Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the financial condition and results of operations of Coty Inc. and its consolidated subsidiaries, should be read in conjunction with the information contained in the Condensed Consolidated Financial Statements and related notes included elsewhere in this document, and in our other public filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 (“Fiscal 2025 Form 10-K”). When used in this discussion, the terms “Coty,” the “Company,” “we,” “our,” or “us” mean, unless the context otherwise indicates, Coty Inc. and its majority and wholly-owned subsidiaries. Also, when used in this Quarterly Report on Form 10-Q, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation. The following report includes certain non-GAAP financial measures. See “Overview—Non-GAAP Financial Measures” for a discussion of non-GAAP financial measures and how they are calculated.
All dollar amounts in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.
More information about potential risks and uncertainties that could affect our business and financial results is included under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q and other periodic reports we have filed and may file with the SEC from time to time.
Forward-looking Statements
Certain statements in this Form 10-Q are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, strategic planning, targets and outlook for future reporting periods (including the extent and timing of revenue, expense and profit trends and changes in operating cash flows and cash flows from operating activities and investing activities), the Company’s future operations and strategy (including the expected implementation and related impact of its strategic priorities), ongoing and future cost efficiency, optimization and restructuring initiatives and programs, expectations of the impact of inflationary pressures and the timing, magnitude and impact of pricing actions to offset inflationary costs, strategic transactions (including their expected timing and impact), the strategic review of the Company’s consumer beauty business, including its mass color cosmetics business and associated brands and the Company’s distinct Brazil business comprised of local Brazilian brands, and any transactions related thereto, use of proceeds from any transaction and the timing and outcome of the strategic review, expectations and/or plans with respect to joint ventures, the timing and size of any future distribution related to the Wella Distribution Rights (as defined below), the Company’s capital allocation strategy and payment of dividends (including suspension of dividend payments and the duration thereof and any plans to resume cash dividends on common stock or to continue to pay dividends in cash on preferred stock) and expectations for stock repurchases, investments, plans and expectations with respect to licenses and/or portfolio changes, product launches, relaunches or rebranding (including the expected timing or impact thereof), plans for growth in certain categories, markets, channels and other white spaces, synergies, savings, performance, cost, timing and integration of acquisitions, future cash flows, liquidity and borrowing capacity (including any refinancing or deleveraging activities), timing and size of cash outflows and debt deleveraging, the timing and magnitude of any “true-up” payments in connection with our forward repurchase contracts and plans for settlement of such contracts, the timing and extent of any future impairments, and synergies, savings, impact, cost, timing and implementation of the Company’s ongoing strategic transformation agenda (including operational and organizational structure changes, operational execution and simplification initiatives, fixed cost reduction plans, continued process improvements and supply chain changes), the impact, cost, timing and implementation of e-commerce and digital initiatives, the expected impact, cost, timing and implementation of sustainability initiatives (including progress, plans, goals and our ability to achieve sustainability targets), the expected impact of geopolitical risks including the ongoing war in Ukraine and/or the ongoing war in the Middle East on our business operations, sales outlook and strategy, expectations regarding the impact of tariffs (including magnitude, scope and timing) and plans to manage such impact, expectations regarding economic recovery in Asia, consumer purchasing trends and the related impact on our plans for growth in China, the expected impact of global supply chain challenges and/or inflationary pressures (including as a result of the war in Ukraine and/or the ongoing war in the Middle East, or due to a change in tariffs or trade policy impacting raw materials) and expectations regarding future service levels, inventory levels and excess and obsolescence trends, expectations regarding the expanded use of artificial intelligence (“AI”) and advanced analytics in our operations and the timing and impact thereof, and the priorities of senior management. These forward-looking statements are generally identified by words or phrases, such as “anticipate”, “are going to”, “estimate”, “plan”, “project”, “expect”, “believe”, “intend”, “foresee”, “forecast”, “will”, “may”, “should”, “outlook”, “continue”, “temporary”, “target”, “aim”, “potential”, “goal” and similar words or phrases. These statements are based on certain assumptions and estimates that we consider reasonable, but are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual events or results (including our financial condition, results of operations, cash flows and prospects) to differ materially from such statements, including risks and uncertainties relating to:
•our ability to successfully implement our strategic priorities (including leveraging our leadership position and
capabilities in global fragrances to fuel strong expansion and continue to grow our footprint and diversification in a limited number of structurally profitable and growing beauty categories and geographic markets at scale), achieve the benefits contemplated by our strategic initiatives (including revenue growth, cost control, gross margin growth and debt deleveraging), and compete effectively in the beauty industry, in each case within the expected time frame or at all;
•our ability to anticipate, gauge and respond to market trends and consumer preferences, which may change rapidly, and the market acceptance of new products, including new products in our skincare and prestige cosmetics portfolios, any relaunched or rebranded products and the anticipated costs and discounting associated with such relaunches and rebrands, and consumer receptiveness to our current and future marketing philosophy and consumer engagement activities (including digital marketing and media), and our ability to effectively manage our production and inventory levels in response to demand;
