Coty seeks skin-care balm as makeup demand slump shaves millions off revenue

(Reuters) - Gucci lipstick maker Coty Inc will step up its investments in skin-care to offset a pandemic-driven fall in demand for its makeup products that led to a disappointing quarterly revenue, driving its shares down 13% on Tuesday.

FILE PHOTO: A screen displays the logo and trading information for Coty Inc at the New York Stock Exchange (NYSE) in New York, U.S., November 18, 2019. REUTERS/Brendan McDermid

The company’s mass beauty segment posted a 21.6% decline in comparable sales in the second quarter. Sales fell 10.1% in the first quarter.

Cosmetics makers have been ramping up their presence in the skin-care category, as people have shunned foundation and lipsticks for serums and moisturizers amid a resurgence in coronavirus cases and ensuing lockdowns.

“People were buying a lot of skincare (in travel retail) and Coty is not exposed to this category for the moment,” Chief Executive Officer Sue Nabi said in an interview with Reuters, adding Coty would look to reinforce its skin-care category.

The company is now working on making skin-care products for its Asian customers, while also preparing a Kim Kardashian West skin-care line for launch in fiscal 2022.

The Burberry fragrance maker also said a 30% growth in online sales in its Europe, Middle East and Africa (EMEA) market could not make up for pandemic-led store closures in certain European markets.

Sales in the EMEA region dropped 21.9% to $708.9 million.

Overall net revenue from continuing operations fell 16% to $1.42 billion, missing estimates of $1.43 billion.

To make up for the drop in sales and lower traffic at airport stores, Coty is now planning to open more stores in China’s island province of Hainan, where affluent Chinese customers are known to splurge at duty-free malls.

Excluding items, Coty earned 10 cents per share from continuing operations, 3 cents above the Refinitiv IBES estimate, helped by its move to lay off workers and control certain expenses.

Reporting by Aditi Sebastian and Praveen Paramasivam in Bengaluru; Editing by Vinay Dwivedi