[caption id="attachment_95471" align="aligncenter" width="700"] Source: Company reports/Coresight Research[/caption] 4Q19 Results Coty’s fiscal 4Q19 revenues declined 8% to $2.12 billion, meeting the consensus estimate. Adjusted EPS was $0.16, up 14.3% and in line with the consensus estimate. Coty CEO Pierre Laubies said the company has largely achieved its goal of stabilizing its business operationally and resolving supply chain disruption during FY19. By division, luxury (the largest division) posted a 5.8% sales increase, offset by an 11.5% decline in the consumer beauty division and a 3.1% drop in professional beauty revenues. Comps in the luxury division rose 5.8% in the fourth quarter. Growth contributors included strength in the Asia, Latin America, the Middle East, Africa and Australia region (ALMEA); strength in Europe; and, solid performance in travel retail. The company also reported strength in the brands Burberry, Calvin Klein and Gucci, supported by launches of Burberry Her, Gucci Guilty Revolution, and Gucci’s Alchemist Garden Collection. For FY19, luxury e-commerce rose 30% to reach over 10% of total luxury revenues, or approximately $330 million. In 4Q19, the consumer beauty segment declined 11.5%. Coty reported its sell out performance remained consistent over the course of the year, declining high single digits as its brands faced share losses and the mass beauty category continued to experience weakness in North America and Europe. Revenues and sell out in ALMEA grew in the low single digits, supported by strength and share gains in Brazil. Management provided a high-level summary of the consumer beauty categories’ performance in FY19:

• Color cosmeticsbrands accounted for close to half of net revenues and declined in the low teens, which reflects pressure on mass cosmetics in the category.
• Retail hair coloraccounted for a mid-teen percentage of net revenues, declining by high single digits. This reflected stable performance of Wella Retail and declines in Clairol.
• Body Careaccounted for a mid-teen percentage of total consumer beauty revenues. Body care grew moderately in FY19, fuelled by local Brazilian brands.
• Mass fragrancesaccounted for approximately 10% of revenues and declined.
• Younique, a direct sales business, accounted for approximately 10% of the division with continuing declines in sponsorships.

Coty announced in a separate press release on August 28 that Younique and Coty will separate, and that Coty will sell its controlling stake to Younique’s original founders as soon as practical. The decision to terminate the partnership was mutual. Professional beauty decreased by 3.1% in 4Q19, primarily due to weakness in North America stemming from destocking at key accounts. Professional beauty comprised 21% of FY19 Coty net revenues: The year was reportedly challenging for this division primarily in North America due to supply chain disruptions. However, professional beauty had solid growth in ALMEA, primarily due to online platforms for the Wella brand and ghd (Good Hair Day). Revenues in Europe, Coty’s largest region, accounted for 44% of revenues of the full year, $3.78 billion, down 10% on a reported basis and 5% on a like-for-like basis. Management said the decline was a result of weakness in its consumer beauty segment caused by underlying mass beauty market challenges, market pressure share, and supply chain disruptions, only partially offset by solid performance in the luxury segment. North America accounted for 31%, or $2.66 billion of the company’s total net revenue, down 10% on an as reported basis and 10% on a like-for-like basis. The decline was due to weakness in consumer beauty and professional beauty, shelf space loss of several brands and pressure on the Younique brand.  Consumer beauty was impacted by a difficult mass market, shelf space losses in several brands, supply chain disruption and ongoing pressure in Younique. The professional beauty brands were challenged due to customers’ trade inventory reductions and supply chain reductions. AMEA accounted for 25% or $2.21 billion of the company’s total net revenues, down 0.7% compared to last year as reported and up 7% on a like-for-like basis. The company said growth was driven by momentum in luxury as well as growth in professional beauty and consumer beauty. Growth in China, Brazil and the Middle East were strong in FY19. Outlook The company expects adjusted EPSof mid-single digit growth, stable to slightly lower like-for-like net revenues, and adjusted operating net income growth of 5-10% YoY atconstant foreign exchange.