August 21, 2018 / 10:44 AM / a year ago

Trucker strike in Brazil hurts Coty sales, forecast falls short

(Reuters) - Coty Inc (COTY.N) fell short of quarterly sales forecasts for the first time in six quarters on Tuesday due to a 10-day long trucker strike in Brazil that disrupted supplies to retailers in May and June.

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

The beauty products maker also said its chief financial officer was stepping down and gave a profit forecast for 2019 that was below Wall Street expectations, helping send its shares down as much as 11.2 percent.

The strike in Brazil reduced sales at Coty’s consumer beauty unit at a time when analysts were expecting growth. The unit accounts for nearly half of its total sales and includes brands such as Rimmel, Max Factor and CoverGirl.

Chief Executive Camillo Pane said the pain from the strike would still be felt in both sales and operating income in the first quarter of fiscal 2019.

“I remain unsatisfied with the current performance with the consumer beauty division and this will remain one of my key priorities,” Pane said on a conference call with analysts.

Coty said efforts to streamline its product lines after its acquisition of 41 beauty brands from Procter & Gamble (PG.N) in 2016 were also expected to weigh on the current quarter.

Coty’s expects current quarter adjusted operating profit to fall by a percentage in the “low-teens”, but sees growth for the full year in the “mid-teens”.

“Coty will have a high performance bar in the rest of 2019 in order to get to their guidance of mid-teens profit growth for the fiscal year,” D.A. Davidson analyst Linda Weiser said.

Pane said any impact of the P&G integration would be largely over by the first half of 2019 and that the company would stabilize its consumer beauty business by driving growth in e-commerce and new markets like China, Brazil, Italy and Mexico.

Earlier this month, rival cosmetics makers Revlon Inc (REV.N) and e.l.f Beauty Inc (ELF.N) also missed quarterly sales estimates and cut their full-year forecasts.

Excluding one-time items, Coty earned 14 cents per share, one cent above expectations. Net revenue rose nearly 3 percent to $2.30 billion, but missed analysts’ estimate of $2.32 billion.

Its full-year earnings forecast of 74 cents to 78 cents per share was below the Wall Street estimate of 81 cents. The company also announced a new cost savings plan, through which it expects to save up to $150 million over three years.

Reporting by Jaslein Mahil and Soundarya J; Editing by Arun Koyyur

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