COTY Inc.

Income statement: notes and sources

Sources: 10-K FY2023 (adjusted operating income and EBITDA FY2021–FY2023); FY2023, FY2024, FY2025, FY2026 earnings releases; SEC XBRL aggregates (EDGAR-derived via StockAnalysis/edgar.tools) for gross profit, pre-tax, tax. FY2022 attributable-to-common is depressed by USD 198.3M of preferred dividends including a deemed dividend on the Series B preferred exchange. Note a data-provider discrepancy for FY2022 gross profit (3,369 SEC-derived vs 3,381 on one aggregator); the SEC-derived figure is used.

Margins

Revenue CAGR FY2022–FY2026: 2.3% (USD 5,304.4M to 5,806.6M). Five-year CAGR FY2021 (USD 4,629.9M) to FY2026: 4.6%.

Commentary. The P&L shows a clear inflection. FY2022–FY2024 were recovery years: revenue rose from USD 5.3bn to 6.1bn on prestige-fragrance strength (FY2024 LFL +11%), gross margin expanded ~90bp via pricing and supply-chain productivity, and adjusted EBITDA grew from USD 905M to 1,091M. FY2025 marked the turn: revenue fell 4% as Coty proactively cut retailer inventories, China and Asia Travel Retail weakened, and Consumer Beauty declined 8%; adjusted EBITDA margin still rose 60bp on short-term savings, but reported profit collapsed due to USD 212.8M of impairments, the USD 248.1M equity-swap loss and restructuring. FY2026 deteriorated further at the profit line: LFL revenue fell 5% (masked by a 4% FX tailwind), gross margin fell 190bp (under-absorption, tariffs, promotions, excess and obsolescence), adjusted EBITDA fell 22% to USD 846.9M and reported net loss attributable to common widened to USD 618.0M. The gap between reported and adjusted results is persistently large, driven by amortisation, impairments, restructuring and the non-operating swap marks; analysts should note that adjusted EPS includes the swap losses (FY2026 adjusted EPS ex-swap was USD 0.34).

Balance sheet

Sources: 10-K FY2026 and FY2025 balance sheets (FY2024–FY2026); SEC XBRL aggregates via StockAnalysis for FY2022–FY2023 assets, goodwill, intangibles and equity (Finboard shows a different equity series for FY2022–FY2023 of 3,346 and 3,997 — discrepancy noted, likely due to treatment of noncontrolling interests). FY2022 financial net debt not separately verified; the FY2023 release states FY2023 net debt improved by ~USD 0.3bn year-on-year, implying ~USD 4.3bn at FY2022. FY2026 economic net debt equals financial net debt as the Wella stake was sold.

Debt composition at 30 June 2026 (10-K FY2026 fair-value table): Senior Secured Notes USD 2,719.8M carrying (fair value 2,684.1); 2018 Coty Credit Agreement / revolver borrowings USD 349.9M. All long-term debt except the 2023 Revolving Credit Facility is fixed-rate. On 15 April 2026 Coty repaid the remaining EUR 250M (~USD 294.7M) of 2026 Euro Senior Secured Notes using revolver proceeds; in Q1 FY2026 it issued new notes and redeemed all 5.000% senior secured notes due 2026 and part of its 3.875% notes due 2026.

Cash flow

Sources: earnings releases FY2023–FY2026. FY2022 FCF derived from FY2023 release (FY2023 FCF of 402.9 was 149.6 lower). FY2024 buyback is the 22 Feb 2024 repurchase of 27M shares for ~USD 200M (Q3 FY2024 release); treasury shares rose from 66.5M to 94.3M over FY2024.

Commentary. Cash generation has proved more resilient than earnings: FY2026 FCF rose 25% to USD 348.2M despite a 22% EBITDA decline, aided by lower capex (USD 190M vs 245M in FY2024) and working-capital discipline. FY2022 FCF was inflated by one-off TSA and working-capital benefits post-Wella. The Wella proceeds (USD 750M, Dec 2025) and Gucci signing payment (USD 250M, Jul 2026 — i.e., FY2027) are the main sources of deleveraging rather than organic FCF.

Ratios

Leverage ratios are company-reported (FY2023 ~4.1x per Q4 FY2023 call commentary).

