Coty: net income up 64% in the first quarter, but adjusted EBITDA down 7%
Coty published its results for the first quarter of fiscal 2027, ended September 30, on November 4, 2026. Net income attributable to the group rose 64% to $106.2 million, and adjusted EPS reached $0.16 compared with $0.12 a year earlier, an increase of 33%. Adjusted EBITDA, however, fell 7% to $274.2 million.
Part of the gap is visible below the operating line. Net income includes a $14.8 million gain from the mark-to-market revaluation of a share swap, compared with a $26.5 million charge a year earlier. Adjusted EPS therefore includes a positive effect of $0.01, compared with a negative effect of $0.03.
This adjusted EPS exceeds the average of $0.12 expected by analysts. Revenue, at $1,555.2 million, declined 1% as reported and 2% on a like-for-like basis, compared with $1,577.2 million a year earlier.
Gross margin and adjusted EBITDA margin down 1.2 points
Operating profitability declined at all levels. Gross margin, identical on a reported and adjusted basis, fell 1.2 points to 63.3%.
The group attributes this to higher freight and raw material costs linked to the conflict in the Middle East, as well as higher write-downs of excess or obsolete inventory resulting from overly high demand forecasts.
This decline carries through to the following aggregates. The adjusted EBITDA margin lost 1.2 points to 17.6%, and the adjusted operating margin fell 1 point to 14.2%, for adjusted operating income of $220.5 million compared with $240.5 million. The group attributes this decline to lower sales and a lower gross margin.
On an accounting basis, operating income went from $185 million to $170.4 million, a decrease of 8%. The operating margin declined 0.7 points to 11%.
Key prestige brands grow, mass consumer loss widens
The Prestige division, which accounts for 68% of sales, fell 1% to $1,058.4 million, both as reported and on a like-for-like basis.
Within the division, the six key brands (Hugo Boss, Burberry, Calvin Klein, Marc Jacobs, Chloé and Kylie Cosmetics) grew 5% on a like-for-like basis, after a 6% decline in the first half of fiscal 2026. They represent 73% of the division's sales.
Prestige operating income rose 1% to $211 million, a margin of 19.9%. Coty also extended its Marc Jacobs license, now for a term of 40 years, as part of a partnership begun in 2003.
The mass consumer division (32% of sales) fell 2% as reported to $496.8 million, and 3% on a like-for-like basis, compared with an 8% decline in the first half of fiscal 2026. Its operating loss, however, widened to $24.1 million from $7.7 million a year earlier.
Net financial debt reduced to $2,576.4 million, further decline in adjusted EBITDA expected
Cash generation is improving. Operating cash flows reached $130.4 million compared with $65.2 million, and free cash flow reached $84.6 million compared with $11.2 million, supported, according to CFO Soraya Benchikh, by better management of suppliers and trade receivables.
With a first payment of $250 million from the sale of Gucci Beauty, net financial debt was reduced to $2,576.4 million at September 30, compared with $2,912.1 million at June 30.
The ratio of net debt to adjusted EBITDA stands at 3.1 times. The group is exiting fiscal 2026, which closed with a net loss of $604.8 million, according to the accounts published on August 19, 2026.
For the second quarter, Coty anticipates a like-for-like sales decline in the low single digits, an unfavorable currency effect of similar magnitude, and a decline in adjusted EBITDA in the high single digits. Adjusted EPS excluding the share swap is expected to be between $0.16 and $0.18.
The group targets more than $300 million of free cash flow over the first half and plans to complete its strategic review by the end of calendar year 2026. Markus Strobel, Executive Chairman and interim Chief Executive Officer, stressed that the group has “still work to do to turn these early signs of recovery into a broad-based turnaround.”
