Coty’s third quarter results came in largely as Wall Street anticipated on revenue, but the company’s adjusted profit fell short of consensus estimates. Management attributed the revenue and margin pressures primarily to the ongoing transition away from the Gucci fragrance license, as well as inventory reductions among key retail partners. CEO Sue Nabi acknowledged the operational challenges that arose from uncertainty over the Gucci license, stating, “the uncertainty over the last few years around the fate of the Gucci license… were a challenge for the Coty organization and the Coty reputation.”

Is now the time to buy COTY? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Coty’s Q3 Earnings Call

• Robert Ottenstein (Evercore) asked about the impact of exiting the Gucci license and potential changes to Coty’s licensing model. CEO Sue Nabi detailed how Coty’s focus will shift to amplifying existing and new brands, emphasizing portfolio diversification and risk management.
• Susan Anderson (Canaccord) followed up on the Gucci transition, inquiring about financial impact and litigation. Nabi reiterated that while the Gucci loss will affect profits, Coty aims to offset this through growth in other brands and ongoing cost adjustments, and will defend its rights in litigation.
• Filippo Falorni (Citi) questioned what is driving anticipated performance improvement in the next quarter. Nabi cited strong U.S. fragrance market trends, innovation from recent launches like BOSS Bottled Beyond, and incremental growth from body mists.
• Oliver Chen (TD Cowen) asked about key launches and the outlook for Consumer Beauty in Brazil. Nabi and Mercier confirmed a return to growth is expected, driven by fragrance innovation and a strategic overhaul in color cosmetics, with Brazil’s business likely to see earlier conclusions from its review.
• Olivia Tong Cheang (Raymond James) explored the opportunities in ultra-premium and mist categories. Nabi described entry barriers, including patented technology, and stated the ultra-premium segment could become a much larger portion of Coty’s business.

Catalysts in Upcoming Quarters

In future quarters, our analysts will closely watch (1) the pace at which Coty’s core prestige fragrance brands can offset the impact from the Gucci license exit, (2) progress on expanding Gen Z-targeted mists and ultra-premium collections, and (3) outcomes from the strategic reviews of the color cosmetics and Brazil businesses. Execution in these areas will be critical for stabilizing margins and supporting revenue growth.

Coty currently trades at $3.61, down from $3.74 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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