Coty raised its annual profit forecast for the second time on Tuesday after crushing quarterly estimates.
For 2023, the company has raised its per-share profit forecast to 38 cents to 39 cents, up from 35 cents to 36 cents, with Q3 earnings coming out 19 cents per share, significantly higher than analysts’ expectations of 3 cents per share.
The company benefitted from the success of new product launches, continued demand for affordable and high-end fragrances and cosmetics and price hikes.
A key trend that has also been contributing to the company’s good fortunes is the lipstick effect, wherein more consumers are indulging in smaller luxuries amidst high inflation and cutting back on big-ticket purchases. This trend has also led to an increase in demand for Coty products from various retailers.
“Our retailers are now rebuilding and reordering. At the end of the third quarter, the level of inventory was very healthy,” Coty Chief Financial Officer Laurent Mercier told Reuters.
Another factor that is creating tailwind for Coty’s business is the post-pandemic recovery in the travel retail sector, with duty-free stores at airports and shopping hubs like Hainan in China driving demand.
“China has been very active for Coty during this quarter,” Mercier said in a post-earnings call, adding that the introduction of new luxury foundations and skin care products is expected to fuel sales in the current quarter further.