Yahoo Finance Coty (COTY) Gains on Growth in Online Sales, Core Beauty Units
With the easing of pandemic-led restrictions and individuals spending more time outdoors, the demand for makeup and beauty products is picking up pace. The same trends are supporting some players from the cosmetics space, including Coty Inc. COTY. The company manufactures, markets and distributes beauty products worldwide. Coty is gaining from growth in the Prestige and Consumer Beauty categories and strong online sales. It is also progressing well with its strategic growth pillars, which include boosting makeup brands, fragrance and skincare offerings.
Shares of this Zacks Rank #1 (Strong Buy) company have increased 25.7% in the past three months against the industry’s decline of 17.3%. Let’s take a closer look at the factors driving the stock.
You can see the complete list of today’s Zacks #1 Rank stocks here.
E-commerce Sales on the Rise
Consumers growing inclination toward online shopping has been serving as an upside for Coty’s online wing. Coty’s e-commerce business has been performing impressively for a while now. It is on track with strengthening the e-commerce and direct-to-consumer capabilities, while focusing on digital-first omnichannel.
During first-quarter fiscal 2022, the company’s e-commerce sales rallied 23%. Coty’s e-commerce penetration reached the mid-teens percentage of revenues in the first quarter. In the reported quarter, e-commerce sales in the prestige segment rose 21% year on year and increased 27% year on year in the Consumer beauty unit.
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Strengthening Prestige & Consumer Beauty Units
The company’s long-term growth strategy consists of six strategic pillars aimed at sustainable growth. These include stabilizing Consumer Beauty make-up brands and mass fragrances, accelerating luxury fragrances and setting up Coty as a core player in prestige make-up. The company is working to establish a strong skincare portfolio in the prestige and mass channels. It is striving to boost its presence in China via Prestige and certain Consumer Beauty brands. Such efforts along with prudent moves to boost direct-to-consumer capabilities are targeted toward setting Coty as an industry leader.
With respect to stabilizing the consumer beauty brands, the company is repositioning campaigns and advertising. Coty’s efforts to reposition its key Consumer Beauty brands — COVERGIRL, Rimmel and Max Factor — are on track. Under the COVERGIRL banner, the company has been coming up with clean, vegan and cruelty-free beauty products. The company is also launching product launches under the prestige unit. During the first quarter, the company rolled out Gucci Flora Gorgeous Gardenia, Burberry Hero, Calvin Klein Defy among others. It also relaunched Kylie Cosmetics. The company is benefiting from impressive performance across Burberry, Marc Jacobs, Gucci and Chloe.
Management is on track to boost its leading brands through innovations and renovations of key icons for the fragrance business. It is also making progress with the expansion of the skincare portfolio. Coty is undertaking strategic partnerships to enhance its brand portfolio. The company entered into a multi-channel agreement with Perfect Corp. — a well-known beauty tech solutions provider. The partnership will help Coty’s customers to shop in the most convenient and personalized manner, both online and offline.
Wrapping Up
Coty continues to witness strong growth in the beauty market as it progresses with the second quarter of fiscal 2022. Management highlighted that the business is witnessing growth across the United States and China along with steady improvement in Western Europe. It is also seeing a strong rebound in Travel Retail. Backed by such upsides and gains from product launches, management raised its LFL sales view for fiscal 2022. It now expects revenue growth in the range of low-to-mid teens percentage, up from the previous guidance of a low-teens growth.
How Other Cosmetic Stocks are Faring
Inter Parfums, Inc. IPAR, flaunting a Zacks Rank #1, has been benefiting from its focus on innovation and product launches. This well-known manufacturer, distributor and marketer of a wide range of fragrances and related products is gaining from strong demand conditions for some its largest brands. Inter Parfums is striving to expand offerings under well-known banners such as Donna Karan, DKNY, Oscar de la Renta, Jimmy Choo and Kate Spade among others. IPAR has been exploring potential license deals with different brands.
Inter Parfums’ shares have rallied 23.7% in the past three months. The Zacks Consensus Estimate for its current fiscal-year sales and earnings indicate growth of 51.4% and 95.9%, respectively. IPAR has a trailing four-quarter earnings surprise of 29.7%, on average.
Helen of Troy Limited HELE, carrying a Zacks Rank #2 (Buy), is focused on strengthening its Leadership Brands portfolio. These brands account for a significant chunk of the company’s sales, and generate solid margins and volumes. HELE’s leadership brands include names like Braun, OXO, Vicks, Honeywell and more. The company’s robust online operations have been yielding results. Amid the easing of pandemic-led norms, Helen of Troy’s Beauty and Houseware segments have been doing well.
Helen of Troy’s shares have moved up 7.7% in the past three months. HELE has a long-term earnings growth rate of 22.2%. The company has a trailing four-quarter earnings surprise of 19.8%, on average.
Renowned cosmetics player, Estee Lauder Companies Inc. EL, has been gaining from strength in its skincare category, thanks to consumers’ rising at-home grooming trends. Estee Lauder’s online business has also been performing well and is likely to remain a major growth engine. In fact, EL’s brand teams have been fully committed to enhancing consumer experiences online. This Zacks Rank #3 (Hold) company is also progressing well with strong cost-saving measures, which are aiding margins.
Shares of Estee Lauder have increased 3.9% in the past three months. The Zacks Consensus Estimate for its current fiscal-year sales and earnings indicate growth of 16% and 15.2%, respectively. EL has a long-term earnings growth rate of 11.2%.
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