Why Are Coty Shares Sliding Premarket?

Coty shares dropped over 20% in premarket trading on Thursday, after mixed quarterly results and subpar forecasts, signaling continued pressure for its cosmetics and fragrance businesses.

If the move holds in the regular session, it would be the stock's worst intraday performance since March 2020.

The company forecast like-for-like sales to decline 6% to 8% in its fiscal first quarter, and 3% to 5% in the second quarter, before it returns to growth in the second half of the fiscal year 2026.

Analysts expected revenue decline of 2.9% in Q1, and growth of 0.2% in Q2.

Coty guided for adjusted per share profit of $0.33 to $0.36 in the first half of the fiscal year, with growth expected in the second half. Analysts expect full-year adjusted earnings of $0.5 per share.

CFO Laurent Mercier noted on the post-earnings call that retailers are destocking, while consumers are leaning towards cheaper, value options, amid economic uncertainties. The management said new fragrance launches will drive the business in the coming months.

On Stocktwits, the retail sentiment for the company held in the 'bullish' zone as of early Thursday. A user remarked that "the ER [earnings report] is not bad as you think and it is not going to fall below $4 tomorrow," although market moves on Thursday, especially for retail stocks, will be dictated by Walmart's results.

Analysts broadly expect upbeat results from the retail store chain, which is reporting before the market opens.

Coty's fourth-quarter revenue fell 8% to $1.25 billion, but beat estimates of $1.20 billion from LSEG/Reuters. The company's consumer beauty segment, which includes drugstore brands such as CoverGirl, Sally Hansen, and Rimmel, saw a 12% sales drop, dragging topline performance.

Coty's prestige business, with brands like Kylie Cosmetics and fragrances by Gucci and Marc Jacobs, recorded a 5% decrease. The company reported a $0.05 per share adjusted loss versus expectations of a $0.01 per share profit.

Coty's shares have fallen nearly 30% year-to-date, following a 44% drop in 2024.

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