Coty Inc. reported a 3% decline in third-quarter net revenues on a like-for-like basis, bringing total sales to $1.299 billion—slightly missing analysts’ projections of $1.3 billion. The company’s shares dropped 7% by Wednesday afternoon following the announcement, as the beauty giant cited a difficult retail and consumer environment globally.
Chief Executive Officer Sue Nabi described fiscal year 2025 as "pivotal and transitional" for the company. Speaking on an investor call, Nabi pointed to a "triple headwind" comprising a slowing fragrance market, tough year-on-year comparisons, and reduced retail inventory levels—especially in the U.S.
In April, Coty laid off 700 employees globally as part of its ongoing restructuring efforts aimed at resetting its business baseline and preparing for what it hopes will be a stronger 2026.
Prestige and Consumer Categories Under Pressure
Sales in Coty’s prestige division—which includes Burberry, Marc Jacobs, Infiniment Coty Paris, and Jil Sander and makes up 64% of the group’s revenue—fell 2.5% to $829 million in Q3. The decline was attributed to softer prestige fragrance and makeup sales, following blockbuster launches in 2024 that were difficult to replicate this year.
Meanwhile, Coty's consumer beauty segment, which accounts for 36% of its revenue and includes mass-market brands like CoverGirl and Max Factor, recorded a 5% dip to $470 million. The drop was primarily driven by underperformance in colour cosmetics and bodycare, partially offset by growth in mass fragrance and skincare.
The mass makeup category, in particular, has been hit hard, especially in the U.S. market. Coty plans to scale innovation across CoverGirl, Max Factor, and Bourjois to meet evolving consumer demands. Rimmel’s Thrill Seeker Ink Pens—launched in the UK—saw a surge in popularity via TikTok Shop and Amazon, which the company sees as a playbook for future launches.
Social Commerce and Strategic Refocusing
Coty is actively pivoting toward faster-growing sales channels. CoverGirl is set to debut on TikTok Shop next month, and Nabi confirmed that new fragrance formats and broader pricing strategies are in the pipeline.
In addition, Coty is assessing its brand portfolio for potential divestitures, especially within the consumer beauty segment. The recent divestment of Kim Kardashian’s Skkn by Kim brand highlights this strategy.
Tariff Risks and Regional Dynamics
Geographically, Coty’s Q3 sales in the Americas slipped by 1%, while EMEA fell by a similar margin to $610 million. However, EMEA saw isolated growth, with European and African markets up by 3%. Asia-Pacific sales dropped 4% to $159 million due to weak performance in China and the travel retail sector.
Tariff-related challenges are also in focus. While Coty is somewhat shielded—thanks to local U.S. manufacturing for its consumer products and negligible Chinese imports—its prestige fragrances are largely made in Europe. The company is now exploring shifting production to the U.S. and diversifying its supplier base, especially for components sourced in China.
To manage near-term pressures, Coty has stockpiled prestige fragrance inventory to sustain operations through the end of fiscal 2025. A mid-single-digit price increase in the U.S. for prestige items is also expected this summer.
Looking Ahead to 2026
Despite current struggles, Nabi remains optimistic about Coty’s long-term growth. The company is banking on new launches, increased investment in innovation across fragrance, makeup, and skincare, and a broader rollout in social commerce to drive recovery.
“We are in control of our destiny,” said Nabi. “In fiscal 2026, we have exciting launch and distribution initiatives planned, which we anticipate will improve sales.”
