Coty predicts 20% coronavirus-related decrease in third-quarter sales

By

Robin Driver

Published
Mar 20, 2020

As Covid-19 continues to cause disruption around the globe, American cosmetics conglomerate Coty Inc. reported on Friday that it expects to see a 20% decline in sales in the third quarter, resulting in a “meaningful impact on profit.” Coty’s revenues totaled $1.99 billion in Q3 2019.

 
However, the company was also keen to emphasize that it is strong enough to weather the storm, announcing a series of measures it is implementing to counteract the effects of the health crisis.
 
The New York-based owner of brands including CoverGirl, Rimmel and Max Factor has established a global response team to monitor the progress of the pandemic and implement appropriate measures in all the countries in which it has operations, in compliance with local guidelines.

On top of this, the company is refocusing its business to prioritize open channels, particularly e-commerce, which is experiencing increased traffic as brick-and-mortar stores across North America and Europe are temporarily closed to support social distancing efforts.
 
The group has, for example, carried out activations on Amazon, and has seen its U.S. sales nearly double over the last few weeks.
 
Coty has also begun preparing for a pick-up in demand in Asia, where the disruption caused by Covid-19 is starting to ease off, particularly in China.
 
Like a number of other companies, the group has withdrawn its previously reported financial guidance for fiscal 2020 and also announced that it is increasing its focus on cost control and cash flow, introducing a range of both temporary and structural measures.
 
As part of its financial initiatives, Coty is recommending to the board that shareholders be given the option to receive up to 100% of their quarterly dividend in kind for the coming two quarters.
 
JAB, Coty’s largest shareholder, has also announced that it will be fully repaying the loan it took out to finance its tender offer in 2019.
 
“The work performed by Coty over the past 18 months has been incredibly helpful given the current exceptional circumstances, not only because our brands have been improved, but also because we have considerably strengthened our cost and financial structures,” explained Coty COO and CFO Pierre-André Terisse in a release.
 
“We are very confident in Coty’s ability not only to navigate well through this crisis, but also to exit stronger, as the management continues to reduce its costs aggressively and to accelerate top line initiatives,” added Peter Harf, founding partner of JAB and chairman of Coty.
 
In order to support the fight against the coronavirus pandemic, the company has, along with its industry peers, also moved to begin the manufacturing and supply of hand sanitizer for medical and emergency services.