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3 Beauty Stocks Off to an Ugly Start—Can 1 Stage a Comeback?Coty NYSE: COTY said it is shifting its internal focus toward retail sell-out and market-share gains as it works through a fiscal 2027 transition year, following a period in which sell-out trailed the broader beauty category.

Executive Chairman and Interim Chief Executive Officer Markus Strobel said the company historically had been more focused on sell-in, or shipments to retailers, and is now changing incentives to better align with consumer demand at the shelf. Market share and sell-out have become important measures in Coty’s fiscal 2027 bonus systems, he said.

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Rebalancing in 2025: Here Are 3 Stocks to Buy Under $10“Our objective is to drive sell-out and to drive market share,” Strobel said. He said Coty expects first-quarter trends to resemble the past two quarters before improving sequentially, supported by incremental innovation, more disciplined spending and a narrower set of investment priorities.

Strobel said the pace at which Coty can reduce its sell-out gap versus the market represents a key source of potential upside or risk. Faster progress would benefit results, while a slower recovery would require the company to manage accordingly.

Consumer Beauty Changes Begin in U.S., Expand to Europe Estée Lauder undergoes a profit makeover to swoon investors Coty has begun a Consumer Beauty performance-improvement effort called Color the Future, which Strobel described as a consumer-focused version of its Coty.Curated initiative. The program began in the U.S. in January and includes simplifying product lineups, reducing the number of SKUs, concentrating investment behind fewer initiatives and prioritizing stronger innovation.

The initial efforts have focused largely on COVERGIRL and Sally Hansen. Strobel said both brands materially reduced their gap versus the category during the year, while Sally Hansen has begun to grow ahead of the market in value.

He attributed the progress more to equity-building advertising and targeted innovation than increased promotions. COVERGIRL has returned to national television advertising, aimed at Gen X consumers, with investment concentrated behind its Simply Ageless and LashBlast franchises. Sally Hansen has also resumed national advertising in nail care, while its Insta-Dri innovation has received a strong consumer response, Strobel said.

The company expects the actions to support Consumer Beauty profitability over time by reducing returns and obsolescence. Strobel said that selling fewer, faster-moving SKUs should lower excess inventory and the risk of products being returned by U.S. retailers when innovation does not sell through.

Coty plans to extend the approach across Europe. The company has already rolled out initiatives in the U.K. and said Rimmel has shown initial traction there, catching up with the category in the latest month. Strobel said brands including Max Factor, Bourjois and Manhattan will be among the European brands receiving the interventions in coming weeks and months.

On shelf space, Strobel said Coty expects its overall U.S. shelf presence to remain stable during fall resets. The company has “lost a bit” and “gained a bit,” he said, but does not currently see a major risk of shelf-space losses. Coty said a roughly 20% reduction in shelf SKUs is not expected to have a material sales impact, as it seeks to allocate space to products with faster turnover.

Pricing, Promotions and Consumer Beauty Review Strobel said prestige beauty faced significant price competition during the October-to-December holiday season, though that pressure has eased since then. In Consumer Beauty, he said companies are becoming more selective about pricing rather than implementing broad-based increases or reductions.

“That differentiation is, I think, going to help stabilize this pricing and promotion environment a little in the next couple of months,” Strobel said.

Coty is continuing its strategic review of Consumer Beauty and intends to conclude it by the end of calendar 2026. Strobel called that deadline a “very strong aspiration,” while noting the company could take additional time if doing so produced a substantially better outcome.

Although Brazil could be easier to separate because it is “very ring-fenced,” Strobel said Coty is not pursuing simply the easiest path. Instead, it is evaluating the Consumer Beauty business as a whole and seeking the option that creates the most value.

Brazil has returned to growth following what Strobel described as a “wobble” early in the year. He said the market is growing, Coty is growing, and the company expects to regain share in the country.

Gucci Exit, Cost Actions and Fiscal 2028 Goal Looking beyond fiscal 2027, Strobel said Coty is targeting a return to growth for its underlying portfolio excluding Gucci in fiscal 2028. The company is seeking to drive growth through a sharper focus on major global brands such as Burberry and Hugo Boss, as well as through more incremental innovation designed to lift entire brand franchises.

As an example, Strobel pointed to BOSS Bottled Beyond, which he said was among the year’s top two male fragrance launches but did not materially lift the broader Hugo Boss franchise. Coty has since launched BOSS Bottled Beyond for Her, beginning in travel retail, to establish a women’s business that it believes can also create a halo effect for the male franchise.

