Coty raises FY23 adjusted EBITDA view to $1.075B-1.085B from $1.065B-1.075B

Coty increased its outlook for the first half and full year FY24. Since providing its guidance on its FY23 earnings call four weeks ago, Coty has seen strong momentum in beauty demand across its key markets and categories, particularly in prestige fragrances. At the same time, Coty’s recent launch of its Burberry Goddess fragrance is setting new market records and reinforces Coty’s position as a fragrance leader. Not only was Burberry Goddess the winning launch in the U.S. in August, with market sales several times higher than recent competitive blockbuster launches, but two of Coty’s fragrance innovations are among the top five of the Fall. Coty now has three fragrance lines in the U.S. top ten. The combination of these factors is driving acceleration in Coty’s volumes and sales, with the Company now expecting core LFL sales growth in first half FY24 of +10-12%, an increase from its earlier outlook of +8-10%. This strength is supporting Coty’s increased FY24 core LFL sales growth outlook of +8-10%, up from its earlier guidance to be at the top end of its medium-term target range of +6-8%. Coty continues to target modest gross margin expansion in FY24 and 10-30 bps of adjusted EBITDA margin expansion, implying adjusted EBITDA of approximately $1.075B-1.085B at current FX rates, an increase from the implied adjusted EBITDA of $1.065B-1.075B in its prior guidance. The Company remains on track to drive leverage towards 3x exiting CY23, fueled by seasonally strong free cash flow generation, and towards 2.5x exiting CY24. The Company remains committed to delivering a best-in-class medium term growth algorithm, including a mid-20s % EPS CAGR based on profit expansion, lower interest expense and in the medium term managing share count towards 800M; active deleveraging; and targeted capital returns.