Coty posts surprise profit as beauty products regain shine

(Reuters) - Coty Inc COTY.N posted a surprise quarterly profit on Friday as demand for its beauty products and fragrances recovered from lockdown lows and the cosmetics maker kept a tight lid on costs, sending its shares 17% higher in premarket trading.

Cosmetics makers’ sales have improved in the past few months as a surge in online orders and higher demand for skin-care products offset the blow from weak traffic at brick-and-mortar stores.

To grab a share of the e-commerce boom, Coty has been ramping up investments in its digital platform, helping the company double its online penetration as a percentage of overall sales in the first quarter.

The Gucci perfume maker also said it was gaining market share in luxury fragrances across the United States, the United Kingdom and Germany.

“The thinking that fragrances would be a category that’s going to suffer eternally because of the lockdown is wrong at least (based) on what we are seeing in the United States,” Coty Chief Executive Officer Sue Nabi said in an interview with Reuters.

Nabi also pointed to a recovery in the company’s struggling mass beauty business, which sells products at supermarkets and pharmacies, with key U.S. retailers opting against cutting shelf space for its CoverGirl brand for the first time in five years.

Coty said it reduced fixed costs by about $80 million in the quarter as part of its efforts to save more than $200 million annually, partly by simplifying its organizational structure.

Net revenue fell about 13% to $1.69 billion but was higher than analysts’ estimates of $1.08 billion, Refinitiv IBES data showed.

Excluding items, Coty earned a profit of 11 cents per share, compared with expectations of a loss of 6 cents.

Reporting by Praveen Paramasivam and Aditi Sebastian in Bengaluru; Editing by Aditya Soni