European nail care demand drives Coty's profit beat; shares jump 10%

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© Reuters. A screen displays the logo and trading information for Coty Inc at the NYSE in New York© Reuters. A screen displays the logo and trading information for Coty Inc at the NYSE in New York

By Aditi Sebastian and Praveen Paramasivam

(Reuters) – Coty Inc (N:) beat Wall Street estimates for quarterly profit and revenue on Wednesday as it sold more nail care products to salons and beauty professionals in Europe, sending its shares up 10% in premarket trading.

The cosmetics maker, which is majority owned by German conglomerate JAB Holdings, said it would take a hit from the coronavirus outbreak, but it was still early to estimate the impact.

Strong demand for nail care products such as OPI in Europe drove a 0.6% rise in sales in its professional beauty unit in the second quarter ended Dec. 31, the company said in a statement.

The company is in the midst of exploring options for the unit, including a sale, as part of a plan to focus on its higher margin skin care products and perfumes.

“We see a lot of appetite for the (professional beauty) business which has been performing very well,” Chief Financial Officer Andre-Pierre Terisse told Reuters, referring to the review.

The New York-based company is making a big push to attract millennial customers who are buying brands promoted by social media influencers, including Kylie Jenner and Lili Reinhart.

The company bought a $600 million majority stake in Jenner’s make-up and skincare businesses in November and tapped American actress Reinhart to market its products.

Sales in its luxury beauty business, its biggest by revenue, slipped 0.1% to $1.02 billion on a reported basis due to protests in Hong Kong. Excluding Hong Kong, its sales rose 1.3%, boosted by sales at duty free and other travel-retail stores.

Net revenue fell to $2.35 billion from $2.51 billion, but was still ahead of analysts’ estimates of $2.34 billion, according to IBES data from Refinitiv.

Net loss attributable to the company narrowed to $21.1 million, or 3 cents per share, in the second quarter ended Dec. 31 from $960.6 million, or $1.28 per share, a year earlier.

Excluding certain items, Coty earned 27 cents per share, beating analysts’ average estimate of 24 cents, according to IBES data from Refinitiv.

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