Coty (NYSE: COTY) reported Q3 EPS of $0.05, $0.01 worse than the analyst estimate of $0.06. Revenue for the quarter came in at $1.39 billion versus the consensus estimate of $1.37 billion.

Outlook

The global beauty market remains strong with demand for prestige fragrances continuing to grow at a double-digit percentage pace and above historical levels, while the mass beauty market is performing consistent with historical levels, growing at a mid-single-digit percentage. Coty continues to benefit from this attractive market dynamic with momentum across its core categories, strong launch results and early wins in key white spaces. The Company now expects FY24 LFL revenue growth to be at the high end of its prior guidance range of +9-11%, which includes expectations for low-to-mid single-digit percentage LFL revenue growth in Q4 reflecting an estimated mid-single-digit percentage headwind in its Prestige business from difficult prior year comparisons, when retailers restocked inventory as Coty\'s fragrance service levels recovered from earlier shortages. Reported revenues in Q4 are expected to include a 1-2% headwind from FX and an approximately 2% scope headwind from the divestiture of the Lacoste license. At the same time, the strong continued sell-out in Coty\'s business supports expected LFL revenue growth acceleration sequentially into first half FY25 from the levels expected in Q4.

Coty also expects FY24 adjusted EBITDA margin expansion to be at the upper of end of its previous guidance range of 10 to 30 basis points. At the same time, FX headwinds in Q4 are contributing to Coty\'s expectations for FY24 adjusted EBITDA to remain within its prior guidance range of $1,080 to $1,090 million based on current FX rates. In total, the Company continues to expect modest FY24 gross margin expansion year-over-year. Coty now expects FY24 adjusted EPS to be at the high end of the prior guidance range, excluding the equity swap, of $0.44 to $0.47, implying strong growth at the upper end of the +16-25% guidance range.

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