COTY - Embedded Expectations Analysis - 2021 07 23
Coty Inc. (COTY:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 51.3x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about their performance in China, peer benchmarking, and gross margin target.Specifically, management may lack confidence in their ability to reposition their key mass brands and maintain strong performance in China, particularly from fragrance sales. In addition, they may have concerns about the effectiveness of their media spending, their increased bond offering, and the degree to which European post-pandemic reopening will reverse declines sales growth. Furthermore, they may lack confidence in their ability to execute their promotion strategy, benchmark themselves against peers, and meet their 60% gross margin target. Finally, they may be overstating the potential of Kylie Skin in America and their focus on creating top-selling female fragrances.
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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