Coty, the global beauty conglomerate based in New York, is contemplating a significant strategic shift by exploring the possibility of a dual listing on the Paris Stock Exchange. This move underlines Coty’s commitment to strengthening its connections with France and Europe and tapping into new investor opportunities.

While Coty has not yet confirmed its intentions regarding the dual listing, the company sees it as a promising avenue to attract fresh investments and solidify its global presence, especially in the realm of prestige beauty products. This development aligns with Coty’s recent pivot towards premium products and brands.

Sue Nabi, Chief Executive Officer of Coty, recently addressed investors in Paris at the Hôtel du Louvre. This location held historical significance as it was where fundraising efforts for the Statue of Liberty, symbolizing the enduring friendship between France and the US, were initiated. This choice of venue sent a clear message that Coty is determined to strengthen its French connections.

Despite Coty’s impressive growth and solid market position, it remains dwarfed by industry giants like L’Oréal and Estée Lauder, boasting market caps of $216 billion and $69 billion, respectively, compared to Coty’s $10.6 billion. Coty’s contemplation of a Paris listing is a strategic move to attract new investors and bolster its global presence as it strives for growth in the prestige segment. This decision coincides with a favorable period for Coty, with the company’s stock approaching a four-year high. Even as Kering, a significant licensor and the owner of Gucci, unveils ambitious plans in the beauty industry, Coty has raised its profit outlook for fiscal 2023 three times this year. It now anticipates EBITDA of $965 million to $970 million, up from $955 million to $965 million.

However, it’s essential to note that the dual listing is not yet confirmed, and Coty could decide otherwise. The meeting with investors served as an initial step to gauge interest.

The Dual Listing Potential

If Coty proceeds with its dual listing plans, it will be listed on both the New York Stock Exchange, where it has been listed since 2013, and the Paris Stock Exchange (PAR). This would enable investors to acquire shares on both platforms.

Dual listings are typically associated with large multinational corporations like Amazon and Apple due to their size and capital requirements. For a European company to list in the US is common, given the vast investor base and the extensive reach of the US market. However, the reverse, listing in Europe as a US-based company, is less conventional. The specifics of Coty’s potential Paris listing, including its structure and timeline, remain uncertain.

Paris: A Beacon for Coty

Paris holds a unique allure for Coty, as it represents the historical birthplace of the beauty industry, with significant influence over regional investors. Several luxury and beauty giants, including LVMH, Kering, L’Oréal, and Hermes, are listed on the Paris Stock Exchange. This presence of industry leaders in Paris makes it an attractive hub for investors, aligning with Coty’s strategic objectives.

Furthermore, international funds often have restrictions on investing in American companies or the amount of shares they can hold. A Paris listing would grant European investors greater access to Coty shares. Already, there is growing interest among European investors, with Sue Nabi noting that 30 percent of Coty’s investors are European, reflecting a 10 percent year-over-year increase. A dual listing would provide Coty with fresh capital and enhance liquidity for existing shareholders.

Coty may be seeking larger and more engaged investors with longer-term perspectives. Additionally, a listing could facilitate relationships with investors who possess in-depth knowledge of the luxury market. By broadening its investor base, Coty aims to increase its chances of securing quality investments and boosting liquidity. In Europe, the luxury sector enjoys significant international trade, attracting investors with a strong understanding of the industry.

Many aspects of the potential listing, including its structure and precise financial benefits for investors, remain undisclosed. Coty has indicated that if it proceeds, it would list existing shares rather than issuing new ones.

Emphasizing European Heritage

Beyond diversifying its investor base, a dual listing would allow Coty to accentuate its French roots and European identity. This approach aligns with the broader strategy of reinforcing brand equity through a European lens. Coty has already taken steps in this direction by introducing its first branded perfume line, “Infiniment Coty Paris,” in May. The company has also expanded into prestige skincare and forged partnerships, such as the one with bio-fermented skincare company Orveda. Notably, the EMEA region accounted for a significant portion of Coty’s business, representing 46 percent of sales in the third quarter of 2023, compared to 42 percent in the US.

Coty recognizes that the prestige beauty category holds immense potential, with strong growth evident. Sales in this category surged by 16 percent in the first quarter of 2023 compared to the previous year, outpacing mass-market growth, which stood at 10 percent, according to market research firm Circana. Coty’s prestige revenue also experienced a 10 percent increase, while its mass-market segment grew by 6 percent in the quarter ending on March 31. Notably, prestige products now account for over 60 percent of Coty’s sales, leading to an improved margin structure. Gross margin increased to 64 percent in the same period, up from 56 percent in 2021.

While Coty’s mass-market business remains steady, especially with the revitalization of CoverGirl, the higher-end segment is poised for substantial growth. The emphasis on identity and European heritage aligns with Coty’s strategy to secure its position in a rapidly evolving market.

The Timing of Coty’s Move

The question of “why now?” is aptly answered by Sue Nabi: “why not now?” Coty’s decision to explore a dual listing aligns with its consistent delivery of strong results, fostering renewed trust among investors. JAB Holdings, the majority owner of Coty, supported the May announcement, highlighting Sue Nabi’s leadership and the successful turnaround that paved the way for the dual listing structure.

Coty’s profits are improving, and it possesses strong growth potential thanks to yet-to-be-realized international investments and ventures into new categories such as skincare, as pointed out by Korinne Wolfmeyer, Vice President and Senior Research Analyst at Piper Sandler. Additionally, after being burdened with long-term debt following its acquisition of several P&G brands, Coty has managed to regain financial control. This financial stability is crucial in attracting new investors, as noted by Anna Lizzul, Vice President of Consumer Equity Research at Bank of America.

Ultimately, the hope with a French listing is that it could boost Coty’s stock price and deliver benefits for investors. But whether Coty delivers has to do with its performance on the strategic initiatives laid out in 2021: stabilize and grow the consumer beauty business, accelerate luxury and prestige makeup, build a skincare portfolio, grow direct-to-consumer channels, expand in China with prestige products, and invest in sustainability.

“While a dual listing alone may not be a definitive positive catalyst, a combination of strong execution, sales growth, margin expansion, and the potential for attracting diverse investors positions Coty for continued success,” emphasized Anna Lizzul.

In summary, Coty’s exploration of a dual listing in Paris underscores its commitment to its European heritage and its strategic vision for growth in the dynamic beauty industry. This move holds the potential to reshape Coty’s trajectory and elevate its position in the global beauty market, marking an exciting chapter in the company’s journey.