•use of estimates and assumptions in preparing our financial statements, including with regard to revenue recognition, income taxes (including the expected timing and amount of the release of any tax valuation allowance), the assessment of goodwill, other intangible and long-lived assets for impairments, and the market value of inventory;
•the impact of any future impairments;
•managerial, transformational, operational, regulatory, legal and financial risks, including diversion of management attention to and management of cash flows, expenses and costs associated with our transformation agenda, our global business strategies, the management of our strategic partnerships, the strategic review of our consumer beauty business, and future strategic initiatives, and, in particular, our ability to manage and execute many initiatives simultaneously including any resulting complexity, employee attrition or diversion of resources;
•the timing, costs and impacts of divestitures and the amount and use of proceeds from any such transactions;
•future divestitures and the impact thereof on, and future acquisitions, new licenses and joint ventures and the integration thereof with, our business, operations, systems, financial data and culture and the ability to realize synergies, manage supply chain challenges and other business disruptions, reduce costs (including through our cash efficiency initiatives), avoid liabilities and realize potential efficiencies and benefits (including through our restructuring initiatives) at the levels and at the costs and within the time frames contemplated or at all;
•increased competition, consolidation among retailers, shifts in consumers’ preferred distribution and marketing channels (including to digital and prestige channels), distribution and shelf-space resets or reductions, compression of go-to-market cycles, changes in product and marketing requirements by retailers, reductions in retailer inventory levels and order lead-times or changes in purchasing patterns, impact from public health events on retail revenues, and other changes in the retail, e-commerce and wholesale environment in which we do business and sell our products and our ability to respond to such changes (including our ability to expand our digital, direct-to-consumer and e-commerce capabilities within contemplated timeframes or at all);
•our and our joint ventures’, business partners’ and licensors’ abilities to obtain, maintain and protect the intellectual property used in our and their respective businesses, protect our and their respective reputations (including those of our and their executives or influencers) and public goodwill, and defend claims by third parties for infringement of intellectual property rights;
•any change to our capital allocation and/or cash management priorities, including any change in our dividend policy and any change in our stock repurchase plans;
•any unanticipated problems, liabilities or integration or other challenges associated with a past or future acquired business, joint ventures or strategic partnerships, which could result in increased risk or new, unanticipated or unknown liabilities, including with respect to environmental, competition and other regulatory, compliance or legal matters, and specifically in connection with our strategic partnerships, risks related to the entry into a new distribution channel, the potential for channel conflict, risks of retaining customers and key employees, difficulties of integration (or the risks associated with limiting integration) and management of the partnerships, our relationships with our strategic partners, our ability to protect trademarks and brand names, litigation, investigations by governmental authorities, and changes in law, regulations and policies that affect the business or products of our strategic partnerships, including the risk that direct selling laws and regulations may be modified, interpreted or enforced in a manner that results in a negative impact to the business model, revenue, sales force or business of any of our strategic partnerships;
•our international operations and joint ventures, including enforceability and effectiveness of our joint venture agreements and reputational, compliance, regulatory, economic and foreign political risks, including difficulties and costs associated with maintaining compliance with a broad variety of complex local and international regulations;
•our dependence on certain licenses (especially in the fragrance category) and our ability to renew expiring licenses on favorable terms or at all;
•our dependence on entities performing outsourced functions, including outsourcing of distribution functions, and third-party manufacturers, logistics and supply chain suppliers, and other suppliers, including third-party software providers, web-hosting and e-commerce providers;
•administrative, product development and other difficulties in meeting the expected timing of market expansions, product launches, re-launches and marketing efforts, including in connection with new products in our skincare and prestige cosmetics portfolios;
•changes in the demand for our products due to declining or depressed global or regional economic conditions, and declines in consumer confidence or spending, whether related to the economy (such as austerity measures, tax increases, high fuel costs, or higher unemployment), wars and other hostilities and armed conflicts, natural or other disasters, weather, pandemics, security concerns, terrorist attacks or other factors;
•global political and/or economic uncertainties, disruptions or major regulatory or policy changes, and/or the enforcement thereof that affect our business, financial performance, operations or products, including the impact of the war in Ukraine and any escalation or expansion thereof, war in the Middle East and any escalation or expansion thereof, the current administration in the U.S. and related changes to regulatory and trade policies, changes in the U.S. tax code and/or tax regulations in other jurisdictions where we operate (including implementation of the global minimum corporate tax (part of the “Pillar Two Model Rules”) that may impact our tax liability in the European Union (“EU”)), and recent changes and future changes in tariffs, retaliatory or trade protection measures, trade policies and other international trade regulations in the U.S., the EU, and Asia and in other regions where we operate (and our ability to manage the impact of such changes), potential regulatory limits on payment terms in the EU, future changes in sanctions regulations, recent and future changes in regulations impacting the beauty industry, including regulatory measures addressing products, formulations, raw materials and packaging, and recent and future regulatory measures restricting or otherwise impacting the use of web sites, mobile applications or social media platforms that we use in connection with our digital marketing and e-commerce activities;
•currency exchange rate volatility and currency devaluation and/or inflation, including the impact of elevated oil prices;