Coty is also bringing in new brands, including Swarovski and Etro, next year, Strobel said. Travel retail remains an important channel because it can provide prominent displays and brand-building opportunities, in addition to sales. He said Coty’s travel-retail business is growing nicely.

The company also plans a restructuring program to address the future loss of Gucci-related sales and profit. Strobel said the program is expected to cover Coty’s go-to-market setup, manufacturing and distribution network, organizational layers and central functions. He said Coty wants its cost-savings and restructuring actions alone to offset the impact, with portfolio growth providing additional support.

Coty said it was pleased with its agreement with Kering related to Gucci, citing compensation equivalent to a year of profit and cash, funds to support debt reduction, restructuring-related proceeds and a resolution to inventory matters. Strobel said the company expects to provide more details on its restructuring plans in coming months, after considering interdependencies with the Consumer Beauty review.

Outlook and Potential Variables On profitability, Strobel said Coty’s ability to reduce the EBITDA decline seen in the prior two quarters could be influenced by conditions in the Middle East, oil prices, tariff refunds and continuing productivity savings. The company has included $20 million to $30 million of costs in its assumptions for oil prices between $90 and $100, he said, and is also awaiting a potential tariff refund of about $30 million.

In closing remarks, Strobel said Coty had seen improvements during the quarter but was not satisfied with its current performance. The company provided guidance only for the first quarter, while targeting fiscal 2027 EBITDA “above $50” and free cash flow close to fiscal 2026 levels, as stated on the call.

“Our priorities are straightforward: improve sell-out, close the gap to market, strengthen profitability,” Strobel said.

About Coty (NYSE:COTY)Coty Inc is a multinational beauty company specializing in the development, manufacturing and marketing of fragrances, color cosmetics and skin and body care products. Established in 1904 by François Coty in Paris, the company has grown through a blend of organic innovation and strategic acquisitions to become one of the leading players in the global beauty industry. Coty's portfolio encompasses a broad range of consumer and luxury brands, reflecting its commitment to catering to diverse consumer preferences and market segments.

The company's product offerings span three main divisions: Coty Luxury, Coty Consumer Beauty and Coty Professional Beauty.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

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Key Takeaways Coty expects Q4 LFL revenues to fall by a mid-single-digit percentage amid Middle East disruption. Coty's Prestige segment may benefit from core fragrances, new launches and Marc Jacobs Beauty makeup.Coty expects adjusted EBITDA of $85-$95 million and adjusted EPS from breakeven to a 2-cent loss. Coty Inc. (COTY - Free Report) is likely to witness a top-line decline when it reports fourth-quarter fiscal 2026 earnings on Aug. 19. The Zacks Consensus Estimate for revenues is pegged at around $1.2 billion, indicating a 4.8% decrease from the year-ago period level.

The consensus mark for the bottom line has remained unchanged over the past 30 days at a loss of 1 cent a share, which suggests an increase of 80% from the figure reported in the year-ago period. COTY’s earnings lagged the consensus mark by a wide margin in the trailing four quarters, on average.

Factors Likely to Influence COTY’s Upcoming ResultsCoty’s fourth-quarter fiscal 2026 results are likely to reflect resilient beauty demand, particularly across fragrances and cosmetics, while consumer demand in developed markets remained broadly consistent with recent periods. Management expects moderate sequential improvement in both Prestige and Consumer Beauty, aided by easier year-over-year comparisons.

However, continued disruption in the Middle East is likely to have weighed on sales, with Coty estimating a 2-3% impact on fourth-quarter revenues. Management expects fourth-quarter like-for-like or LFL revenues to be down by mid-single-digit percentage, with foreign currency having a broadly neutral impact.

Prestige trends are likely to have received support from Coty’s core fragrance franchises and recent innovation, including BOSS Bottled Beyond and Calvin Klein Euphoria Elixirs, while the June debut of Marc Jacobs Beauty marked the brand’s expansion into makeup. Consumer Beauty is likely to have seen improving U.S. trends at CoverGirl and Sally Hansen, supported by an increased focus on core franchises and more impactful innovation, although performance remained uneven.

On the margin front, lower shipments, tariffs and elevated excess and obsolescence are likely to have exerted pressure, partly offset by productivity and procurement initiatives. Coty expects adjusted gross margin contraction of 100-200 basis points year over year.

Investments shifted from the third quarter to key fourth-quarter commercial periods (particularly Mother’s Day and Father’s Day) are likely to have supported brand investments during the quarter. Coty expects fourth-quarter adjusted EBITDA of $85-$95 million and adjusted EPS, excluding the equity swap, between breakeven and a loss of 2 cents per share.

