Coty Inc. (NYSE: COTY) shares fell 6.93% to $2.82 in Wednesday’s extended trading after the company reported a wider-than-expected fourth-quarter fiscal year 2026 adjusted EPS loss. The beauty conglomerate posted an adjusted EPS loss of $0.02, missing the consensus estimate for a loss of $0.01, according to Benzinga Pro data. Despite the earnings miss, Coty’s quarterly revenue of $1.27 billion beat Street estimates of $1.19 billion by 6.25%.

The negative market reaction underscores investor sensitivity to profitability pressures despite top-line growth. Coty also announced a significant strategic shift: the early termination of its beauty license agreement with Kering for the Gucci brand. This exit is expected to result in a step-down in sales and profit in fiscal year 2028 as the brand transitions fully to Kering.

Gucci Beauty License Exit Details

Coty announced an agreement with Kering for the early transition of the Gucci Beauty license, ending approximately one year ahead of the original term. Key financial and operational terms include:

• Upfront Payment: Coty received $250 million in cash at signing.
• Future Payments: An additional $150 million is payable no later than September 30, 2027, with up to $30 million contingent on certain criteria.
• Transition Period: Coty will continue to operate the Gucci Beauty brand through at least June 30, 2027.
• Total Consideration: $400 million, plus additional proceeds from inventory.

Management stated that this exit accelerates cash inflows through settlement terms but will lead to a step-down in sales and profit in FY28, reflecting the loss of the brand's contribution to the Prestige segment after the transition period concludes.

Q4 FY26 Financial Performance

In the quarter ended June 30, 2026, Coty delivered mixed results with top-line growth beating expectations but profitability pressures persisting. Interim CEO Markus Strobel noted that the company closed FY26 on a stronger note, delivering sales and profit ahead of targets while growing free cash flow.

Net revenues rose 1% on a reported basis year-over-year, beating analyst consensus estimates of $1.194 billion by 6.25%. On a like-for-like (LFL) basis, revenues declined 1%, including an estimated 1% headwind from the conflict in the Middle East.

Segment Performance

Prestige net revenues of $771.8 million (61% of total sales) rose 1% on a reported basis. On an LFL basis, Prestige revenues declined 0.5%, including an estimated 1.5% headwind from the Middle East conflict. Adjusted operating income was $60.2 million versus $74.7 million in the prior year.

Consumer Beauty net revenues of $497.4 million (39% of total sales) rose 1% on a reported basis. On an LFL basis, Consumer Beauty revenues declined 3%. Adjusted operating loss was $(20.7) million versus $(7.0) million in the prior year.

Full-Year FY26 Summary

For the twelve months ended June 30, 2026, Coty reported net revenues of $5,806.6 million, down 2% on a reported basis and 5% on an LFL basis. Adjusted EBITDA declined 22% to $846.9 million, with a margin of 14.6%. Financial net debt stood at $2,912.1 million, resulting in a financial leverage ratio of 3.4x.

Other Strategic Developments

• Wella Monetisation: In December 2025, Coty monetised its remaining stake in Wella for $750 million.
• Marc Jacobs Beauty: The online launch of makeup under Marc Jacobs Beauty started strongly, with online sell-out at Sephora ahead of targets. Expansion into hundreds of Sephora stores across the U.S. and Travel Retail is planned beginning in September.
• Consumer Beauty Progress: Sell-out performance in the U.S. improved for CoverGirl and Sally Hansen. Sally Hansen is now outperforming the category in units in the U.S.

Outlook

Coty expects Q1 FY27 LFL revenue to decline by a low- to mid-single-digit percentage. Adjusted gross margin in Q1 FY27 is expected to decline approximately 50 to 100 basis points year-over-year. Adjusted EBITDA in Q1 FY27 is expected to decline by a low-teens percentage. Adjusted EPS, excluding the equity swap, is expected to be $0.11 to $0.13 per share in Q1 FY27, versus the 14 cent analyst estimate. For the first half of FY27, Coty expects free cash flow of over $300 million.

What the Numbers Show

The Q4 FY26 results reflect a business in early-stage stabilisation. Revenue growth of 1% on a reported basis exceeded estimates, supported by a 3% foreign exchange tailwind, while the LFL decline of 1% signals that underlying demand headwinds persist. The adjusted EPS loss narrowed meaningfully from $(0.05) to $(0.02), reflecting a 70% improvement in adjusted net loss to $(13.4) million from $(44.9) million, driven in part by a significantly smaller mark-to-market impact from the equity swap ($10.0 million negative impact versus $59.6 million in the prior year quarter). However, adjusted EBITDA fell 26% to $93.6 million, with the margin contracting 270 basis points to 7.4%, as gross margin pressure from tariffs, lower cost absorption, and elevated excess and obsolescence charges weighed on profitability. The divergence between the revenue beat and the EPS miss against consensus estimates underscores that cost pressures remain disproportionate to incremental revenue gains. Free cash flow of $72.6 million in Q4 and $348.2 million for the full year, up from $34.9 million and $277.6 million respectively, represents a meaningful positive signal on capital discipline despite lower profitability.

Coty Inc (NYSE: COTY) has provided first-quarter guidance for adjusted earnings per share of $0.11 to $0.13. The company’s forecast falls short of the consensus analyst estimate of $0.14, signaling a potential shortfall in profitability for the period.

The guidance suggests that operational results may have underperformed market expectations. With the upper end of the projected range ($0.13) remaining $0.01 below the estimate, investors are likely to scrutinize the underlying drivers of this divergence.

What the Numbers Show

The gap between the guided midpoint and the analyst estimate highlights a clear beat/miss dynamic. While the source does not disclose revenue or margin figures, the EPS miss implies either lower top-line growth, compressed margins, or higher expenses than anticipated by the sell-side consensus. Without further data on non-recurring items, the miss appears to reflect broader operational execution challenges rather than isolated accounting adjustments.