•the impact of ongoing wars and geo-political uncertainty on capital markets and the related impact on our ability to refinance outstanding debt at favorable rates;
•our ability to implement and maintain pricing actions to effectively mitigate increased costs and inflationary pressures, and the reaction of customers or consumers to such pricing actions;
•the number, type, outcomes (by judgment, order or settlement) and costs of current or future legal, compliance, tax, regulatory or administrative proceedings, investigations and/or litigation, including product liability cases (including asbestos and talc-related litigation for which indemnities and/or insurance may not be available), distributor or licensor litigation, and compliance, litigation or investigations relating to our joint ventures or strategic partnerships;
•our ability to manage seasonal factors and other variability and to anticipate future business trends and needs;
•disruptions in the availability and distribution of raw materials and components needed to manufacture our products, and our ability to effectively manage our production and inventory levels in response to supply challenges;
•disruptions in operations, sales and in other areas, including due to disruptions in our supply chain, restructurings and other business alignment activities, manufacturing or information technology systems, labor disputes, extreme weather and natural disasters, impact from public health events, the outbreak of war or hostilities (including the war in Ukraine and war in the Middle East and any escalation or expansion thereof), the impact of global supply chain challenges or other disruptions in the international flow of goods (including disruptions arising from the closure of strategic airspaces or critical maritime routes or from changing tariff scenarios), and the impact of such disruptions on our ability to generate profits, stabilize or grow revenues or cash flows, comply with our contractual obligations and accurately forecast demand and supply needs and/or future results;
•our ability to adapt our business to address climate change concerns, including through the implementation of new or unproven technologies or processes, and to respond to increasing governmental and regulatory measures relating to environmental, social and governance matters, including expanding mandatory and voluntary reporting, diligence and
disclosure, as well as new taxes (including on energy and plastic), new diligence requirements and the impact of such measures or processes on our costs, business operations and strategy;
•restrictions imposed on us through our license agreements, credit facilities and senior unsecured bonds or other material contracts, our ability to generate cash flow to repay, refinance or recapitalize debt and otherwise comply with our debt instruments, and changes in the manner in which we finance our debt and future capital needs;
•increasing dependency on information technology, including as a result of expanded use of AI and advanced analytics in our operations as well as remote working practices, and our ability or the ability of any of the third-party service providers we use to support our business, to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, including ransomware attacks, costs and timing of implementation and effectiveness of any upgrades or other changes to information technology systems, and the cost of compliance or our failure to comply with any privacy or data security laws (including the European Union General Data Protection Regulation (the “GDPR”), the California Consumer Privacy Act and similar state laws, the Brazil General Data Protection Law, and the China Data Security Law and Personal Information Protection Law) or to protect against theft of customer, employee and corporate sensitive information;
•our ability to attract and retain key personnel and the impact of senior management transitions;
•the distribution and sale by third parties of counterfeit and/or gray market versions of our products;
•the impact of our ongoing strategic transformation agenda and continued process improvements on our relationships with key customers and suppliers and certain material contracts;
•our relationship with JAB Beauty B.V., as our majority stockholder, and its affiliates, and any related conflicts of interest or litigation;
•our relationship with KKR, whose affiliates are investors in Rainbow JVCO LTD and subsidiaries (together, “Wella” or the “Wella Company”) following the sale of a majority stake in our Professional and Retail Hair business, including the Wella, Clairol, OPI and ghd brands (together, the “Wella Business”) and the subsequent sale of our remaining Wella stake, any related conflicts of interest or litigation, and the timing and terms of any future sale or initial public offering of Wella;
•future sales of a significant number of shares by our majority stockholder or the perception that such sales could occur; and
•other factors described elsewhere in this document and in documents that we file with the SEC from time to time.
More information about potential risks and uncertainties that could affect our business and financial results is included under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q and other periodic reports we have filed and may file with the SEC from time to time.
All forward-looking statements made in this document are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by applicable law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.
Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance unless expressed as such, and should only be viewed as historical data.
Industry, Ranking and Market Data
Unless otherwise indicated, information contained in this Quarterly Report on Form 10-Q concerning our industry and the markets in which we operate, including our general expectations about our industry, market position, market opportunity and market sizes, is based on data from various sources including internal data and estimates as well as third-party sources widely available to the public, such as independent industry publications, government publications, reports by market research firms or other published independent sources and on our assumptions based on that data and other similar sources. We did not fund and are not otherwise affiliated with the third-party sources that we cite. Industry publications and other published sources generally state that the information contained therein has been obtained from third-party sources believed to be reliable. Internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which we operate and management’s understanding of industry conditions, and such information has not been verified by any independent sources. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we generally believe the market, industry and other information included in this Quarterly Report on Form 10-Q to be the most recently available and to be reliable, such information is inherently imprecise and we have not independently verified any third-party information or verified that more recent information is not available.
