Coty blames ‘shelf space loss’ for Q4 earnings drop

Coty blames ‘shelf space loss’ for Q4 earnings drop

Beauty behemoth Coty has posted a loss of $304.8 million in fourth quarter earnings, a fall attributed to the loss of shelf space for some of its Procter & Gamble integrated brands following the recent merger.

Despite the loss, company revenue reached $2.24 billion, up from $1.08 billion the previous year, which beat market expectations of $2.16 billion. However, the failure of retailers to stock P&G brands such as CoverGirl and Clairol is expected to continue into the second half of 2018.

Coty’s consumer business fell 10 percent in organic sales, excluding currency fluctuations and acquisitions.

Chief Executive Camillo Pane said, “Fiscal 2017 was a transformational year for Coty. We completed the incredibly complex acquisition of the P&G Beauty Business, fully reorganised into a product and customer focused organisational structure, successfully reached significant milestones in our integration efforts, and boosted our brand portfolio through the additions of Younique, ghd, and the agreement to acquire the Burberry Beauty license.”

Other factors contributing to the fall include increased marketing spend and higher costs relating to the P&G acquisition. Indeed, according to the Financial Times, investors are questioning whether the company had the correct resources to focus on the 41 brands acquired through the deal, as well as Coty’s own brands.

Pane continued, “We are rapidly working to address (fixed costs)… Our cost base is not where it should be and we are highly focused on this issue as a key initiative for fiscal 2018.”