Coty Q4 Sales Beat Expectations, Free Cash Flow Hits $348M
Coty reports Q4 like-for-like sales down 1%, beating forecasts. Full-year free cash flow reached $348 million.
Key points
- Coty Q4 like-for-like sales declined 1%, beating expectations due to strong U.S. orders.
- Fiscal 2026 free cash flow was $348 million, aided by $250 million in cost savings.
- Net debt decreased by $840 million year-over-year, supporting balance sheet strength.
Coty (NYSE: COTY) reported fourth-quarter fiscal 2026 results that outperformed market expectations, driven primarily by disciplined cash management rather than top-line growth. The company posted a 1% decline in like-for-like sales for the quarter, a result better than consensus due to resilient customer orders in the United States and a less severe impact from Middle East conflicts than anticipated.
Despite profitability challenges, Coty generated $348 million in free cash flow for fiscal year 2026. This financial resilience was achieved through strict working capital controls and reduced capital expenditures, allowing the company to reduce net debt by nearly $840 million year-over-year. The All In To Win savings program exceeded its target, delivering over $250 million in cost reductions.
Q4 Operational Performance
The prestige division showed sequential improvement, with a modest sales decline supported by strong growth in prestige cosmetics and successful new product launches. In the consumer beauty segment, sales improved but still lagged broader market growth. Positive trends were observed in the U.S. for key brands, including Sally Hansen and CoverGirl, which helped stabilize the division’s performance.
Adjusted gross margin for the quarter was 60.9%, down 140 basis points year-over-year. This margin compression was driven by lower sales volumes and elevated costs. Adjusted EBITDA and earnings per share landed at the high end of guidance, although management noted that overall profitability remains below desired levels.
Fiscal 2027 Strategic Outlook
Coty projects a low to mid-single-digit decline in revenue for the first quarter of fiscal 2027. The company is positioning the coming year as a transition period focused on strengthening core franchises and simplifying the portfolio to achieve consistent growth. Management plans to mitigate the impact of the Gucci license exit by fiscal 2028 through additional cost savings and new product launches.
According to the earnings call transcript published by benzinga.com, the strategic focus remains on deleveraging the balance sheet and maintaining cash discipline. The company aims to streamline its organizational structure to support these financial goals while navigating a challenging market environment.