Our fiscal year ends on June 30. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year. For example, references to “fiscal 2026” refer to the fiscal year ending June 30, 2026. Any reference to a year not preceded by “fiscal” refers to a calendar year.
OVERVIEW
We are one of the world’s largest beauty companies, with an iconic portfolio of brands across fragrance, color cosmetics, and skin and body care. Our brands empower people to express themselves freely, creating their own visions of beauty; and we are committed to protecting the planet.
Recent Changes
Markus Strobel was appointed by the Board of Directors (the “Board”) as Executive Chairman of the Board and Interim Chief Executive Officer (“Interim CEO”), effective January 1, 2026. Our long-term objectives remain focused on value creation, profitability, and growth. While no material changes to our strategy, capital allocation framework, or operational priorities have been finalized or approved, the Interim CEO continues to conduct a comprehensive review of the business to assess opportunities to enhance performance, strengthen competitive positioning, and improve execution across key areas.
Global Economic Landscape and Business Impact
Our products are sold in approximately 123 countries and territories. As a geographically diverse company, we are susceptible to global economic trends, geopolitical conflicts, domestic and foreign governmental policies, and changes in foreign exchange rates. We remain attentive to economic and geopolitical conditions that may materially impact our business.
Tariffs: Recent changes in U.S. and international trade policies—particularly tariff increases—and the ongoing uncertainty surrounding such policies may present challenges to our business operations and financial condition. These challenges may include supply chain disruptions and commodity price volatility, resulting in increases in our cost of goods sold. Under the current tariff framework, the biggest areas of potential challenges for us are prestige fragrances shipped to the U.S. from our Barcelona plant, and the sourcing of various components and marketing materials from China. In response, we have evaluated more diversified sourcing strategies, strategic pricing adjustments and cost-reduction initiatives to help offset these pressures and protect our profitability. We are optimizing our supply chain to enhance resilience and agility in response to changing tariff environments. We have successfully transitioned mass fragrance production, production for certain entry-level prestige fragrance products, and fragrance mists to our U.S. manufacturing site.
In the short term, we are accelerating dual sourcing for certain entry-level prestige products by leveraging regional input materials, and future launches will be developed with dual production capabilities. We expect that any increases in our cost of goods sold will be balanced with minimal price adjustments to ensure competitiveness. On a longer-term basis, we are evaluating expanded regionalization strategies, including potential additional U.S. investments. We will also continue to collaborate with external partners to strengthen our domestic manufacturing capabilities, supporting our goal of a robust, North America-based supply chain.
On February 20, 2026, the U.S. Supreme Court issued a decision addressing the scope of tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). This ruling may allow for the recovery of IEEPA tariff amounts previously paid. The ruling leaves uncertainties regarding the timing and administration of any potential IEEPA tariff refunds by the U.S. government and may be subject to further legal and regulatory developments. Following the U.S. Supreme Court ruling, an executive order was issued imposing a new global tariff, in addition to any existing non-IEEPA tariffs. The Company is actively pursuing refund recovery activities related to IEEPA tariffs.
We currently estimate that our operating results will be impacted by approximately $32.0 in costs related to tariff increases, after mitigating actions, through the first quarter of fiscal 2027. Of this amount, approximately $30.0 is expected to be reflected in our fiscal 2026 operating results, with the remaining amount of approximately $2.0 expected to be reflected in the first quarter of fiscal 2027. In the first nine months of fiscal 2026, approximately $23.0 of net tariff costs are reflected in our operating results. Despite our efforts, reductions in consumer confidence and discretionary spending could impact demand for our products and negatively affect our sales. We are closely monitoring developments, evaluating potential impacts, and proactively taking steps to mitigate adverse effects on our business.
Middle East Conflict: In February 2026, geopolitical tensions in the Middle East escalated significantly leading to a military conflict involving the United States, Israel, and Iran, and resulting in regional instability and increased volatility in global energy markets. We have mitigated certain direct impacts, including those related to disruptions in regional shipping routes such as transit through the Strait of Hormuz. Continued or expanded conflict could adversely affect global economic conditions, supply chains, transportation logistics, and customer demand, and is expected to impact our financial condition, and results of operations. Impacts may vary depending on how conditions develop across the region and in global markets. Net revenues in the Middle East accounted for approximately mid-single-digit percentage of our consolidated net revenues for fiscal 2025. The Middle East accounted for approximately mid-single-digit percentage and low-single-digit percentage of Prestige and Consumer Beauty segment fiscal 2025 net revenues, respectively.
