Coty is determining what life post-Gucci appears to be like like.
On Wednesday, in its first earnings report since Kering introduced that it could quickly lose the rights to make Gucci magnificence for L’Oréal, Coty reported a 6 p.c drop in internet income to $1.58 billion. While the bigger 9 p.c hit got here from its longer-suffering mass shopper magnificence unit, which incorporates Covergirl and Rimmel, its status arm, which homes Gucci, additionally declined by 4 p.c.
While Coty has mentioned that nobody license companion includes greater than 10 p.c of total revenues, the Gucci model carries weight with shoppers. The license, set to run out in 2028, brings in round $500–$600 million for Coty yearly.
Its loss couldn’t come at a extra precipitous time for the corporate. Five weeks in the past, it introduced a strategic pivot with a view in the direction of promoting off its mass shopper enterprise, together with the likes of Bourjois and Sally Hansen, and doubling down on status classes and perfume throughout the value spectrum “from $5 to $500.”
Chief govt Sue Nabi mentioned in an accompanying assertion that Coty is on monitor, because it strikes to be a prestige-focused firm with an emphasis on perfume, cosmetics and skincare. She cited new launches, such because the relaunch of Marc Jacobs Beauty, and just-signed licenses like Marni and Etro, as strengthening its portfolio.
Becoming a dominant status participant whereas grappling with the lack of a main model is not going to be simple, particularly as Coty is banking on perfume for fulfillment because the class’s development begins to chill.
A Masstige-Led Slowdown
Coty has already undergone a latest metamorphosis.
In 2020, it shed 4 hair care manufacturers, together with two it had beforehand acquired from Procter & Gamble, to deal with top-performing strains. The slimmed-down construction labored for a few years. Its widespread portfolio of status perfume licenses, which incorporates the likes of Hugo Boss and Burberry, have been a hit with customers. Prestige perfume noticed 10 p.c compound annual internet income development between its 2021 to 2025 fiscal years.
But its losses have begun to widen once more. Most perfume market development is coming from both ultra-luxury manufacturers like Amouage, or extra reasonably priced viral merchandise like Sol de Janeiro, which helped popularise cheaper, lighter mists.
The status section within the $150 vary, the place many licensed manufacturers sit, is particularly squeezed in comparison with masstige or ultra-luxury fragrances. Niche perfumes, like these from smaller manufacturers together with D.S. & Durga, Kayali and Byredo have additionally eaten away at style homes’ market share.
Coty’s Next Act
Even if the perfume growth seems to have peaked, it stays a huge and dynamic market. Growth shall be arduous, however could be gained: In Coty’s Wednesday earnings report, it famous its ultra-premium fragrances grew by 17 p.c.
Expanding its licensed portfolio seems to be a key a part of Coty’s plans to win in perfume because it competes with L’Oréal, Puig, Interparfums and Estée Lauder, who’re all vying for brand new names. In addition to the revival of Marc Jacobs Beauty in 2026, it’s going to capitalise on new licenses from Marni and Etro; Swarovski will launch in 2027. It has additionally debuted its personal manufacturers: Infiniment Coty Paris and mass physique spray model Origen.
The firm famous that new physique spray launches for Calvin Klein, Kylie Cosmetics, Philosophy, Adidas and Nautica are boosting gross sales with sturdy margins. Amid the results of tariffs and financial uncertainty on shopper sentiment, it has highlighted the idea of “treatonomics,” or shoppers spending on reasonably priced luxuries.
Progress shall be sluggish. In the 2025 fiscal yr resulted in August, Coty’s total development turned unfavorable, with whole internet income down 4 p.c. The firm doesn’t count on to return to development till the second half of its 2026 fiscal yr. The funding financial institution Barclays mentioned in a notice forward of Coty’s earnings that it expects a return to development within the subsequent monetary yr as an alternative.
Coty is hoping its technique of attracting new perfume licences with launching new labels will assist make up for near-term losses.
“Owning brands is owning more of your own destiny and control,” mentioned Oliver Chen, managing director at funding financial institution TD Cowen. But progress on fully new labels is all the time “incremental,” mentioned Chen. “You have to build awareness.”
Daniela Morosini contributed reporting.
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