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Coty Loses Some Luster

COTY's first report looks good in the rear-view, but ...


Fragrance and cosmetics player Coty (COTY) has just taken another step back following its successful IPO back in mid-June.

Coty posted a loss of $62.3 million, or 16 cents per share, for its fourth quarter of fiscal 2013. That loss was actually narrower than the 95-cent loss than it suffered in the year-ago quarter, it reached an adjusted profit of 3 cents per share to top estimates by a penny, and revenues inched up 3% to $1.06 billion to also edge out the consensus mark.

However, COTY shares started out flat but accelerated to more than 6% declines by midday Tuesday. That, coupled with losses sustained in August and early September, have brought shares to around $15.15, well off Coty’s $17.50 IPO pricing.

Tuesday’s drop came thanks to a rough outlook. According to Coty:

“Over the last few months the Company has seen a deceleration of market growth in the U.S. and Europe, triggering significant trade de-stocking activity, particularly by U.S. mass retailers. As a consequence, Coty estimates net revenues in the first quarter of fiscal 2014 to marginally decline versus the prior year period.”

Coty is hardly alone, as rivals such as Elizabeth Arden (RDEN) have experienced weakness as well. (And RDEN’s woes have shown up in the share price, too, with the stock down roughly 25% in the past quarter.)

The Q4 report still had a few bright spots. In addition to the aforementioned earnings and revenue beats, Coty’s fragrances business saw revenue growth of 6%, driven by the traction of brands like Marc Jacobs, Chloe and Playboy. Coty also launched new products that included DOT Marc Jacobs, See by Chloe, Lady Gaga Fame, and Playboy VIP.

Emerging markets were a point of interest for Coty, too; in Asia, sales grew by about 11%.

However, the segment still is a small part of Coty’s buinsess; its footprint remains heavily planted in the U.S. and Europe.

And in light of the challenges in these regions, it probably will be tough for COTY to see much upside anytime soon.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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