How Coty Benefits From Recent Divestment & Deleveraging Plans

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Cosmetics major Coty (NYSE: COTY) saw its stock rally by ~14% on Monday, after it announced that it was exploring the divestment of its hair care and professional beauty segments (which account for roughly one-third of its sales) as well as its Brazilian operations. The move could help the company streamline its brand portfolio – which has been bloated following its $12 billion acquisition of P&G’s beauty business. The company wasn’t able to successfully integrate the businesses and was forced to take billions of dollars in write-downs. Coty stock has lost about half its value since the P&G deal closed in October 2016. Now, with the divestment, Coty should also be able to meaningfully deleverage its balance sheet. Coty’s debt stood at over $7.7 billion at the end of FY’19, up from $4.1 billion at the end of FY’16 (FY ends in June). Below, we take a look at how the company has fared in recent years and what the outlook could be like.

View our interactive dashboard analysis on Why Did Coty Stock Soar?

How does Coty’s Revenue Growth in FY’19 compare with that in prior periods and what’s the forecast?

Total Revenues for Coty declined from $9.4 billion in FY’18 to $8.6 billion in FY’19. The decline was due to the termination of the Guess license and the divestitures of the licenses of Playboy and Cerruti.

This compares with Total Revenues growth of:

  • -3.44% in FY’15 compared to FY’14
  • -1.05% in FY’16 compared to FY’15
  • 75.9% in FY’17 compared to FY’16 driven by the acquisition of P&G’s Beauty business.
  • 23% in FY’18 compared to FY’17, due to the full-year effects of the deal.

We expect Total Revenues growth to be -6% in FY’20.

How does Coty’s Total Expense in FY’19 compare with that in prior periods and what’s the forecast?

Total Expense for COTY increased from $9.6 billion in FY’18 to $12.4 billion in FY’19, driven by asset impairment charges of close to ~$4 billion.

This compares with Total Expense growth of:

  • -9.44% in FY’15 compared to FY’14
  • 1.16% in FY’16 compared to FY’15
  • 97.3% in 2017 compared to 2016

We expect Total Expense growth to be -36% in FY’20.

How does Coty’s EBT in FY’19 compare with that in prior periods and what’s the forecast?

EBT for COTY declined substantially to -$3.8 billion in FY’19, driven by the above-mentioned impairment charges.

We expect EBT to stand at about $0.3 billion in FY’20.

How do COTY’s Net Income and EPS in FY’19 compare with that in prior periods and what’s the forecast?

For more information on COTY’s Net Income and EPS, view our interactive dashboard analysis.

 

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