Coty Inc (NYSE: COTY) delivered fourth-quarter fiscal 2026 results that met the high end of its guidance range for adjusted EBITDA and earnings per share. The company generated $348 million in free cash flow for the full year, an increase of approximately $70 million year-over-year, while reducing net debt by nearly $840 million.

The global beauty company navigated a challenging operating environment, with fiscal 2026 like-for-like sales declining 5% overall. However, Q4 performance showed sequential improvement, with like-for-like sales falling just 1%, better than the mid-single-digit decline expected. This resilience was supported by stronger-than-anticipated customer orders in the U.S. across prestige fragrances and mass cosmetics, as well as a milder impact from the Middle East conflict than initially projected.

Financial Performance and Cash Generation

Despite profitability pressures, Coty demonstrated strong cash discipline. The $348 million in fiscal 2026 free cash flow was achieved despite a decline in EBITDA of over $200 million. Key drivers included disciplined working capital management, a reduction in cash bonuses, a $34 million decrease in interest payments, and a $25 million reduction in capital expenditures.

Adjusted gross margin for the full fiscal year stood at 63%, down 190 basis points year-over-year. The decline was driven by lower volume absorption, elevated excess and obsolescence costs in both divisions, and tariff impacts. In Q4, the adjusted gross margin was 60.9%, down 140 basis points year-over-year.

What the Numbers Show

A significant divergence exists between Coty’s earnings power and its cash generation. While adjusted EBITDA declined 22% in fiscal 2026 and 26% in Q4, free cash flow increased by approximately $70 million. This indicates that the company’s ability to generate cash is currently being supported by balance sheet management—specifically reduced interest outlays and lower capex—rather than operational profit growth. The $250 million in savings from the "All In To Win" program helped create a leaner cost base, yet this was insufficient to offset top-line pressure and margin compression in the P&L.

Divisional Trends and Strategic Shifts

In the Prestige division, like-for-like sales improved sequentially to a decline of 0.5% in Q4. Prestige cosmetics delivered double-digit sales and sellout growth, bolstered by brands such as Kylie, Burberry, and early contributions from Marc Jacobs makeup. Conversely, prestige fragrance revenues declined 1% in Q4 and approximately 4% in the second half.

Consumer beauty saw like-for-like sales decline 3% in Q4, an improvement from the full-year sellout decline of 4%. Positive trends emerged in the U.S., with Sally Hansen returning to sales growth and CoverGirl showing improving sellout trends. Rimmel gained volume market share in the UK over the last three months.

Outlook and Portfolio Simplification

For the first quarter of fiscal 2027, Coty expects like-for-like revenue to decline by a low-to-mid-single-digit percentage. Adjusted gross margins are projected to fall 50 to 100 basis points year-over-year due to cost absorption headwinds from lower shipment volumes. Adjusted EBITDA is expected to decline by a low-teens percentage, translating to adjusted EPS of $0.11 to $0.13 per share (excluding equity swap impact).

Fiscal 2027 will be a transition year focused on simplifying the portfolio. Coty has agreed to exit the Gucci license by fiscal 2028, receiving $400 million in proceeds plus inventory value. The company plans to use these funds to reduce debt, invest in core brands, and fund organizational optimization. Gucci Beauty contributes a low double-digit percentage of total revenues, and its exit will require significant fixed cost savings to moderate the mechanical profit impact in fiscal 2028.

Coty Inc. (NYSE: COTY) filed its annual report on Form 10-K for the fiscal year ended June 30, 2026, with the U.S. Securities and Exchange Commission on August 20, 2026.

The filing is publicly accessible via the SEC’s website. The company did not disclose specific financial metrics in the announcement.

Filing Details

The 10-K filing covers the fiscal year ending June 30, 2026. Investors can access the full document through the link provided by the company.

About Coty Inc.

Founded in Paris in 1904, Coty operates as one of the world’s largest beauty companies. Its portfolio includes iconic brands across fragrance, color cosmetics, and skin and body care. The company sells prestige and mass market products in over 120 countries and territories.