Yahoo Finance Prudent Partnerships & Growth Pillars Aid COTY, High Costs Ail
Coty Inc. COTY is committed to strategic partnerships to enhance its brand portfolio. The beauty products provider is benefiting from its focus on six strategic pillars aimed at sustainable growth. The company is on track with optimizing the overall cost structure amid rising inflationary pressure.
Let’s discuss this in details.
Strategic Partnerships: Key Driver
Coty has made several strategic partnerships to enhance its brand portfolio. The company and Jil Sander unveiled that they have renewed their license deal and are in for a long-running collaboration. The renewed deal is likely to solidify the ongoing business alliance while laying the foundation for a new strategic project stretching over 10 years.
On Nov 18, 2021, Coty signed a licensing agreement with Orveda — an ultra-premium skincare brand made in France. Prior to this, Coty entered into a multi-channel agreement with Perfect Corp. — a well-known beauty tech solutions provider. The partnership will help Coty’s customers shop in the most convenient and personalized manner, online and offline. On Mar 3, 2021, the company signed a letter of intent to partner with LanzaTech — a pioneer in producing next-generation green and sustainable ingredients.
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What Else is Driving Growth?
The Zacks Rank #3 (Hold) company is benefiting from its focus on six strategic pillars aimed at sustainable growth. These include stabilizing Consumer Beauty make-up brands and mass fragrances; accelerating luxury fragrances and setting up Coty as a core player in prestige make-up; establishing a skincare portfolio in prestige and mass channels; strengthening e-commerce and Direct-to-Consumer (DTC) capabilities; growing presence in China via Prestige and certain Consumer Beauty brands; as well as setting Coty as an industry leader in sustainability. With respect to stabilizing and growing its consumer beauty business, the company is on track with repositioning campaigns and disruptive advertising.
Coty is on track to mitigate the impact of inflation via cost savings. It is progressing well with the All In to Win transformation program across five key work areas, driving notable improvement in cost, gross margins, sales growth and cash. In the first quarter of fiscal 2023, Coty delivered savings of more than $20 million fueled by fixed cost and gross margin initiatives. Management continues to deliver savings of $170 million in fiscal 2023.
Hurdles on the Way
Coty continues to witness dynamic inflation and a supply chain environment. The global supply-chain-related challenges coupled with robust demand for fragrances is causing industry-wide supply constraints for key fragrance components. Moreover, intermittent COVID-induced lockdowns across China pressured the company’s performance in first-quarter fiscal 2023. The company expects the cost of goods sold inflation to remain at nearly 2% in fiscal 2023.
In addition, Coty’s international presence keeps the company exposed to the risk of adverse currency fluctuations. Management expects unfavorable currency rates to affect revenues by 6-8% in fiscal 2023.
The upsides mentioned above will likely offer some respite amid such hurdles.
Coty’s shares have increased 45.4% in the past three months compared with the industry’s 28.9% growth.
3 Solid Staple Picks
Some other top-ranked stocks are Inter Parfums IPAR, e.l.f. Beauty ELF and Conagra Brands CAG.
Inter Parfums currently sports a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 15%. IPAR has a trailing four-quarter earnings surprise of 27.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and earnings per share (EPS) suggests growth of 22.8% and 29.1%, respectively, from the year-ago reported numbers.
e.l.f. Beauty, operating as a cosmetic and skin care products provider, currently sports a Zacks Rank of 1. ELF has a trailing four-quarter earnings surprise of 92.8%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year’s sales and earnings suggests growth of 24.9% and 33.3%, respectively, from the prior-year reported numbers.
Conagra Brands, operating as a consumer-packaged goods food company, currently sports a Zacks Rank of 1. CAG has a trailing four-quarter earnings surprise of 8.9%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 6.8% and 11.9%, respectively, from the corresponding year-ago reported figures.
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Conagra Brands (CAG) : Free Stock Analysis Report
Inter Parfums, Inc. (IPAR) : Free Stock Analysis Report
Coty (COTY) : Free Stock Analysis Report
e.l.f. Beauty (ELF) : Free Stock Analysis Report
