May 14, 2014
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Coty's profit beats as fragrance, skincare demand grows

May 14, 2014

Perfume and cosmetics maker Coty reported a better-than-expected adjusted profit, helped by growth in its fragrance and skincare business, primarily in Europe and emerging markets.

Coty said it expected sales in the current quarter to be flat compared with the same period in 2013, when it had sales of $1.06 billion, as North American demand remains weak.

The U.S. business was hurt in the quarter ended March 31 as middle-income consumers cut back on discretionary purchases such as the nail category including the Sally Hansen brand.

While revenue in Europe, Middle East and Africa and Asia Pacific rose, revenue from the United States fell 11.3 percent.

Net revenue rose 1 percent to $1.01 billion.

Sales of fragrances, Coty's largest business, rose 4 percent, helped by strong demand for brands such as Calvin Klein, Davidoff, Marc Jacobs and Playboy.

Skin and body care division sales rose 8 percent while those of color cosmetics fell 6 percent hurt by low demand of the nail category in the United States.

Coty gets most of its revenue from perfume brands such as Calvin Klein as well as those it sells under the names of celebrities such as Beyonce Knowles, Lady Gaga and Jennifer Lopez.

The company also said it entered into an agreement with Avon Products to market its select fragrances through Avon Brazil's network of 1.5 million independent sales representatives.

The company, whose competitors include Estee Lauder, L'Oreal and Elizabeth Arden, did not name the fragrances it would market.

Brazil, Avon's largest market, is also the largest fragrance market globally, Coty said in a statement.

Coty reported a net loss of $253.3 million, or 66 cents per share, in the third quarter, compared with a profit of $20.4 million, or 5 cents per share, a year earlier.

The company recorded a non-cash asset impairment charge of$316.9 million after its efforts to revamp its TJoy business in China did not produce expected cash flows.

Coty acquired TJoy Holdings, which makes ginseng-based skin-whitening and anti-aging creams, in December 2010. The company is based in Suzhou, in East China's Jiangsu province.

Excluding a tax benefit of 10 cents per share, Coty earned a profit of 12 cents per share, beating the average analyst estimate by 3 cents, according to Thomson Reuters I/B/E/S.

New York-based Coty's shares were up marginally in premarket trading. They closed at $15.44 on the New York Stock Exchange on Tuesday.

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