Coty Sees FY24 LFL Revenue Growth Of + 9%-11%, Ahead Of Its Recently Raised Guidance Of + 8%-10%; For 1H FY24, Coty Now Expects LFL Revenue Growth Of + 11%-13%, An Increase From Its Previous Outlook Of + 10%-12%

OutlookSeveral months into FY24, the beauty market remains a strong and outperforming category, with ongoing premiumization trends. Coty continues to benefit from this attractive market dynamic, with momentum across its

Outlook

Several months into FY24, the beauty market remains a strong and outperforming category, with ongoing premiumization trends. Coty continues to benefit from this attractive market dynamic, with momentum across its core categories, strong launch results, and early wins in key white spaces. Against this favorable backdrop and given Coty’s strong Q1 delivery, the Company now expects FY24 LFL revenue growth of +9-11%, ahead of its recently raised guidance of +8-10%. For the first half FY24, Coty now expects LFL revenue growth of +11-13%, an increase from its previous outlook of +10-12%. Reported FY24 revenues are expected to include neutral to 2% benefit from FX, primarily in first half of FY24, and a 1-2% scope headwind from the divestiture of the Lacoste license, concentrated in the second half of FY24.

Coty is targeting FY24 adjusted EBITDA margin expansion of 10-30 bps on the stronger revenue outlook, with similar performance in 1H24 and 2H24. As a result, Coty now sees FY24 adjusted EBITDA of $1,080-1,090M based on current FX rates, above its recently raised EBITDA outlook of $1,075-1,085M. Within this outlook, Coty expects steady improvement in the YoY gross margin trajectory, driving modest FY24 gross margin expansion YoY, with strong expansion in 2H24. Coty continues to target FY24 adjusted EPS, excluding the equity swap, of $0.44-0.47, implying strong +16-25% YoY growth, with the incrementally higher profit outlook balanced by the discrete one-time negative tax impact. As part of Coty’s target to manage its diluted share count toward approximately 800 million by FY26, Coty expects to execute a 27 million share buyback in Q3 via its first equity swap and a 23 million buyback in FY25 via its second equity swap.

In light of Coty’s strong free cash flow trajectory in first half FY24, its successful Paris dual listing, and given misalignment on final deal terms, Coty and its counterparties have decided to end the partial sale of its Wella stake. Coty remains fully on track to reach its targeted leverage of ~3x exiting CY23 driven by its strong free cash flow trajectory and its successful Paris dual listing, as well as leverage of ~2.5x exiting CY24 and ~2x exiting CY25, as it continues to target the full divestiture of its Wella stake by end of CY25.

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