Market Trends and Sales Performance
Fragrances: Net revenues from fragrances decreased by a low-single-digit percentage compared to the prior-year period, reflecting a more competitive and promotional marketplace. We continue to plan to leverage innovations and new launches to unlock value in key markets like the U.S. market. Within our Consumer Beauty segment, we plan to streamline lifestyle fragrance initiatives while amplifying key franchises. We also remain focused on strengthening sell-out and improving market share across priority markets.
Color Cosmetics: Net revenues from color cosmetics declined by a mid-single-digit percentage versus the prior-year period. We have begun implementing a performance improvement plan designed to narrow the sell-out gap over time through sharper strategic priorities and more focused investment behind core brands and franchises. Our market share in the mass color cosmetics segment has improved, although, our share gains still lag overall growth within the category. Prestige makeup sales improved by high-single-digits compared to the prior year period. We remain committed to strengthening execution across both mass and prestige, supported by targeted initiatives aimed at improving competitiveness and driving sustainable growth.
Skin and Body Care: Net revenues from skin and body care declined by a low-single-digit percentage compared to the prior-year period, as competitive pricing actions and broader category dynamics in the Brazil body care market impacted net sales. We will focus on scalable and structurally profitable opportunities within skincare, while optimizing our mass body care exposure.
Geographic Regions: Net revenue in the Americas declined by a mid-single-digit percentage, driven primarily by our business performance in the U.S. color cosmetics market. During the same period, net revenue in EMEA and Asia Pacific decreased by a low single-digit percentage, reflecting negative market trends across many European and Asian markets.
Financial Outlook
We expect that our reported net revenue for the fourth quarter of fiscal 2026 will decline by a mid-single-digit percentage compared to the prior year period. We anticipate that our fourth quarter fiscal 2026 gross margin will be pressured as a result of lower net sales, as well as the net impact from tariffs, and elevated excess and obsolescence. We are re-accelerating our cost reduction efforts to deliver savings of approximately $80.0 in fiscal 2026.
Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures for Coty Inc. including Adjusted operating income (loss), Adjusted EBITDA, Adjusted net income (loss), and Adjusted net income (loss) attributable to Coty Inc. to common stockholders (collectively, the “Adjusted Performance Measures”). The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in tables below. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for or superior to, financial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies, including companies in the beauty industry, may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
Despite the limitations of these non-GAAP financial measures, our management uses the Adjusted Performance Measures as key metrics in the evaluation of our performance and annual budgets and to benchmark performance of our business against our competitors. The following are examples of how these Adjusted Performance Measures are utilized by our management:
•strategic plans and annual budgets are prepared using the Adjusted Performance Measures;
•senior management receives a monthly analysis comparing budget to actual operating results that is prepared using the Adjusted Performance Measures; and
•senior management’s annual compensation is calculated, in part, by using some of the Adjusted Performance Measures.
In addition, our financial covenant compliance calculations under our debt agreements are substantially derived from these Adjusted Performance Measures.
Our management believes that Adjusted Performance Measures are useful to investors in their assessment of our operating performance and the valuation of the Company. In addition, these non-GAAP financial measures address questions we routinely receive from analysts and investors and, in order to ensure that all investors have access to the same data, our management has determined that it is appropriate to make this data available to all investors. The Adjusted Performance Measures exclude the impact of certain items (as further described below) and provide supplemental information regarding our operating performance. By disclosing these non-GAAP financial measures, our management intends to provide investors with a supplemental comparison of our operating results and trends for the periods presented. Our management believes these measures are also useful to investors as such measures allow investors to evaluate our performance using the same metrics that our management uses to evaluate past performance and prospects for future performance. We provide disclosure of the effects of these non-GAAP financial measures by presenting the corresponding measure prepared in conformity with GAAP in our financial statements, and by providing a reconciliation to the corresponding GAAP measure so that investors may understand the adjustments made in arriving at the non-GAAP financial measures and use the information to perform their own analyses.
Adjusted operating income/Adjusted EBITDA excludes restructuring costs and business structure realignment programs, amortization, acquisition- and divestiture-related costs and acquisition accounting impacts, stock-based compensation, and asset impairment charges and other adjustments as described below. For adjusted EBITDA, in addition to the preceding, we exclude adjusted depreciation as defined below. We do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance. They are primarily incurred to realign our operating structure and integrate new acquisitions, and implement divestitures of components of our business, and fluctuate based on specific facts and circumstances. Additionally, Adjusted net income attributable to Coty Inc. and Adjusted net income attributable to Coty Inc. per common share are adjusted for certain interest and other (income) expense items, as described below, and the related tax effects of each of the items used to derive Adjusted net income as such charges are not used by our management in assessing our operating performance period-to-period.
Adjusted Performance Measures reflect adjustments based on the following items:
•Costs related to acquisition and divestiture activities: We have excluded acquisition- and divestiture-related costs and the accounting impacts such as those related to transaction costs and costs associated with the revaluation of acquired inventory in connection with business combinations because these costs are unique to each transaction. Additionally, for divestitures, we exclude write-offs of assets that are no longer recoverable and contract related costs due to the divestiture. The nature and amount of such costs vary significantly based on the size and timing of the acquisitions and divestitures, and the maturities of the businesses being acquired or divested. Also, the size, complexity and/or volume of past transactions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of any future acquisitions or divestitures.
