Coty Inc. (COTY) — A Turnaround Story in the Beauty Industry
About the Company
Coty is one of the world’s largest beauty and fragrance companies. Founded in 1904 and headquartered in New York, Coty owns a broad portfolio including mass-market brands (CoverGirl, Max Factor, Rimmel) and licensed luxury lines (Gucci, Burberry, Hugo Boss, Marc Jacobs). The company operates in two main segments: Consumer Beauty and Prestige.
Financial Overview
• Revenue (FY25): $5.9B (–2% YoY)
• EBITDA (FY25): ~$853M
• FY26 Outlook: EBITDA > $1B
• Net Income: –$381M (loss)
• Free Cash Flow: consistently positive, >$400M per year
• Market Cap: ~$3.4B
• Enterprise Value: ~$7.8B (high debt load)
• P/S: 0.58 (cheap vs. sales)
• Forward P/E: 7.5 (profit expected soon)
• P/B: ~1 (shares trade near book value)
The Core Paradox
Despite reporting GAAP losses, Coty generates strong Free Cash Flow. This allows the company to pay down debt and invest in growth without relying on new equity issuance.
Risks and Dilution
In the past, Coty diluted shareholders through secondary offerings, which explains the large float (~872M shares) and the long decline in stock price. Today, however, the risk of further dilution is low: Coty funds debt repayments via FCF, while insiders own over 57% of the shares and are aligned with investors. The main risk remains high leverage (Debt/Equity ~2.4).
News and Strategic Plans
• All-in to Win program: cost savings, margin expansion, additional ~$130M targeted savings.
• Focus on luxury fragrances and Gen Z-oriented products (mists, emotion-driven scents).
• Shifting part of production to the U.S. to mitigate tariffs and strengthen supply chains.
• Exploring potential divestitures of certain brands to sharpen focus on core profitability.
• Management outlook: sales to return to growth in 2H FY26, EBITDA > $1B.
Leadership and Management Changes
CEO Sue Nabi continues to lead the turnaround strategy with emphasis on luxury and digitalization. Recent executive reshuffles strengthened digital innovation (Jérôme Auvinet), operational efficiency (Stéphane Delbos), and supply chain (Fatima Zahri), as part of the company’s transformation agenda.
Market Sentiment and Investor Behavior
After FY25 results, Coty’s stock plunged ~20% as retail investors sold off heavily. However, option flow data shows institutions buying aggressively at the $3.8–4.0 level, selling puts and creating bullish pressure. This reflects a classic transfer of shares from “weak hands” to “strong hands.”
Technical Levels to Watch
• Support: ~$3.8–4.0
• First target: $6 (partial profit-taking zone)
• Second target: $7.5–8
• Bull case: $10+ if recovery and deleveraging accelerate
Conclusion
Coty represents a turnaround opportunity: weak on paper (losses, sales decline), but fundamentally supported by strong FCF, powerful brands, and high insider ownership. Currently, the stock trades near book value with institutions accumulating while retail exits. This creates a speculative opportunity: buy near the bottom, take partial profits on the way up, and hold the remainder as a long-term “free ride.”