By Juveria Tabassum and Ananya Mariam Rajesh
(Reuters) – CoverGirl parent Coty forecast annual profit below Wall Street expectations on Tuesday, hurt by steeper input expenses, even as the company raised product prices to shield itself from towering costs and a strong dollar.
Raw material and freight costs have eased from pandemic-era highs, but a tight labor market is exacerbating the drag of persistent inflation on production costs.
This overshadowed Coty’s fourth-quarter revenue beat as customers splurged on both its high-end and affordable fragrances and cosmetics, ranging from Hugo Boss to Gucci.
Shares of the perfume and cosmetics maker were up about 2% in premarket trading.
A strong dollar has hurt the company, which makes more than half of its sales from overseas markets, mainly Europe, the Middle East and Africa.
Coty’s Chief Financial Officer, Laurent Mercier, told Reuters in an interview that inflation is here to stay, at least in the first half of fiscal 2024.
“But then we are expecting some easing of these cost of goods inflation in the second half,” Mercier said.
Coty’s cost of sales grew to $502.1 million, from $446.2 million a year ago. The company reported a quarterly adjusted profit of 1 cent per share, while analysts had expected a profit of 2 cents, as per Refinitiv data.
Still, consistent price hikes helped it bump up its margins by 110 basis points, to 62.9%, in the quarter ended June 30.
Coty forecast 2024 adjusted profit between 44 cents and 47 cents per share. Analysts on average had expected a profit of 48 cents, according to Refinitiv data.
Its net revenue for the fourth quarter rose 16%, to $1.35 billion, topping an expectation of $1.31 billion.
In contrast, rival Estee Lauder provided downbeat annual forecasts, hurt by frail recovery in travel retail and slowing U.S. demand.
(Reporting by Juveria Tabassum and Ananya Mariam Rajesh in Bengaluru; Editing by Pooja Desai)
