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Coty Fourth-Quarter Sales Seen Meeting Company's 'Conservative' Outlook, RBC Says

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Coty Fourth-Quarter Sales Seen Meeting Company's 'Conservative' Outlook, RBC Says

Coty's (COTY) fiscal fourth-quarter sales are expected to meet the company's own "conservative" guidance, with a similar outlook likely for 2027, RBC Capital Markets said in a note e-mailed Tuesday.

In May, the beauty company guided fourth-quarter like-for-like sales to decrease in the mid-single-digit range. RBC projects organic net sales to drop 6%, while Wall Street is looking for a 4.7% decrease, the brokerage said in a note to clients.

"We see this quarter as a neutral event, as we expect Coty to deliver (fourth-quarter) results generally within the company's conservative guidance range," RBC Co-Head of Global Consumer and Retail Research Nik Modi wrote. Although recent results across beauty, luxury, and retail are mixed, they lean "slightly positive" for Coty, Modi added.

The company is scheduled to report results Wednesday.

For fiscal 2027, the brokerage projects Coty's like-for-like sales to drop by a low-single-digit percentage and per-share earnings to decrease by a mid-single-digit percentage.

"Depending on the timing and magnitude of tariff refunds, Coty may see a one-time margin bump, but we would expect the company to reinvest back into the business to support turnaround initiatives," Modi said.

The company's turnaround initiatives and efforts to align inventory levels are expected to weigh on its first-half financial performance, according to the note. "Once the company starts to lap easier comps in (the second half of 2027), we believe it may be possible for Coty to return to both top- and bottom-line growth."

Coty recently struck a deal to transition the Gucci Beauty license back to Kering for around $400 million. Coty and Kering agreed to a mutual resolution of all pending litigation and related claims related to the Gucci Beauty license, removing a major overhang for the beauty company, according to RBC.

"Given the ongoing reset, Coty likely remains a show me story for most investors, but valuation remains notably cheap, especially with improved leverage," Modi said.

Price: $2.70, Change: $+0.03, Percent Change: +1.12%

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