Updated from 7:59 a.m. EST with additional details
The New York-based beauty company reported adjusted earnings of 30 cents per share, below Wall Street's projections of 34 cents per share. Revenue came in at $2.30 billion, while analysts had forecast $2.35 billion.
CEO Camillo Pane said the second quarter was "challenging." "The business was impacted by significantly higher-than-anticipated inventory levels in the market on the acquired P&G Beauty Business, competitive pressure in the consumer beauty division and the distraction associated with the merger integration efforts," he added.
Fiscal 2017 is a "transitional year" for the company, which it has previously noted. Coty expects the combined company net revenue decline in constant currency will slow down in the second half of the year.
Coty is still in the midst of integrating the P&G business, but said it has "already started to tackle the growth challenges of our business." Pane's strategy includes strengthening global brands, shifting more resources to fuel the growth of brands with higher growth potential, stabilizing the remaining brands and continuing to expand geographic reach.
Revenue in the consumer beauty segment fell 11% in constant currency during the most recent quarter vs. the combined legacy Coty and P&G beauty net revenues a year ago. Consumer beauty, which is the largest segment and includes color cosmetics and nail polish, continues to be a pocket of risk, according to Piper Jaffray analyst Stephanie Wissink.
"Weakness in the U.S. in particular is something we expect to continue to monitor, given the general industrywide view that worldwide color cosmetics trends begin in the U.S.," Wissink said in a note.
Revenue in the luxury segment slumped 4% in constant currency due to its continued wholesale distribution reduction and difficult innovation comparisons compared to last year. Growth in brands such as Hugo Boss, Davidoff and Chloe were offset by declines in Calvin Klein and Marc Jacobs.
Professional beauty net revenues increased 14% in constant currency, helped by strength in professional hair and revenue from ghd, a high-end hair styling brand, which was acquired in November.