Coty backs FY24 EPS view 44c-47c, consensus 41c

Entering the second half of FY24, the beauty market remains a strong and outperforming category, even as the exceptional double-digit percentage growth of the past two years normalizes closer to medium term trends including mid-to-high single-digit percentage growth in prestige fragrances and low-to-mid single-digit percentage growth in mass beauty, consistent with Coty‘s medium term expectations. Coty continues to benefit from this attractive market dynamic, with momentum across its core categories, strong launch results, and early wins in key white spaces. The Company continues to expect FY24 LFL revenue growth of +9-11%, which includes expectations for +6-8% LFL revenue growth in second half FY24, consistent with its medium term growth algorithm, despite facing an estimated low-to-mid single-digit percentage headwind in its Prestige business from retailer inventory restocking which occurred in the prior year as Coty’s fragrance service levels recovered. Reported revenues in the second half are expected to include a 1-2% headwind from FX and an approximately 2% scope headwind from the divestiture of the Lacoste license. Coty continues to target FY24 adjusted EBITDA margin expansion of 10 to 30 basis points and FY24 adjusted EBITDA of $1,080 to $1,090 million based on current FX rates. Coty expects strong year-over-year gross margin expansion in the second half, even as the Company manages the moderate impact from the Red Sea conflict. In total, the Company continues to expect modest FY24 gross margin expansion year-over-year. Coty continues to target FY24 adjusted EPS, excluding the equity swap, of $0.44 to $0.47, implying strong +16-25% year-over-year growth.