Coty (COTY) Q2 2026 [Q&A] earnings summary

Executive summary

• Leadership transition underway, with Markus Strobel appointed Executive Chairman and Interim CEO, emphasizing realism, discipline, and focus to address underperformance and restore growth.

• Strategic priorities include streamlining portfolios, focusing on core brands, discontinuing smaller fragrance projects, and improving operational discipline.

• Sequential improvement in like-for-like (LFL) sales in Q2 FY26, though both Prestige and Consumer Beauty segments remain negative year-over-year.

• AI partnerships and digital initiatives are reducing costs and enhancing brand engagement.

• Net revenues for the quarter ended December 31, 2025, increased 1% year-over-year to $1,678.6 million, driven by Prestige growth and FX, offset by Consumer Beauty declines.

Financial highlights

• Q2 FY26 adjusted EBITDA was ~$330M (19.7% margin), down 15% year-over-year; first half FY26 adjusted EBITDA was ~$626M (19.2% margin), down 18%.

• Q2 reported net loss was $126.9M, mainly due to a $201.9M realized loss on the Wella sale; adjusted net income was $119.7M, up 21% year-over-year.

• Gross margin for the quarter declined by approximately 290 basis points to 63.8%, pressured by promotions, tariffs, and higher costs.

• Q2 net revenue: $1,678.6M (+1% reported, -3% LFL); six months: $3,255.8M (-3% reported, -6% LFL).

• Free cash flow for FYTD was $524M, supported by receivables and working capital management.

Outlook and guidance

• Q3 FY26 revenue expected to decline mid-single digits LFL, mainly from Consumer Beauty weakness, with FX providing a low- to mid-single digit benefit.

• Q3 adjusted EBITDA expected between $100M–$110M, with continued gross margin headwinds and negative free cash flow due to seasonality and $30M in taxes from the Wella sale.

• Profitability improvements expected from fiscal 2027 as operational and innovation plans take effect.

• Cost reduction efforts are being re-accelerated, targeting $80M–$200M in savings for fiscal 2026.

• No material changes to strategy or capital allocation have been finalized; updates will be provided in future disclosures.