Coty (NYSE: COTY) reported Q4 EPS of ($0.05), $0.07 worse than the analyst estimate of $0.02. Revenue for the quarter came in at $1.25 billion versus the consensus estimate of $1.21 billion.

Outlook

Entering FY26, the market backdrop remains complex. Consumer demand for beauty continues to be solid, particularly for fragrances across price points and formats. At the same time, broader macroeconomic and tariff uncertainty is fueling cautious retailer ordering and a more promotional competitive environment. Against this backdrop, Coty is launching major innovations, capturing new growth opportunities with a multi-brand push into fragrance mists, and expanding distribution across fragrances. In parallel, the Company is continuing to clean the baseline, including assuring that retailer inventories are rightsized relative to current demand trends to drive alignment between sell-in and sell-out, and that the Company is rebalancing its resources within Consumer Beauty to overdrive its profit engines, particularly mass fragrances.

Consistent with its prior outlook, Coty expects a gradual improvement in sales trends over the course of FY26 from the 4Q25 LFL levels when the Company actively intervened to clean up the baseline of the business. Coty anticipates a LFL decline of 6% to 8% in 1Q26 and a LFL decline of 3% to 5% in 2Q26, with a return to LFL growth in 2H FY26. These expected gradual improvements in sales trends in both Prestige and Consumer Beauty are underpinned by multiple levers, including several major launches in both divisions, and geographic and channel expansion, coupled with easier comparisons in the second half of the year.

On the reported revenue side, Coty estimates a low single digit percentage FX benefit in the first half.

Coty expects the organizational changes it is making to start yielding results in the coming year, with the benefits building over the coming quarters. The Company expects 1H FY26 gross margin pressure stemming from lower sales as well as the net impact from tariffs, particularly as Coty's tariff mitigation efforts will contribute more meaningfully in 2H FY26. At the same time, the step-up of fixed cost savings as part of its All-In To Win program is expected to broadly balance the resumption of variable compensation, with fluctuation in the quarterly phasing of net fixed costs over the course of the year. Altogether, Coty expects a gradual improvement in year-on-year profit trends from 4Q25, with 1Q26 adjusted EBITDA declining at a mid-to-high teens percentage and 2Q26 adjusted EBITDA declining at a low-to-mid teens percentage, followed by a return to adjusted EBITDA growth in 2H FY26.

The benefit from both lower interest expense and a lower tax rate is supporting a high single digit to mid-teen percentage decline in 1H26 adjusted EPS to $0.33 to $0.36, with adjusted EPS growth in 2H26.

Coty estimates seasonally stronger free cash flow in 1H26 of over $350 million, resulting in leverage at the end of CY25 approximately in line with to below the 4Q25 level of ~3.5x, reflecting the lower adjusted EBITDA and FX headwinds from the Euro-denominated debt. The Company remains fully focused on deleveraging over CY26 and beyond, targeting an investment grade profile.

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