Coty Inc, the parent company of popular beauty brand CoverGirl, has announced a boost in profit expectations for the year. The company attributes this success to its strategic emphasis on high-margin skincare products, which has helped offset the negative effects of supply chain disruptions and rising inflationary pressures. Even though Coty has faced sales challenges due to COVID-19 restrictions in some markets, the company’s stock rose approximately 5%, largely due to the encouraging rebound in makeup demand in the United States. This uptick in demand is primarily driven by the reopening of office spaces and social gatherings.

Sue Nabi, CEO of Coty, expressed her enthusiasm in an interview, highlighting the success of selling more expensive products in regions with high price elasticity. Specifically, she mentioned China and the popularity of the skincare brand Lancaster. Additionally, new product launches like Gucci’s Flora Gorgeous Gardenia and Burberry Hero have contributed to increased sales in the United States.

This decision to raise profit outlook for the full year comes following a similar move by competitor Estee Lauder Cos Inc, which credited its increase to price hikes and a higher number of customers returning to stores. Coty now expects an adjusted per-share profit forecast of between 22 cents and 26 cents, surpassing the previous range of 20 cents to 24 cents.

While Coty’s second-quarter revenue of $1.58 billion fell slightly short of analysts’ expectations of $1.60 billion, investors remain optimistic due to the company’s strong operating performance. Analysts noted that the sales miss in the prestige division was the most surprising aspect of the report. Although the division experienced a 12% increase in sales in the second quarter, this was slower growth compared to the impressive 34% jump observed in the first quarter.

On an adjusted basis, Coty earned 17 cents per share, surpassing estimates of 11 cents. Overall, the company’s strategic focus on higher-margin skincare products and successful product launches have contributed to increased sales and profitability, even in the face of market challenges.

Useful Links:
1. Coty Inc Official Website
2. CNBC: How the COVID-19 Pandemic Affected Makeup Sales