Coty opens FY27 with 1% revenue fall as conflict hits margin

By Priya Raman

Coty’s net revenue for the three months ended 30 September 2026 fell 1% to $1.55 billion, while reported and adjusted gross margin dropped 120 basis points year over year to 63.3%. Management calls fiscal 2027 a “transitional year” for the business.

The Middle East conflict weighed on both gross-margin measures through higher freight and material costs. Coty also recorded higher excess and obsolescence, which it linked to elevated demand forecasts.

What did Coty report in the first quarter?

Prestige beauty accounted for 68% of Coty’s total sales. Its $1 billion in reported net revenue fell 1%, matching its 1% like-for-like decline.

Markus Strobel, Executive Chairman and Interim CEO, said sales, adjusted EBITDA and EPS beat expectations, while free cash flow improved significantly under the Coty.Curated strategy.

“Our like-for-like sales decline narrowed to 2%, broadly in line with the fourth quarter, and a clear improvement from the declines of 6% and 4% in the first and second halves of fiscal 2026, reflecting improvements in key markets like the US, Asia Pacific and Latin America,” Strobel said.

EMEA net revenue fell $44.8 million year over year, mainly because lower sales in the Middle East and Europe outweighed growth in Africa. Strobel cautioned that Coty still needed to turn early progress into a broad-based recovery.

Within prestige, reported net revenue fell $11.1 million year over year. A moderate decline in prestige fragrance and skin care was partly offset by prestige cosmetics growth.

Reported operating income increased, primarily on lower advertising and consumer promotional costs, although lower gross margin largely offset that benefit.

Consumer beauty reported net revenue dropped $10.9 million from the previous quarter, reflecting lower colour cosmetics and mass fragrance sales. Growth in mass body care partly offset the decline.

The quarter improved at group level, but the sales recovery remained incomplete.

How is Coty.Curated changing the portfolio?

Coty’s Coty.Curated framework, introduced after the group’s 2026 results, aims to strengthen the business by concentrating investment behind six core prestige brands.

Strobel said the framework was beginning to deliver results. The six brands represented 73% of prestige sales in Q1. They moved from a 6% like-for-like decline in the first half of fiscal 2026 to 5% growth in Q1. Five of the six grew, and their combined sell-out returned to growth.

Strobel said the first-half launches were resonating with consumers and tracking ahead of plan:

• Boss Bottled Beyond for Her
• Burberry Goddess Amber Vanilla
• Mood Stones by Kylie Jenner
• Marc Jacobs Beauty make-up

Coty has also extended its Marc Jacobs Beauty licence with WHP Global and G-III Apparel Group, the brand’s co-owners, for 40 years. The company says the agreement will accelerate global growth across categories and markets; Marc Jacobs is one of the core brands in its prestige portfolio.

The licence extension follows L’Oréal taking over the Gucci Beauty licence from Coty one year earlier than expected after a deal with Gucci owner Kering. Coty’s licence to produce Gucci fragrance and make-up had been expected to terminate in 2028, following L’Oréal’s €4bn acquisition of Kering Beauté the previous year.

Coty now has 40 years of certainty around Marc Jacobs as the Gucci licence winds down.

What does Coty expect for the rest of FY27?

For the rest of FY27, Coty plans to build on the fully incremental launch of Boss Bottled Beyond for Her to grow Hugo Boss’ female fragrance business while keeping investment focused on core franchises. It also expects higher Burberry marketing investment to strengthen fragrance and make-up momentum and deepen consumer engagement.

Coty expects Q2 2027 like-for-like revenue to decline by a low-single-digit percentage, broadly consistent with the previous two quarters.

Soraya Benchikh, CFO, said: “I joined Coty at a pivotal moment, with clear priorities to deliver quality growth, improve productivity to fund disciplined reinvestment, and strengthen cash generation and conversion.”

She called the first quarter encouraging early progress but said sustainable improvement would take time. Adjusted EBITDA beat guidance on better-than-expected sales and cost control while Coty continued investing in its brands; its year-over-year decline moderated to 7% from steeper falls in fiscal 2026.

Coty enters Q2 with continued contraction still likely, but stronger core brands and better cost control underneath.