Coty Q4 FY25 slides: 5-year transformation gains overshadowed by US challenges

Introduction & Market Context

Coty Inc (NYSE:COTY) shares plunged nearly 20% in Thursday’s premarket trading after the beauty giant’s Q4 FY25 earnings presentation revealed significant challenges despite highlighting a successful five-year transformation. The stock traded at $3.89 premarket, approaching its 52-week low of $4.46, as investors reacted to disappointing results and acknowledged headwinds.

The presentation, delivered on August 20, 2025, painted a picture of long-term progress contrasted with emerging challenges, particularly in the crucial US market. This follows Coty’s Q3 2025 earnings miss, where the company reported EPS of just $0.01 against forecasts of $0.06.

5-Year Transformation Results

Coty emphasized its five-year transformation journey, showcasing substantial improvements in its core business segments and financial health. The company’s Prestige Fragrance segment demonstrated consistent growth, with revenues increasing from approximately $2.4 billion in FY21 to $3.5 billion in FY25, representing a 10% compound annual growth rate (CAGR).

As shown in the following chart of Prestige Fragrance revenue growth:

Similarly, the Consumer Beauty segment stabilized and grew modestly over the five-year period, with revenues increasing from approximately $1.9 billion in FY21 to $2.1 billion in FY25, reflecting a 2% CAGR. This segment had previously been a trouble spot for the company.

From a profitability perspective, Coty highlighted significant improvements in its adjusted EBITDA, which grew from $760 million (16.5% margin) in FY21 to $1,082 million (18.4% margin) in FY25, representing a 9% CAGR. The company achieved this growth despite challenges including the Lacoste divestiture and exit from Russia.

The financial health improvements are illustrated in this chart showing both EBITDA growth and leverage ratio reduction:

The company’s debt management strategy has yielded positive results, with its leverage ratio improving dramatically from approximately 6.8x in FY21 to 3.5x in FY25. This improvement has been recognized by major credit rating agencies, with Moody’s issuing six upgrades since FY20, S&P Global Ratings providing five upgrades, and Fitch Ratings (which initiated coverage in FY23) issuing one upgrade.

Current Challenges & Market Headwinds

Despite the long-term improvements, Coty’s presentation acknowledged several challenges affecting current performance. The company admitted that its strong delivery and financial constraints had "masked weak signals" that are now impacting results.

Particularly concerning is Coty’s significant underperformance in the US market. While the US Prestige Beauty market grew by approximately 4%, Coty’s revenues in this segment declined by mid-single digits. The situation was even worse in the Mass Beauty segment, where despite a market contraction of just 1%, Coty’s revenues plummeted by mid-teens percentages.

The broader beauty market is also experiencing moderation in growth rates. The presentation showed that Prestige Fragrances growth has slowed from low double digits in FY24 and Q1 FY25 to mid-single digits in Q3 and Q4 FY25. Similarly, the Mass Cosmetics category has deteriorated from high single-digit growth in FY24 to low single-digit declines in Q3 and Q4 FY25.

Quarterly Performance & Market Reaction

The Q4 FY25 results appear to have disappointed investors substantially, as evidenced by the nearly 20% premarket stock decline. This follows Coty’s Q3 2025 performance, which saw the company miss EPS expectations with $0.01 versus the forecasted $0.06, and revenue slightly below expectations at $1.3 billion.

CEO Sue Nabi had previously emphasized the resilience of the beauty market, stating, "Beauty has remained resilient in this for decades." However, the current results suggest that even this traditionally defensive sector is facing headwinds in the current economic environment.

The company is implementing a €370 million cost-saving program aimed at restructuring and improving operational efficiency, though this initiative received limited attention in the Q4 presentation materials.

Forward-Looking Statements

Looking ahead, Coty is focusing on addressing its US execution weaknesses and navigating the moderating beauty market. The company plans new product launches in the Prestige Fragrance segment and is targeting continued EBITDA margin expansion.

In the Q3 earnings call, the company had indicated it was targeting a 20-30 basis point expansion in EBITDA margin and expected gradual improvement in fiscal 2026. Mid-single-digit price increases were planned for the prestige segment to drive revenue growth.

However, the significant stock decline following the Q4 presentation suggests investors may be skeptical about Coty’s ability to overcome its current challenges, particularly in the critical US market, despite the company’s five-year track record of financial improvement and debt reduction.

Full presentation:

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