Coty taps P&G veteran as CEO but analysts warn of execution risks

Investing.com -- Coty’s decision to appoint Procter & Gamble veteran Markus Strobel as chief executive has Evercore bearish on stock as it sees the leadership change raises execution risk just as the beauty group faces intense competitive pressure.

Evercore downgraded Coty to In Line after longtime CEO Sue Nabi stepped down, saying Nabi had been central to the investment case and to rebuilding the company’s marketing and creative capabilities.

Coty shares ended 3% down on Monday and are trading down in Tuesday premarket trading.

The brokerage said it now lacks visibility on timing and catalysts for a potential value unlock, despite the shares screening as undervalued.

Strobel takes over as Coty conducts a strategic review of its Consumer division, which accounts for about 15% of profits but most of the operational challenges and bearish sentiment.

Coty’s current structure traces back to its merger with Procter’s Specialty Beauty business, where Strobel previously worked, that beauty requires a business model different from Procter’s mass market strengths in scale and functional superiority.

There have been difficulties in past integrating brands such as CoverGirl, including loss of shelf space in U.S. drugstores and what it described as diseconomies of scale that left the business exposed to newer, faster moving competitors.

Evercore highlighted two key challenges for the new CEO. First, makeup has become a tougher category, with high fixed costs, low barriers to entry and pressure from social media driven indie brands, leaving CoverGirl particularly exposed to a disrupted drugstore channel.

Second, L’Oréal’s growing scale in beauty, especially fragrances, has widened the competitive gap, even as Coty has held its own in fragrances under Nabi.

The brokerage warned that fragrances depend heavily on creativity and speed, areas where leadership transitions can cause disruption, though it acknowledged Coty has a pipeline of launches and partnerships through 2027 that could reduce transition risk.

Evercore set a $7 price target based on a sum of the parts valuation, implying about a 55% discount to peers on an EV EBITDA basis, and said Coty could remain undervalued in the absence of clearer near term catalysts.

You May Also Be Interested In

• BetterLife Pharma files final prospectus for $100M public offering
• GSK to close German vaccine plant, 641 jobs at risk
• Goldman, BofA vie to manage Anthropic employee wealth post-IPO - report