On Wednesday, Coty hosted the conference call for its third-quarter fiscal year 2026 earnings report. The CoverGirl and Rimmel owner reported a 1% decline in net revenue to $1.28 billion for the quarter.
The Prestige category, which comprises 65% of Coty’s total sales and includes brands like Marc Jacobs and Jil Sander, was flat, with net revenue of $830.9 million for the quarter. Consumer Beauty net revenue, which comprises 35% of the company’s sales and includes brands like CoverGirl and Sally Hansen, decreased 4% to $450.7 million.
Coty does not release individual brand performance, but Coty executive chairman and interim CEO Markus Strobel said the drugstore makeup brand CoverGirl is showing progress thanks to a new strategy that targets Gen X consumers rather than Gen Z.
“I think, at one point in time, we tried to turn CoverGirl into the ultimate Gen Z brand. That didn’t really work, because this was not credible for the consumer,” said Strobel. “When I go see retailers in the United States, but also in Europe, they always say, ‘Please, please, please. Can anybody do something for Gen X? Because Gen X women have money ready to spend, but nobody talks to them.’ … We’re in the process of making [CoverGirl] the ultimate Gen X brand, and retailers really support us in this.”
Strobel said Coty has focused on CoverGirl’s core franchises like Simply Ageless and Lash Blast in an effort to reach that consumer, a model it may replicate with brands like Rimmel in the U.K. and Bourjois in Europe.
The company also estimated a 1.4% impact on revenue from Middle East disruption. Coty chief financial officer Laurent Mercier estimated that a $1 impact on oil price equates to an impact of $2 million on Coty’s profits.
“[The Middle East] is a very strong fragrance business, and also very dynamic. So indeed, it’s creating a headwind. Now, you need really to understand that within the Middle East, there are different dynamics. The channel which is the most impacted [is] travel retail, which, of course, given the circumstances, is drastically reduced. Also in Emirates, because you have a lot of tourists,” said Mercier on Wednesday’s earnings call. “But on the other hand, you have markets like Saudi, which are pretty well protected.”
Strobel also attributed some of the decline to poor sell-through in European markets over the Christmas holidays. Strobel said Coty will be reducing its volume in an effort to increase its sell-through, a strategy he said has helped CoverGirl and Sally Hansen close the gap in the U.S. market. The company has also pulled color cosmetics from some smaller markets like Southeast Asia and Mexico.
“We have basically decided to get our whole organization focused on sellout and market share. This is, for us, a big cultural shift,” said Strobel. “In Q3, we sold in much slimmer, much sharper bundles. Because, in the past, we sold in very big bundles. A lot of volume. The problem with it is, if it doesn’t sell out, it comes back in return as some obsolescence.”
