Morningstar | Coty Announces Changes to Leadership Team; Shares Remain Undervalued
No-moat Coty announced that current CEO Camilo Pane, who has been at the helm since 2016, will be resigning immediately for family reasons. Pane will be succeeded by Pierre Laubies, who had recently served as CEO of coffee company Jacobs Douwe Egberts. We appreciate Laubies' operational experience in the consumer goods industry, which includes integrating the ex-Mondelez coffee business at JDE. We think he should be able to leverage this experience to help Coty successfully integrate the assets acquired from Procter & Gamble in 2016 while extracting cost synergies and reducing its debt load. We're holding steady on our $12.70 fair value estimate, which incorporates around 1% compound sales growth (including a decline in fiscal 2019) high-single-digit operating margin on average over the next five years, and Standard stewardship rating as we wait to develop a better sense of Laubies' strategic priorities.Coty also announced changes to its board of directors. Peter Harf, who has been a board member since 1996 will be replacing Bart Becht as chairman. Harf had previously served as CEO of Coty (1993 to 2001) and chairman of Coty's board (from 2001 to 2011). We expect this experience has led Harf to have a cozy relationship with management, and consequently view the company's decision to begin a process to add two new independent board members as prudent. At present, seven of its nine directors are independent, though we note four directors are affiliated with JAB Holdings, which holds 39% of Coty's stock.
Coty and its subsidiaries are a beauty company. The company manufactures, markets, sells and distributes beauty products, including fragrances, color cosmetics, hair care products and skin and body related products. The company is organized into three divisions, which is also its operating and reportable segments: Consumer Beauty, Luxury and Professional Beauty. Consumer Beauty is primarily focused on color cosmetics, retail hair coloring and styling products, body care and mass fragrances. Luxury is primarily focused on fragrances, skincare and cosmetics. Professional Beauty is primarily focused on hair and nail care products for salon personnel.
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