Earnings Whispers for COTYOur proven model doesn’t conclusively predict an earnings beat for Coty this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

 Coty currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable CombinationHere are some companies worth considering, as our model shows that these have the right combination of elements to beat on earnings this reporting cycle.

Target Corporation (TGT - Free Report) currently has an Earnings ESP of +5.09% and a Zacks Rank of 2. The consensus estimate for the quarterly revenues is pinned at $26.1 billion, which indicates 3.4% growth from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Target’s upcoming quarter’s EPS is pegged at $2.25, which implies 9.8% growth year over year. TGT delivered a trailing four-quarter earnings surprise of 8.2%, on average.

Dollar General Corporation (DG - Free Report) currently has an Earnings ESP of +1.61 and a Zacks Rank of 3. The Zacks Consensus Estimate for quarterly revenues is pegged at $11.2 billion, which indicates an increase of 4.2% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Dollar General’s second-quarter fiscal 2026 EPS is pegged at $2.00, implying 7.5% year-over-year growth. DG has a trailing four-quarter earnings surprise of roughly 21%, on average.

Ross Stores, Inc. (ROST - Free Report) currently has an Earnings ESP of +4.03% and a Zacks Rank of 3. The consensus estimate for Ross Stores’ quarterly revenues is pinned at $6.1 billion, which suggests 10.7% growth from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for the upcoming quarter’s EPS is pegged at $1.92, which calls for a 10.7% jump year over year. ROST delivered a trailing four-quarter earnings surprise of 10.2%, on average.

NEW YORK--(BUSINESS WIRE)--Regulatory News:

Today, Coty Inc. (NYSE: COTY) (Paris: COTY) announced a set of organizational changes that advance its Coty.Curated strategy by bringing commercial decision-making closer to the center and enabling the company to move faster.

Executive Chairman and interim CEO Markus Strobel will take direct control of Prestige commercial operations, with Coty’s regional leaders reporting to him. The change brings leadership closer to the markets, speeds up decision-making, and sharpens accountability for sell-out and market share.

As part of these changes, Coty will integrate Prestige R&D and sustainability with supply chain into one simplified function under the interim leadership of Graeme Carter, Chief Supply Chain Officer. Bringing prestige innovation, sustainability, and supply chain together under one leader streamlines how the company develops and delivers behind its core businesses. Gordon von Bretten, President of Consumer Beauty, will continue to drive an already integrated model in Consumer Beauty.

Caroline Andreotti, Chief Commercial Officer Prestige, will leave Coty at the end of September after three years in the role and almost two decades with the company. She shaped Coty’s global commercial strategy, its relationships with key customers and partners, and its leadership in prestige.

Dr. Shimei Fan, Chief Scientific and Sustainability Officer, will leave Coty at the end of August. She led the company’s R&D organization and sustainability agenda, helped launch key innovations, and oversaw significant progress including multiple ESG ratings upgrades and the first approval of Coty’s science-based carbon reduction targets by the SBTi.

Markus Strobel, Executive Chairman and interim CEO, said: “Coty.Curated is about clarity and focus, and a simpler operating model helps us deliver on that. It positions us to keep building behind our core brands and to support our teams as the business moves forward. I want to thank Caroline and Shimei for their leadership and their many years of contribution to Coty, and wish them every success for their future endeavors.”

People and Purpose leadership transition

Priya Srinivasan, Chief People and Purpose Officer, has decided to step down for personal reasons and will leave Coty in August. She led the global people function, including leadership development and engagement, and played an important role in advancing Coty’s talent agenda.

Séverine Charbon will join Coty as Chief People and Purpose Officer effective September 1. She brings more than 25 years of international experience in talent strategy and organizational transformation, most recently as Chief Talent Officer International at Publicis Groupe.

Strobel added: “Priya has been a thoughtful and trusted leader, and a real champion of our people and culture. She has strengthened how we develop talent, deepened employee engagement, and helped make Coty a place where people can do their best work. We are grateful for everything she has given to Coty and wish her the very best in the future. We now look forward to Séverine joining Coty at this important time and continuing to build on the strong foundations in place.”

ABOUT COTY INC.

Founded in Paris in 1904, Coty is one of the world’s largest beauty companies, with a portfolio of beloved brands across fragrance, color cosmetics, and skin and body care. Coty serves consumers around the world, selling prestige and mass‑market products in over 120 countries and territories. Together with its brands, Coty empowers people to express the beauty of their individuality – and is committed to transforming the beauty industry to become more sustainable and inclusive through its Beauty That Lasts strategy.

Learn more at coty.com or follow us on LinkedIn and Instagram.