•Restructuring and other business realignment costs: We have excluded costs associated with restructuring and business structure realignment programs to allow for comparable financial results to historical operations and forward-looking guidance. In addition, the nature and amount of such charges vary significantly based on the size and timing of the programs. By excluding the referenced expenses from our non-GAAP financial measures, our management is able to further evaluate our ability to utilize existing assets and estimate their long-term value. Furthermore, our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Asset impairment charges: We have excluded the impact of asset impairments as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Amortization expense: We have excluded the impact of amortization of finite-lived intangible assets, as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance. Although we exclude amortization of intangible assets from our non-GAAP expenses, our management believes that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets.
•Gain or loss on sale and early license termination: We have excluded the impact of gain or loss on sale and early license termination as such amounts are inconsistent in amount and frequency and are significantly impacted by the size of the sale and early license termination.
•Costs related to market exit: We have excluded the impact of direct incremental costs related to our decision to wind down our business operations in Russia. We believe that these direct and incremental costs are inconsistent and infrequent in nature. Consequently, our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Gains on sale of real estate: We have excluded the impact of gains on sale of real estate as such amounts are inconsistent in amount and frequency and are significantly impacted by the size of the sale. Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Stock-based compensation: Although stock-based compensation is a key incentive offered to our employees, we have excluded the effect of these expenses from the calculation of adjusted operating income and adjusted EBITDA. This is due to their primarily non-cash nature; in addition, the amount and timing of these expenses may be highly variable and unpredictable, which may negatively affect comparability between periods.
•Depreciation and Adjusted depreciation: Our adjusted operating income excludes the impact of accelerated depreciation for certain restructuring projects that affect the expected useful lives of Property, Plant and Equipment, as such charges vary significantly based on the size and timing of the programs. Further, we have excluded adjusted depreciation, which represents depreciation expense net of accelerated depreciation charges, from our adjusted EBITDA. Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Other (income) expense: We have excluded the impact of pension curtailment (gains) and losses and pension settlements as such events are triggered by our restructuring and other business realignment activities and the amount of such charges vary significantly based on the size and timing of the programs. Further, we have excluded realized and unrealized gains and losses on the investment in Wella, as well as expenses related to potential or actual sales transactions reducing equity investments, as our management believes these gains and losses do not reflect our underlying ongoing business, and the adjustment of such impact helps investors and others compare and analyze performance from period to period. Such transactions do not reflect our operating results and we have excluded the impact as our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Noncontrolling interest: This adjustment represents the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interests based on the relevant noncontrolling interest percentage.
•Tax: This adjustment represents the impact of the tax effect of the pretax items excluded from Adjusted net income. The tax impact of the non-GAAP adjustments is based on the tax rates related to the jurisdiction in which the adjusted items are received or incurred. Additionally, adjustments are made for the tax impact of any intra-entity transfer of assets and liabilities. Also, in connection with our market exit in Russia, we have adjusted for the release of tax charges previously taken related to certain direct incremental impacts of the decision.
Constant Currency
We operate on a global basis, with the majority of our net revenues generated outside of the U.S. Accordingly, fluctuations in foreign currency exchange rates can affect our results of operations. Therefore, to supplement financial results presented in accordance with GAAP, certain financial information is presented in “constant currency”, excluding the impact of foreign currency exchange translations to provide a framework for assessing how our underlying businesses performed excluding the impact of foreign currency exchange translations. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency information by translating current and prior-period results for entities reporting in currencies other than U.S. dollars into U.S. dollars using prior year foreign currency exchange rates. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate. The constant currency information we present may not be comparable to similarly titled measures reported by other companies.
Basis of Presentation of Acquisitions, Divestitures, Terminations or Market Exit
During the period when we complete an acquisition, divestiture, early license termination, or market exit, the financial results of the current year period are not comparable to the financial results presented in the prior year period. When explaining such changes from period to period and to maintain a consistent basis between periods, we exclude the financial contribution of: (i) the acquired brands or businesses in the current year period until we have twelve months of comparable financial results, and (ii) the divested brands or businesses or early terminated brands or markets exited in the prior year period, to maintain comparable financial results with the current fiscal year period. There are no acquisitions, divestitures, early license terminations, and market exits that would impact the comparability of financial results between periods presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations.
