COTY INC.

Current report

We are one of the world’s largest beauty companies, with an iconic portfolio of brands across fragrance, color cosmetics, and skin and body care. Our brands empower people to express themselves freely, creating their own visions of beauty; and we are committed to protecting the planet. We have sharpened our priorities to capitalize on structural tailwinds in the fragrance market. We are leveraging our leadership in fragrance innovation, licensing, and manufacturing to expand across price points, from mass to ultra-premium and across scenting formats. With slower growth in China’s beauty market, we have shifted focus to a broader set of emerging markets and the U.S. In Consumer Beauty, we aim to improve performance and profitability through agile innovation, social media advocacy, and expansion into body mists and masstige fragrances. Skincare remains a strategic focus, but achieving scale takes time, and we will pursue this while remaining very mindful of the investment demand. We also continue to advance key sustainability priorities.

Current report

Strategic Progress

Current report

We have been making progress on our strategic priorities. In Consumer Beauty, we have implemented the relaunch of our top brands. We are now focusing on diversifying our business by overdriving mass fragrances and adjacencies, while accelerating our color cosmetics business through digital advocacy, channel diversification and on-trend innovation, all of which is intended to step change our Consumer Beauty profitability. In Prestige, we are accelerating our fragrance business with exceptional new launches and franchise-building extensions, expanding our premium and ultra-premium category portfolio, extending into the rapidly growing fragrance mist adjacency with multiple brands, while also enhancing the assortment of our Prestige cosmetic products. We are continuing to thoughtfully expand our skincare portfolio (which contributed a mid-single digit percentage of our fiscal 2025 net revenue). We continue to expand our e-commerce capabilities across our portfolio, through online launches, our digital advocacy strategy and active participation in key online shopping events. We are adjusting our strategy in step with the beauty market evolution. Our aim is to continue expanding our footprint and diversifying into a limited number of structurally profitable and growing beauty categories and geographic markets at scale. We are leveraging and overdriving our leadership position and best-in-class capabilities in global fragrances to fuel strong expansion— with fragrances already constituting more than 65% of our fiscal 2025 net revenues and an even larger portion of our profits.

Current report

During the third quarter of fiscal 2025, we formulated a new plan, which was announced on April 24, 2025, to strengthen our operating model and simplify our fixed cost structure (the “Fixed Cost Reduction Plan”). Cash costs associated with the program include restructuring and business structure realignment costs and are expected to be approximately $80.0, roughly evenly split between fiscal 2026 and fiscal 2027.

Current report

Global Economic Landscape and Business Impact

Current report

Recent changes in U.S. and international trade policies—particularly tariff increases—and the ongoing uncertainty surrounding such policies may present challenges to our business operations and financial condition. These challenges may include supply chain disruptions and commodity price volatility, resulting in increases in our cost of goods sold. Under the current tariff framework, the biggest areas of potential challenges for us are prestige fragrances shipped to the U.S. from our Barcelona plant, and the sourcing of various components and marketing materials from China. In response, we have evaluated more diversified sourcing strategies, strategic pricing adjustments and cost-reduction initiatives to help offset these pressures and protect our profitability. We are optimizing our supply chain to enhance resilience and agility in response to changing tariff environments. We have successfully transitioned mass fragrance production—including key brands such as Adidas, Origen, and Nautica—as well as fragrance mists to our U.S. manufacturing site. Additional transfers of entry-level prestige fragrance products are planned for early in the third quarter of fiscal 2026, further optimizing U.S. capacity.

Current report

In the short term, we are accelerating dual sourcing for all entry-level prestige products by leveraging regional input materials, and future launches will be developed with dual production capabilities. We expect that any increases in our cost of goods sold will be balanced with minimal price adjustments to ensure competitiveness. On a longer-term basis, we are evaluating expanded regionalization strategies, including potential additional U.S. investments. We will also continue to collaborate with external partners to strengthen our domestic manufacturing capabilities, supporting our goal of a robust, U.S.-based supply chain.

Current report

We estimate additional costs related to tariff increases to be around approximately $70.0 before any mitigating actions taken by the Company. We expect that certain non-price related mitigating actions will offset $15.0-$20.0 of the impact from tariffs. The vast majority of these costs are expected to be incurred in fiscal 2026, based on analyses of announcements made by the U.S. administration including those on April 2, 2025 and on August 1, 2025, as well as announcements by U.S. trade partners. Despite our efforts, reductions in consumer confidence and discretionary spending could impact demand for our products and negatively affect our sales. We are closely monitoring developments, evaluating potential impacts, and proactively taking steps to mitigate adverse effects on our business.

Current report

Market Trends and Sales Performance

Current report

•Fragrances: We believe fragrances will remain a structurally advantageous category, supported by beauty category-leading brand loyalty, strong consumer demand, increasing usage, broader price points and formats, and expanding global penetration. In fiscal 2025, our fragrance category experienced low-single digit percentage net revenue growth compared to the previous fiscal year, driven by high-single digit percentage, but decelerating, growth in the overall fragrance market. Net revenues from prestige fragrances increased by a low-single digit percentage in fiscal 2025, reflecting a deceleration in growth compared to the prior year, as the contribution from our fragrance innovation this fiscal year was more moderate than the contribution from major innovations in the previous fiscal year. With a slate of new launches scheduled for fiscal 2026 and beyond, we believe that our prestige fragrances are strategically positioned to achieve sustained growth and strong momentum across key markets. Within our Consumer Beauty segment, we are planning exciting new fragrance launches and strategic retail partnerships, expanding our mass fragrance presence into value segments. By innovating with leading brands and leveraging high-performing digital channels, we believe we are well positioned to build awareness and fuel demand.

