Coty recorded “solid” travel retail growth in Q1 of its FY2026 financial year for the period ended 30 September, led by what the company described as an accelerating recovery across Asia {we will bring you more details after today’s earnings call}.
Groupwide, net revenues were down -6% on a reported basis and -8% like-for-like to US$1.58 billion, including a +2% benefit from FX.
The business generated a US$1.02 billion gross profit and reported an adjusted gross margin of 64.5%, a decrease of 100 basis points year-on-year. This reflects lower sales as well as a 40 basis point headwind from tariffs.
Reported operating income fell to US$185 million (adjusted US$240.5 million), down -22% with an 11.7% reported operating margin.
Reported net income was US$64.6 million (adjusted US$106 million) with a 4.1% margin. Adjusted EBITDA was US$296.1 million, down -18% year-on-year.
Encouragingly, the company delivered stand-out Prestige sell-out gains in China — up +15% year-on-year, more than double the market. China, including the Hainan offshore duty-free market, now represents 3% of total sales.
Prestige net revenue stood at US$1.07 billion, representing 68% of total sales and marking a -4% decline reported (-6% like-for-like).
The company noted that while sales were lower, underlying Prestige sell-out remained positive and the category continues to outperform broader beauty market trends, particularly in fragrances.
Prestige generated reported operating income of US$208.9 million, compared to $241.5 million in the previous year.
The Consumer Beauty division, accounting for 32% of total revenue, recorded US$507.7 million net revenues, down -9% reported (-11% like-for-like). The division reported operating loss of US$7.7 million, compared with reported operating income of US$14 million in the prior year.
Time ticks by for Gucci licence
As reported, Kering and L’Oréal Group recently announced a €4 billion beauty agreement that will see L’Oréal acquiring Kering Beauty. The deal includes the beauty licence for Kering-owned Gucci, once the current licence with Coty expires.
In response to this, Coty said: “Coty continues to operate Gucci Beauty under its current agreement, with a focus now on optimising the brand during its remaining term.”
Coty appointed Gordon von Bretten as President of Consumer Beauty to help drive innovation, brand equity and consumer engagement within the division.
In addition, the group initiated a strategic review of its mass colour cosmetics portfolio (US$1.2 billion in FY25 sales) to address structural challenges, including portfolio optimisation, innovation acceleration and digital expansion, as part of its broader transformation programme.
Importantly, the company announced plans to better integrate its Prestige Beauty and Mass Fragrance businesses to drive sustainable, profitable growth.
Coty CEO Sue Nabi commented, “Coty’s strategic progress is accelerating as we elevate as a Prestige beauty company with an emphasis on fragrances and scenting across price points, complemented by capabilities in prestige cosmetics and skincare.
“In line with our recent strategic announcements, over the coming years we will concentrate investment behind our portfolio brands with the greatest long-term potential, while also building and elevating our newly added licenses and brands.
“By integrating Prestige Beauty and Mass Fragrances; unlocking material opportunities in ultra-premium fragrances, mists and broader scenting; and implementing a performance improvement plan for our Consumer Beauty brands while pursuing our strategic review of Consumer Beauty Cosmetics and Brazil, we will ensure that Coty realises the full value of its scale as a fragrance and scenting powerhouse. This will further strengthen our top three position in global fragrances.”
Performance by region
Q1 FY26 net revenue in the Americas reached US$649.6 million, down -6% reported and like-for-like. The decline was driven by lower Prestige sales, linked to inventory rightsizing in the fragrance category, and weaker US colour cosmetics performance within Consumer Beauty.
The prestige fragrance category continued to expand at a mid-single-digit rate globally, while Coty’s US prestige fragrance sell-out reached parity with the overall market for the first time in recent quarters.
Coty is reviewing its Brazil operations (US$400 million in FY25 sales), with the goal of enhancing profitability and operational efficiency.
EMEA net revenues declined -4% on a reported basis (-9% lower like-for-like) to US$754.8 million, including a 5% FX tailwind. The performance was impacted by softness in Consumer Beauty colour cosmetics and lower Prestige revenue across several markets.
Asia Pacific net revenue totalled US$172.8 million, down -9% reported and like-for-like. Coty noted continued softness across most markets.
In China, Coty’s Prestige sell-out grew +15%, more than double the category average, driven by strong performance across fragrances, makeup and skincare.
Nabi added: “Following recent changes, Coty’s underlying business trends are already improving, in line to slightly ahead of our expectations, particularly in Prestige. In Q1, our US Prestige fragrance sell-out grew by a mid-to-high single-digit percentage, in line with the market, and we expect the US Prestige business to return to both sales and sell-out growth in Q2.”
A strong innovation pipeline
Coty detailed a strong innovation pipeline for FY26 and beyond, anchored by launches across both Prestige and Consumer Beauty, including BOSS Bottled Beyond, Swarovski, Etro, Marni, Marc Jacobs Beauty and its continued expansion into fragrance mists.
Nabi added: “We continue to build on our multi-year track record of leading fragrance innovations. BOSS Bottled Beyond is currently on track to be the number two male fragrance launch of the fall in Europe, the number one male launch by volume in Germany, and the number one male SKU in Australia, and is unlocking a significant untapped opportunity for Hugo Boss in the US market, where the brand historically had limited presence.
“We have also expanded into new scenting adjacencies across price points, including our ultra-premium collections, which grew +17% on a reported basis in Q1. Coty also unlocked material adjacencies with mist launches under Calvin Klein, Kylie Cosmetics, philosophy, adidas and Nautica, with results confirming that fragrance mists boost brand sales while delivering strong margins.
“Finally, we are seeing positive early results on internally developed scenting projects, such as the Arabian fragrance collection Jawhara, which has launched on Amazon in the US as well as several retailers across Europe.”
She added: “We see tremendous potential to accelerate this momentum, driven by a pipeline of new brand launches and innovations, market-leading ecommerce and globally scaled brick & mortar presence. This includes fragrance launches under Swarovski, Etro and Marni planned within the next two years and Prestige cosmetics innovations, such as makeup under Marc Jacobs Beauty on track to launch in 2026.
“This multi-pronged approach has underpinned our success in nurturing and elevating our core designer brands in the last six years, with Burberry, Hugo Boss, Gucci, Chloe and Marc Jacobs all materially higher than 2019.
“As a result, we expect Q2 sales to be at the more favourable end of our previous guidance, with a return to sales and profit growth in the second half of FY26.”
Outlook
Coty noted that consumer demand for beauty remains robust, particularly across the fragrance category, though retailer caution and macroeconomic uncertainty continue to influence order volumes.
Against this backdrop, Coty is advancing a multi-brand strategy to capture new growth opportunities, led by significant innovation across its fragrance portfolio.
The company is strengthening its presence in the ultra-premium fragrance segment and expanding its footprint in fragrance mists, while continuing to optimise retailer inventories to reflect current demand trends and ensure closer alignment between sell-in and sell-out.
The company expects gradual sales improvement throughout fiscal 2026, supported by upcoming launches and closer alignment between sell-in and sell-out.
Following strong sales momentum in October, especially in Prestige, Coty forecasts Q2 like-for-like sales at the favourable end of its -3% to -5% guidance, with sequential trend improvement in both Prestige and Consumer Beauty.
In addition, FX tailwinds are expected to contribute a low- to mid-single-digit benefit in reported revenues. The company anticipates a return to like-for-like growth in the second half of FY26, underpinned by innovation, operational discipline and its expanded fragrance portfolio.
Coty continues to expect a gradual profit trend improvement, with adjusted EBITDA declining by a low-to-mid teens percentage in 2026 Q2. ✈
More to follow after the earnings call.
