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Coty (COTY) Gains on Strength in Partnerships & Core Priorities

Coty (COTY) focuses on undertaking several strategic partnerships to enhance its brand portfolio. The company's e-commerce business is performing impressively.

This story originally appeared on Zacks

Focus on strategic partnerships as well as core priorities are working favorably for Coty Inc. COTY. The company’s growing e-commerce business is yielding.

Let’s discuss further.

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Strategic Partnerships Driving Growth

Coty made several strategic partnerships to enhance its brand portfolio. Recently, it entered into a multi-channel agreement with Perfect Corp. — a well-known beauty tech solutions provider. The partnership will help Coty’s customers to shop in the most convenient and personalized manner both online and offline. On Mar 3, 2021, the company signed a letter of intent to partner with LanzaTech — a pioneer in producing next-generation green and sustainable ingredients. This partnership is aimed at introducing sustainable ethanol produced from captured-carbon emissions into Coty’s fragrance offerings.

Coty and Kylie Jenner unveiled their long-term alliance in January 2020, aimed at building upon Kylie’s beauty business that includes Kylie Skin and Kylie Cosmetics. The company relaunched Kylie Cosmetics formulated using clean and vegan ingredients with a revamped packaging. The Kylie Cosmetics line along with the new integrated website was rolled out on Jul 15, 2021. The company is impressed with the performance of the brand.

Zacks Investment ResearchImage Source: Zacks Investment Research

What Else is Driving Growth?

On April 23, 2021 Coty revealed its long-term strategy that was highlighted by six priorities aimed at sustainable growth. These include stabilizing Consumer Beauty make-up brands and mass fragrances; accelerating luxury fragrances and setting up Coty as a core player in prestige make-up; establishing a skincare portfolio in prestige and mass channels; strengthening e-commerce and Direct-to-Consumer (DTC) capabilities; growing presence in China via Prestige and certain Consumer Beauty brands; as well as setting Coty as an industry leader in sustainability. With respect to stabilizing the consumer beauty brands, the company rolled out a new repositioning campaign, disruptive advertising as well as a clean vegan mascara in the early spring for CoverGirl, the largest brand in the consumer beauty portfolio. Management is on track to boost its leading brands through innovations as well as renovations of key icons for fragrance business.

Coty’s e-commerce business has been performing impressively for a while now. In fourth-quarter fiscal 2021, the company’s e-commerce sales rallied 19%. Coty’s e-commerce penetration reached high-teens percentage in fiscal 2021, double the figure compared with pre-pandemic levels. The company is on track to strengthen its e-commerce and direct-to-consumer capabilities with focus on digital first omni-channel. Management is shifting its strategy toward digital storytelling and discovery to boost product sales in both in-store and online.

Wrapping up

Coty has been seeing a volatile environment across markets, stemming from pandemic-induced restrictions, reduced store traffic and challenges in social mobility. Moreover, the company has been witnessing softness in international travel owing to the pandemic.

Nevertheless, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay poised amid the hurdles. Shares of the company have gained 9.8% so far this year against the industry’s decline of 7.1%.

Top 3 Picks

United Natural Foods, Inc. UNFI, currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 13.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Helen of Troy Limited HELE, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 19.8%, on average.

The Kraft Heinz Company KHC, currently carrying a Zacks Rank of 2, has a trailing four-quarter earnings surprise of 11.5%, on average.

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