THREE MONTHS ENDED MARCH 31, 2026 AS COMPARED TO THREE MONTHS ENDED MARCH 31, 2025
NET REVENUES
In the three months ended March 31, 2026, net revenues decreased 1%, or $17.5, to $1,281.6 from $1,299.1 in the three months ended March 31, 2025, reflecting a decrease in unit volume of 8% (primarily driven by body care brands — mainly in Brazil — and color cosmetics), partially offset by a positive foreign currency exchange translation impact of 6% (primarily driven by the weakening of the U.S. dollar versus the Euro) and a positive price and mix impact of 1% (primarily driven by lower sales of lower-priced body care products in Brazil, partially offset by increased trade incentives related to prestige fragrances). The overall decrease in net revenues reflects sales declines within Consumer Beauty, largely due to lower mass fragrance sales across regions and lower color cosmetics sales primarily as a result of the negative performance of our brands in the United States market. Net revenues decreased in the Americas and EMEA, partially offset by an increase in the Asia Pacific region.
Net Revenues by Segment | | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| NET REVENUES | | | | | |
| Prestige | $ | 830.9 | | | $ | 829.4 | | | — | % |
| Consumer Beauty | 450.7 | | | 469.7 | | | (4) | % |
| | | | | |
| Total | $ | 1,281.6 | | | $ | 1,299.1 | | | (1) | % |
Prestige
In the three months ended March 31, 2026, net revenues from the Prestige segment increased $1.5 to $830.9 compared to $829.4 in the three months ended March 31, 2025, reflecting a positive foreign currency exchange translation impact of 5% (primarily driven by the weakening of the U.S. dollar versus the Euro) partially offset by a decrease in unit volume of 3% (primarily due to lower sales volume in prestige fragrances) and a negative price and mix impact of 3% (primarily due to increased trade incentives related to prestige fragrances). The increase in net revenues primarily reflects:
•Prestige cosmetics sales growth of $11.6 primarily driven by increased net sales from Kylie makeup supported by success of KylieSkin Tint and launch of Hybrid Blush.
These increases were partially offset by:
•Prestige fragrance sales declines of $8.8 led by Hugo Boss due to a decline in sales in existing product lines, and declines across certain other fragrance brands across the portfolio, partially offset by increased net revenues from Calvin Klein due to launch of Euphoria Elixir; and
•Prestige skincare sales decline of $1.3.
Consumer Beauty
In the three months ended March 31, 2026, net revenues from the Consumer Beauty segment decreased 4%, or $19.0, to $450.7 from $469.7 in the three months ended March 31, 2025, reflecting a decrease in unit volume of 9% (primarily driven by color cosmetics and body care), a negative price and mix impact of 1% (primarily driven by color cosmetics and body care), partially offset by a positive foreign currency exchange translation impact of 6% (primarily driven by the weakening of the U.S. dollar versus the Brazilian Real and the Euro). The decrease in net revenues primarily reflects:
•Mass fragrance sales declines of $11.6 primarily due to lower net sales from Nautica in the U.S. market and across Asia.
•Color cosmetics sales declines of $9.2 due to a decline in sales led by the United States impacting net revenues from Covergirl; and
•Mass body care sales declines of $4.9.
These decreases were partially offset by:
•Mass skincare sales increases of $6.7.
COST OF SALES
In the three months ended March 31, 2026, cost of sales increased 5%, or $23.0, to $489.7 from $466.7 in the three months ended March 31, 2025. Cost of sales as a percentage of net revenues increased to 38.2% in the three months ended March 31, 2026 from 35.9% in the three months ended March 31, 2025, resulting in a gross margin decrease of approximately 230 basis points, primarily reflecting:
(i)approximately 100 basis points, primarily due to an increase in manufacturing and material costs as a percentage of net revenues;
(ii)approximately 80 basis points related to increased freight costs as a percentage of net revenues, primarily driven by the impact of tariffs; and
(iii)approximately 70 basis points increase related to excess and obsolescence costs as a percentage of net revenues.
These decreases were partially offset by:
(iv)approximately 20 basis points related to decreased designer license fees as a percentage of net revenues.
Gross margin was negatively impacted by higher discounts and promotions in the current period, which counterbalanced improvements in pricing, manufacturing efficiency, productivity, and procurement cost optimization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
In the three months ended March 31, 2026, selling, general and administrative expenses decreased 6%, or $50.5, to $727.0 from $777.5 in the three months ended March 31, 2025. Selling, general and administrative expenses as a percentage of net revenues decreased to 56.7% in the three months ended March 31, 2026 from 59.8% in the three months ended March 31, 2025, or approximately 310 basis points. This decrease primarily reflects:
(i)550 basis points due to the loss on the termination of the KKW Collaboration Agreement in the prior period; and
(ii)80 basis points due to favorable transactional impact from our exposure to foreign currency as a percentage of net revenues.
These decreases were partially offset by:
(iii)190 basis points due to an increase in fixed costs as a percentage of net revenues due to an increase in administrative expense which includes an increase in discretionary compensation for employees; and
(iv)120 basis points due to an increase in operational accruals as a percentage of net revenues.
