Coty Inc. COTY has announced the sale of its 20% stake in SKKN by Kim to SKIMS, marking the end of its partnership with Kim Kardashian's beauty brand. With this transaction, SKIMS will integrate the beauty and lifestyle ventures under a unified brand.
The divestment aligns with Coty's broader strategy to streamline its portfolio, invest in innovation and strengthen financial position through deleveraging efforts.
This Zacks Rank #3 (Hold) company continues to solidify its leadership in the fragrance industry, strengthening presence across both prestige and mass-market segments. In the first half of fiscal 2025, the company's prestige fragrance portfolio achieved high-single-digit sell-out growth, despite challenges in markets like China and travel retail.
COTY's cosmetics brands are gaining momentum, bolstered by strong social media advocacy and an increasingly agile innovation strategy. It is actively pursuing growth opportunities across various categories, distribution channels and global markets. In line with its commitment to sustainability, the company is also reaching new ESG milestones, while working toward establishing itself as an industry leader in responsible beauty practices.
Coty is advancing its "All In to Win" transformation program, focusing on cost reduction, margin expansion and revenue growth. Recent operational streamlining efforts have strengthened cash flow, positioning the company for future investments and market expansion.
Despite its strategic efforts, Coty continues to face challenges in the Chinese mainland and Asia Travel Retail markets, where weak demand persists. Retailers are further adjusting their orders, adding pressure to the market.
Coty has also been managing higher advertising and consumer promotions (A⁘CP) spending. In the second quarter of fiscal 2025, A⁘CP expenses remained in the high 20% range, reflecting a year-over-year increase. With these costs expected to remain elevated, ineffective management could further strain margins and profitability in the coming quarters. COTY's shares have lost 6.2% in the past month compared with the industry's decline of 1.3%.
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