Coty's Q3 2025 Earnings Call: Unpacking Contradictions in Inventory Management, Consumer Beauty, and Prestige Growth Strategies

Inventory management and retailer behavior, consumer beauty market performance, prestige fragrance market growth expectations, and consumer beauty performance and growth strategy are the key contradictions discussed in Coty's latest 2025Q3 earnings call.



Sales and Market Trends:
- Coty’s Q4 sales outlook anticipates a sharp decline due to strategic initiatives in the Prestige division to clean up the baseline, despite no weakening of market conditions.
- The decline is attributed to efforts to prepare for significant product innovations in fiscal '26, aiming for growth and stimulating demand.

Prestige Fragrance Growth:
- The Prestige fragrance category saw mid-single-digit growth, with particularly strong performance in the U.S. and Europe, driven by expansion in user penetration and new consumer segments like male teens and Gen Z.
- Growth was supported by increased touchpoints with body mists, small formats, and pan sprays, enhancing category penetration.

Consumer Beauty and Color Cosmetics Challenges:
- The Consumer Beauty division, particularly Color Cosmetics, faced a mid-single-digit decline globally, with pressures in the U.S. and Asia.
- Resource reallocation towards more profitable mass fragrances and targeted innovations in Color Cosmetics is underway to address these challenges.

Tariff Impact and Strategic Pricing:
- Coty expects fiscal '26 to face a low $100 million impact from tariffs on Prestige fragrance production and marketing materials imported from China.
- The company is implementing a mid-single-digit price increase on Prestige products to offset tariff-related costs, relying on the inelastic nature of the category to maintain volumes.

Organizational and Cost Management:
- Coty is adopting a more regional organizational structure, particularly in the U.S., to enhance agility and decision-making, with a focus on regional leadership and local market responsiveness.
- Structural cost savings of $370 million are planned over two years, with ongoing productivity improvements and streamlined support functions to address market volatility and support brand initiatives.