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.