(Reuters) – CoverGirl parent Coty Inc posted quarterly revenue below estimates on Tuesday, as stringent COVID-19 curbs in some markets hurt demand for its high-end cosmetics and perfumes.
Sales in Coty’s prestige division increased just 12% in the second quarter, compared with a 34% jump in the first, following stop-start lockdowns in Australia and New Zealand, along with a zero-COVID policy in China, a high-growth market for many U.S. brands.
Still, sales rebounded in the United States and many other crucial markets as reopening offices and the return of social gatherings pushed up demand for makeup. Coty also benefited from its new line of products including the Flora Gorgeous Gardenia fragrance by Gucci and Rimmel’s Kind & Free collection.
Revenue from continuing operations increased 12% to $1.58 billion in the second quarter ended Dec. 31, while analysts polled by Refinitiv were expecting $1.60 billion. In November, the company forecast sales growth in the low teens.
“(Omicron) had a limited impact clearly. But … the sell-out of both divisions (prestige and consumer beauty) came around the mid-teens,” Chief Executive Officer Sue Nabi said in an interview.
The Hugo Boss fragrance maker, however, forecast fiscal 2022 sales growth towards the higher end of its prior low-to-mid teens range, after seeing growth improve to 13% last month.
Helped by its move to double down on high-margin categories, including skincare, and markets where customers have more spending power, it raised its adjusted per-share profit forecast to between 22 cents and 26 cents from 20 cents to 24 cents.
Coty rival Estee Lauder Cos Inc also raised its expectations for full-year profit last week, benefiting from price hikes and consumers venturing out more.
In the reported quarter, Coty’s adjusted gross margin was 64.6%, up from 58.7% a year earlier. Adjusted per-share earnings rose by 4 cents to 17 cents.
(Reporting by Praveen Paramasivam and Ananya Mariam Rajesh in Bengaluru; Editing by Devika Syamnath)