Current report

•Color Cosmetics: Our net revenues from mass color cosmetics declined by low-double digits percentage during the same period due to a weakening in market demand, particularly in the United States and in several European markets. Our net revenues from prestige color cosmetics declined by a double-digits percentage, impacted by economic conditions in Asia affecting a key brand in the region.

Current report

•Skin and Body Care: Our skincare portfolio contributed a mid-single digit percentage of our fiscal 2025 net revenue. Competitive pricing actions in Brazil negatively impacted demand for certain of our deodorant brands leading to a high-double digit percentage decline in our body care net revenues during fiscal 2025, despite positive trends in the overall mass body care market. Positive, but decelerating, market trends in Brazil have supported volumes in the overall Consumer Beauty business, despite having a negative impact on the segment’s gross and operating margins.

Current report

•Geographic Regions: Net revenue in the Americas declined by a high-single digit percentage during fiscal 2025, driven by softness within the color cosmetics market in the United States. Net revenue from EMEA increased by a low-single digit percentage due to decelerating growth across most European markets. Net revenue in the Asia Pacific region declined by a high-single digit percentage in fiscal 2025, impacted by continued economic challenges in China affecting certain of our brands, and a decline in sales in the Asia Travel Retail channel. Asia Travel Retail channel sales were negatively affected by regulatory restrictions in Asia aimed at formalizing cross-border shopping, which reduced daigou (surrogate shopping) purchases.

Current report

We expect that some of the market trends may continue into fiscal 2026.

Current report

Financial Outlook

Current report

We expect that our reported net revenue for the first half of fiscal 2026 will decline in the low-single digit percentage versus the prior year, which includes an estimated low-single digit percentage benefit from foreign exchange. We anticipate that our first half fiscal 2026 gross margin will be pressured as a result of lower sales as well as the net impact from tariffs, with some easing in the second half fiscal 2026 as a result of mitigation efforts. We are re-accelerating our cost reduction efforts across to deliver savings of approximately $80.0 in fiscal 2026. We expect that our reported net revenue for the second half fiscal 2026 will return to growth versus the prior year, supported by major launches across both our Prestige and Consumer Beauty segments and more favorable comparisons.

Previous report

We are one of the world’s largest beauty companies, with an iconic portfolio of brands across fragrance, color cosmetics, and skin and body care. Our brands empower people to express themselves freely, creating their own visions of beauty; and we are committed to making a positive impact on the planet. Our strategic priorities include stabilizing and growing our Consumer Beauty brands through leading innovation and improved execution, accelerating our Prestige fragrance business and ongoing expansion into Prestige cosmetics, building a comprehensive skincare portfolio over the mid-to-long term leveraging existing brands, enhancing our organizational growth capabilities including digital and research and development, expanding our presence in growth channels such as the Travel Retail channel, in China and other growth engine markets (Latin America, including Brazil, the Middle East, North and South East Asia, Africa and India), and establishing Coty as an industry leader in sustainability.

Previous report

We have been making progress on our strategic priorities. In Consumer Beauty, we have implemented the relaunch of our top brands and returned to stable growth and steady margin improvement. Consumer Beauty net revenue grew 6% in fiscal 2024, with growth across mass fragrances, mass color cosmetics, skincare and body care led by Brazil. We are now focusing on accelerating our digital advocacy strategy to amplify our brand and product innovations, leverage consumer analytics and insights, and improve the return on investment of our marketing activities. Our e-commerce channel net revenues grew by over approximately 20% in fiscal 2024, with double-digit percentage growth in Prestige and Consumer Beauty. In Prestige, we continue to accelerate the fragrance business with exceptional new launches and expansion in premium and ultra-premium categories, while steadily expanding the distribution, productivity and assortment of our Prestige cosmetics. Our prestige cosmetics net revenues grew by a double-digit percentage in fiscal year 2024, led by Kylie Cosmetics and Burberry. We are continuing to thoughtfully expand our skincare portfolio (which contributed a mid-single digit percentage of our fiscal 2024 net revenue) with our focus on winning over the most discerning skin care consumers in our areas of excellence – UV protection, photoaging prevention and repair, biotech-enhanced longevity science, and micro-dose formulations. Our skincare business, which contributed a mid-single-digit percentage of sales, generated strong sales growth in fiscal year 2024. We have successfully expanded our e-commerce capabilities, through best-in-class online launches, our digital advocacy strategy and active participation in key online shopping events, and increasing digital media competitiveness. Revenues from our global Travel channel grew in all three regions – Americas, EMEA and Asia Pacific – contributing approximately 20% to the net revenue growth in fiscal year 2024. Our growth engine markets net revenues grew in fiscal 2024, led by Brazil, the rest of LATAM, Southeast Asia, including India, and Africa.

Previous report

We expect that our net revenue for fiscal year 2025 will grow in the mid-single digit percent to high-single digit percent versus the prior year, excluding the impact of foreign exchange and the early termination of the Lacoste fragrance license. We anticipate that our annual gross margin will remain in the mid-sixties, providing us with opportunities to fund new product initiatives and support our brands through advertising and consumer promotional investments. We continue to target advertising and consumer promotional spending in the high-twenties percentage of net revenues. However, our level of advertising and consumer promotional spending will depend on various factors, including seasonality, the timing of product launches, and budgetary considerations.

Previous report

Global Supply Chain Challenges

Previous report

Our ability to fulfill demand for our products is critical to our success. Through steps taken to improve order fill rates and mitigate the impact of supply chain constraints, we have seen improvements in our order fill rates on a company-wide basis. As a result, in fiscal year 2024 we achieved close to pre-COVID-19 service levels across our divisions.

Previous report

Inflation

Previous report

The impact of inflation on material, logistical and other costs subsided during fiscal year 2024. Inflation may continue to impact certain costs, such as labor. However, we currently anticipate the overall impact of inflation to remain muted.