May 10, 2017 / 11:04 AM / 3 years ago

Coty profit and sales beat as acquisitions pay off; shares jump

(Reuters) - Beauty products maker Coty Inc (COTY.N) reported higher-than-expected quarterly profit and sales, helped by strong demand for labels such as Calvin Klein as well as for recently acquired brands ghd and Younique.

FILE PHOTO: Models gather at a trading post on the floor of the New York Stock Exchange for the IPO of Coty Inc., June 13, 2013. REUTERS/Brendan McDermid/File Photo

Coty’s shares rose as much as 15 percent to a near 6-month high of $20.50 on Wednesday. They eased to trade up 13 percent, set for their best one-day percentage gain since February 2016.

The company has inked multiple deals in the past year to gain market share amid stiff competition and reduce its dependence on its perfume business, that was once struggling.

In the past year Coty has bought more than 40 brands from Procter & Gamble Co (PG.N), the personal care and beauty business of Brazil’s Hypermarcas SA (HYPE3.SA), a majority stake in online cosmetics retailer Younique and also a high-end hair styling appliance brand, ghd.

Coty said its third-quarter revenue rose 6 percent to $2.03 billion on a constant currency basis and after adjusting year-ago sales for the P&G acquisition.

That beat analysts average estimate of $1.94 billion, according to Thomson Reuters I/B/E/S.

Excluding acquisitions, sales declined 2 percent in constant currency.

Coty, however, expects current-quarter net revenue, excluding ghd and Younique, to be lower than the third quarter, which Chief Executive Camillo Pane blamed on lost shelf space at retailers for certain P&G brands.

Pane told Reuters the lost space will continue to hit results for a few more quarters, until marketing efforts on brands such as Covergirl, Max Factor and Clairol, which were “orphaned” at P&G, pays off.

Pane said Brazil was a bright spot in the third quarter, despite a recession, with sales rising in the double-digit percentage range as Coty sold more nail polishes and hair products that are affordable and recession-proof.

Coty’s consumer beauty business saw sales increase 5 percent, reflecting strong contributions from Younique and one month of sales from the Brazil Hypermarcas deal. The business accounted for nearly half of total sales.

Sales in Coty’s luxury business, which sells high-end perfumes such as Calvin Klein and Hugo Boss, rose 2 percent. Sales in the professional division rose 14 percent, driven solely by ghd.

Net loss attributable to Coty increased to $164.2 million in the quarter from $26.8 million a year earlier, due to $213.5 million in restructuring charges related to the P&G deal.

Coty’s adjusted profit of 15 cents per share beat analysts’ estimate by 2 cents.

Reporting by Karina Dsouza in Bengaluru; Editing by Savio D'Souza

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