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Coty Stock Surges As Kylie Cosmetics, Gucci Drive Q1 Earnings Beat, Forecast Boost

Coty posted stronger-than-expected first quarter profits Monday and unveiled plans to sell a further $215 million stake in its Wella beauty division to private equity group KKR.

Coty shares surged higher Monday after the luxury brands and cosmetics group posted stronger-than-expected first quarter earnings and unveiled plans to sell a $215 million stake in its Wella beauty care division. 

Coty, whose brands include CoverGirl, Max Factor, Burberry, Hugo Boss and Kylie Cosmetics, said adjusted earnings for the three months ending in September, its fiscal first quarter, were pegged at 8 cents per share, up from a loss of 1 cents per share over the same period last year and 5 cents ahead of the Street consensus forecast. Group revenues, Coty said, rose 22% to $1.37 billion, against analysts' estimates of a $1.12 billion tally.

Looking into its 2022 financial year, Coty forecast adjusted earnings of between 19 cents and 23 cents per share, with organic sales growth in the "low to mid teens percent", up from up from its previous guidance of "low teens growth". 

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"Our objective coming into fiscal 2022 was to build on the great results we delivered last year and further execute on our strategic growth pillars," said CEO Sue Nabi. "I am very pleased to say that we are off to a great start, building upon our success. Q1 marks the fifth consecutive quarter of Coty delivering results inline to ahead of expectations." 

"Importantly, our Q1 results exemplify the virtuous cycle that we have been working to create, where our strong topline performance coupled with sustained gross margin expansion and cost initiatives, fuel both profit expansion and targeted re-investments to support future growth," she added.  

Coty shares were marked 9.8% higher in early trading Monday to change hands at $10.26 each, a move that would extend the stock's year-to-date gain to around 45%.

In a separate announcement, Coty said it closed the sale of a further 4.7% stake in its Wella division to private equity group KKR for $215.7 million, leaving it with 25.9% ownership in the professional beauty business. KKR, in turn, will continue to hold a 2.4% stake in Coty.