Commentary. Leverage has fallen from roughly 4x+ in FY2022–FY2023 to 3.4x, but almost entirely via asset sales; with EBITDA falling, S&P expects net leverage to exceed 4x after the Gucci exit (S&P commentary, Jul 2026). Inventory days rising from ~128 to ~142 confirms the excess-and-obsolescence problem management flagged. Negative working capital is structural (payables and accruals exceed current assets).

Management guidance (19 Aug 2026). Q1 FY2027 LFL revenue down low- to mid-single-digit; FX neutral; adjusted gross margin down 50–100bp; adjusted EBITDA down low-teens %; adjusted EPS ex-swap USD 0.11–0.13; 1H FY2027 FCF above USD 300M. FY2027 is a transition year with progressive improvement; strategic review conclusions expected by end CY2026; broader outlook to follow. Gucci exit reduces revenue and profit in FY2028; profit expansion targeted from FY2029.

Consensus expectations. Sell-side stance is cautious ("Reduce", average target USD 3.24).

Bull case

1. Valuation embeds deep pessimism: ~6.5x EV/adjusted EBITDA and ~0.8x book for a business whose Prestige division still earns ~20% EBITDA margins and whose franchises (Goddess, BOSS Bottled Beyond, Euphoria Elixirs) are growing.

2. Balance-sheet de-risking is tangible: net debt fell ~USD 840M in FY2026 to USD 2.9bn; Gucci adds USD 250M (received Jul 2026) plus USD 150M by Sep 2027, and 1H FY2027 FCF is guided above USD 300M.

3. Portfolio simplification could unlock value: a sale or separation of mass color/Brazil (~USD 1.6bn revenue, low margin) would convert Coty into a higher-margin fragrance-focused company with a cleaner equity story, while the Wella distribution rights offer optional upside.

Bear case

1. The Gucci exit removes a low-double-digit share of revenue and significant EBITDA in FY2028; S&P expects leverage above 4x, and replacement licences (Swarovski, Etro, Marni) are small and early-stage.

2. Underlying demand is weak: FY2026 LFL -5%, sell-out below market in both divisions, gross margin -190bp, with EMEA -8% LFL and tariff pressure on European-made prestige fragrance.

3. Execution and governance risk: interim CEO, new CFO and multiple EC departures in 2026; JAB control (~54%); no dividend; persistent GAAP losses and impairment exposure on USD 6.6bn of goodwill and intangibles.

Catalysts and monitorables (next 12 months)

Concluding analyst verdict.

Coty in October 2026 is a company midway through a forced metamorphosis. The core thesis that made it a turnaround success between FY2021 and FY2024 — a licensed prestige-fragrance engine riding the strongest category in beauty, funding steady deleveraging through Wella sales — is intact in parts but under strain everywhere. Prestige fragrance still produces attractive economics (adjusted EBITDA margin of 20.5% in FY2026) and Coty retains genuine innovation capability, as the success of Burberry Goddess and BOSS Bottled Beyond demonstrates. The balance sheet is materially smaller and safer than at any point since the P&G deal, with net debt of USD 2.9bn and cash flow that has held up better than earnings.

However, the data show that Coty is losing share in both divisions, that the margin structure has stepped down by roughly 380bp of adjusted EBITDA margin in a single year, and that the company has exhausted its largest non-core monetisation (Wella) while giving up one of its most valuable licences (Gucci). The Gucci episode also illustrates the structural vulnerability of a licensee when licensors align with larger platforms. FY2028 carries a visible earnings hole that management has not yet quantified, and leverage could drift back toward 4x as S&P expects.

The investment case therefore hinges on three binary-ish events within twelve months: a value-accretive resolution of the Consumer Beauty review, credible quantification of fixed-cost savings, and evidence that sell-out is converging with the market. At roughly 6.5x EV/adjusted EBITDA and below book value, the equity already discounts much of the downside, but the near-term flow of information (transition year, interim leadership, ratings pressure) is skewed negative. On balance, the evidence supports a neutral-to-cautious stance: the asset quality in Prestige gives Coty real option value, but conviction requires proof of stabilised share and a clear post-Gucci earnings bridge.