Coty (NYSE: COTY) reported Q2 EPS of $0.27, $0.03 better than the analyst estimate of $0.24. Revenue for the quarter came in at $2.35 billion versus the consensus estimate of $2.34 billion.

Highlights

• 2Q20 net revenue decreased 6.6%, with 1.4% organic LFL decline
• LFL growth in Luxury and Professional Beauty was offset by a decline in Consumer Beauty
• 2Q20 adjusted operating income of $325.0 million grew 1% YoY
• In 1H20, adjusted operating income grew 8.5% on a constant currency and scope basis
• Adjusted EPS of $0.27, rose 13% YoY, including a one-time tax benefit of $0.015 per share
• 2Q20 free cash flow of $363.5 million improved by $169.6 million from the prior year period, bringing the total free cash flow for the first half to $317.0 million

Commenting on the operating results, Pierre Laubies, Coty CEO said:
"Our turnaround plan has now been underway for two quarters, and we are confident that the actions we are taking will build a much healthier business and growth. We saw momentum across many of our priority Luxury brands, including Burberry, Gucci, Tiffany and Hugo Boss, while continuing to grow our footprint in Luxury color cosmetics. Our global sell-out trends continue to improve in key mass beauty categories, and brands like Sally Hansen and Rimmel are gaining share in several core countries. The organization remains vigilant in driving strong gross margin improvement, activating the levers at the center of our strategy: mix management, select price increases, more disciplined promotions, and foregoing low value sales. This has allowed us to continue to increase the working media investments behind our brands. Although we are in the early stages of deploying our strategy and much work remains ahead, we continue to be very enthusiastic about the business we are building and our growth prospects."

Commenting on the financial results, Pierre-André Terisse, Coty CFO said:
"Our second quarter results were in-line with our expectations, and underpinned by strong results in our gross margin and free cash flow generation. This makes me confident in our ability to achieve our targets for the year. In the second half, we will start implementing restructuring and supply chain improvement, as per our turnaround plan. Additionally, we are progressing as planned with our strategic review, with strong interest from multiple parties, and continue to target a decision by this summer. Last, we have now commenced a strategic partnership with Kylie Jenner, and we look forward to building a high growth, digitally native beauty brand. In sum, we are continuing to execute on the three pillars of our roadmap, including implementing our turnaround plan, refocusing on our core fragrances, cosmetics and skincare businesses in conjunction with a substantially improved leverage profile, and amplifying our growth potential."

FY20 Outlook

The FY20 outlook remains unchanged:

• Net Revenues: Stable to slightly lower LFL
• Adjusted Operating Income: 5-10% YoY growth, at constant FX and portfolio scope, after increased working media investment behind our brands
• Adjusted EPS: Mid-single digit growth
• Free Cash Flow: Moderate improvement YoY

For earnings history and earnings-related data on Coty (COTY) click here.