indicators
QoQ: -22.20% | YoY:-6.24%
QoQ: -25.29% | YoY:-7.28%
QoQ: -204.55% | YoY:-460.41%
QoQ: -1 811.81% | YoY:-10 776.32%
QoQ: -2 108.55% | YoY:-11 030.23%
Key Insights
Revenue: $1,299.1 million in Q3 2025; YoY delta -6.24%, QoQ delta -22.20%. Gross profit: $832.4 million; gross margin 64.08% (0.641). Operating income: -$280.4 million; EBITDA: -$280.4 million; EBITDA margin: -21.6%. Net income: -$405.7 million; net margin: -31.2%. EPS: -$0.47. D&A: $105.1 million. Interest expense: $50.2 million. Taxes: -$58.4 million (tax benefit shown as negative expense). Free cash flow: -$165.4 million; cash flow from operations: -$122.5 million; capex: -$42.9 million. ...
Financial Highlights
Revenue: $1,299.1 million in Q3 2025; YoY delta -6.24%, QoQ delta -22.20%. Gross profit: $832.4 million; gross margin 64.08% (0.641). Operating income: -$280.4 million; EBITDA: -$280.4 million; EBITDA margin: -21.6%. Net income: -$405.7 million; net margin: -31.2%. EPS: -$0.47. D&A: $105.1 million. Interest expense: $50.2 million. Taxes: -$58.4 million (tax benefit shown as negative expense). Free cash flow: -$165.4 million; cash flow from operations: -$122.5 million; capex: -$42.9 million. Cash balance: $243.5 million; total assets: $11.471 billion; total liabilities: $7.551 billion; total debt: $4.089 billion; net debt: $3.845 billion. Current ratio: 0.818; quick ratio: 0.514. Gross margin remains the strongest signal of product mix resilience, while operating and net margins reflect meaningful profitability headwinds from portfolio mix, SG&A intensity, and one-off/short-term costs.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.30B |
-6.24% |
-22.20% |
| Gross Profit |
832.40M |
-7.28% |
-25.29% |
| Operating Income |
-280.40M |
-460.41% |
-204.55% |
| Net Income |
-405.70M |
-10 776.32% |
-1 811.81% |
| EPS |
-0.47 |
-11 030.23% |
-2 108.55% |
Key Financial Ratios
operatingProfitMargin
-21.6%
operatingCashFlowPerShare
$-0.14
freeCashFlowPerShare
$-0.19
dividendPayoutRatio
-0.79%
Management Commentary
Theme: Strategy and execution prioritization. Quotes underscore a shift to mass fragrance profitability and a plan to reaccelerate growth through blockbusters and tighter resource allocation. Theme: Margin recovery and cost discipline. Management emphasizes structural cost reductions, regionalization, and targeted pricing while protecting brand equity. Theme: Tariffs and supply chain. Tariff headwinds acknowledged with mitigation through dual sourcing, regional production shifts, and mid-single-digit price actions in Prestige. Theme: Portfolio and go-to-market. Discussions around exiting underperforming brands (e.g., SKKN) and testing new routes to market (TikTok Shop, influencer/content-led campaigns) to drive growth with lower incremental spend.
Yes, Bonnie, good morning. To complement and to answer your question, indeed this first half of fiscal '26 and the full fiscal '26, we are back to the fiscal '23 and '24 recipe of success, which is to put in place this game changing blockbusters, okay? So, that's the first thing I wanted to really re-insist on. It's probably going to be the best pipe of innovations in the last five years. And this new launch that you are referring to will have an impact on Q1.
— Sue Nabi
These are structural interventions.
— Laurent Mercier
Forward Guidance
Management anticipates a gradual improvement in like-for-like trends over FY26 with some weakness in Q4 and H1, followed by stabilization and growth as the year progresses. Key near-term catalysts include: (1) a slate of game-changing blockbuster launches in fiscal year 2026 (with one impacting Q1), (2) mid-single-digit price increases on Prestige to offset incremental costs, (3) tariff offset strategies including dual sourcing and U.S.-based production where feasible, (4) progressive portfolio optimization and increased investment behind Mass Fragrance where margins are higher, and (5) ongoing cost-savings efforts totaling $370 million (with $120 million ongoing productivity and $130 million new programs) to create headroom for investment in high-return franchises. Factors investors should monitor include the pace of sell-in vs. sell-out normalization in Consumer Beauty, the effectiveness of SRM and demand planning improvements, the execution and revenue contribution of new Prestige blockbusters, tariff-related cost evolution, and the realization rate of cost-savings and margin expansion in FY26 and beyond.