OPERATING INCOME
In the three months ended March 31, 2026, operating loss was $372.0 compared to loss of $280.4 in the three months ended March 31, 2025. Operating loss margin worsened to 29.0% in the three months ended March 31, 2026 as compared to an operating loss margin of 21.6% in the three months ended March 31, 2025. The decrease in operating margin is primarily driven by an increase in asset impairment charges (approximately 1,190 basis points), an increase in amortization expense as a percentage of net revenues (approximately 230 basis points), an increase in cost of goods sold (approximately 230 basis points), and an increase in fixed costs as a percentage of net revenues (approximately 180 basis points), partially offset by lower restructuring costs (approximately 590 basis points) and the loss on the termination of the KKW Collaboration Agreement in the prior period (approximately 550 basis points).
Operating Income (Loss) by Segment | | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Operating income (loss) | | | | | |
| Prestige | $ | 58.4 | | | $ | 78.7 | | | (26) | % |
| Consumer Beauty | (423.3) | | | (189.5) | | | <(100%) |
| Corporate | (7.1) | | | (169.6) | | | 96 | % |
| Total | $ | (372.0) | | | $ | (280.4) | | | (33) | % |
Prestige
In the three months ended March 31, 2026, operating income for Prestige was $58.4 compared to income of $78.7 in the three months ended March 31, 2025. Operating margin decreased to 7.0% of net revenues in the three months ended March 31, 2026 as compared to 9.5% in the three months ended March 31, 2025, driven by an increase in amortization expense as a percentage of net revenues (approximately 340 basis points); an increase in fixed costs as percentage of net revenue (approximately 210 basis points); and an increase in cost of goods sold as a percentage of net revenues (approximately 160 basis points) driven by an increase in manufacturing and freight expenses as a percentage of net revenue and negatively impacted by higher discounts and promotions in the current period. These factors were partially offset by a decrease in asset impairment charges (approximately 520 basis points).
Consumer Beauty
In the three months ended March 31, 2026, operating loss for Consumer Beauty was $423.3 compared to loss of $189.5 in the three months ended March 31, 2025. Operating loss margin worsened to 93.9% of net revenues in the three months ended March 31, 2026 as compared to an operating loss margin of 40.3% in the three months ended March 31, 2025, driven by an increase in asset impairment charges (approximately 4,430 basis points); an increase in cost of goods sold as a percentage of net revenues (approximately 460 basis points) driven by an increase in material, excess and obsolete and freight expenses as a percentage of net revenue and negatively impacted by higher discounts and promotions in the current year period; an increase in fixed costs as percentage of net revenue (approximately 240 basis points); and an increase in other operating income as a percentage of sales (approximately 190 basis points).
Corporate
Corporate primarily includes income and expenses not directly relating to our operating activities. These items are included in Corporate since we consider them to be Corporate responsibilities, and these items are not used by our management to measure the underlying performance of the segments.
In the three months ended March 31, 2026, the operating loss for Corporate was $7.1 compared to a loss of $169.6 in the three months ended March 31, 2025, as described under “Adjusted Operating Income for Coty Inc.” below. The decrease in the operating loss for Corporate was primarily driven by a $86.7 decrease in restructuring and other business realignment costs, a loss on the termination of the KKW Collaboration Agreement in the prior period of $71.0, and a $5.2 decrease in stock-based compensation.
Adjusted Operating Income (Loss) by Segment
We believe that adjusted operating income by segment further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported operating income (loss) to adjusted operating income (loss) is presented below, by segment:
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2026 |
| (in millions) | Reported
(GAAP) | | Adjustments (a) | | Adjusted
(Non-GAAP) |
| Operating (loss) income | | | | | |
| Prestige | $ | 58.4 | | | $ | 65.3 | | | $ | 123.7 | |
| Consumer Beauty | (423.3) | | | 372.0 | | | (51.3) | |
| Corporate | (7.1) | | | 7.1 | | | — | |
| Total | $ | (372.0) | | | $ | 444.4 | | | $ | 72.4 | |
| | | | | |
| Three Months Ended March 31, 2025 |
| (in millions) | Reported
(GAAP) | | Adjustments (a) | | Adjusted
(Non-GAAP) |
| Operating (loss) income | | | | | |
| Prestige | $ | 78.7 | | | $ | 80.1 | | | $ | 158.8 | |
| Consumer Beauty | (189.5) | | | 178.6 | | | (10.9) | |
| Corporate | (169.6) | | | 169.6 | | | — | |
| Total | $ | (280.4) | | | $ | 428.3 | | | $ | 147.9 | |
(a)See a reconciliation of reported net income to operating income (loss) to adjusted operating income (loss) and adjusted EBITDA for Coty Inc. and reconciliations of segment operating income (loss) to segment adjusted operating income (loss) and segment adjusted EBITDA for the Prestige, Consumer Beauty and Corporate segments with a description of the adjustments under “Net (Loss) Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc.” and “Segment Operating Income (Loss), Segment Adjusted Operating Income (Loss) and Segment Adjusted EBITDA”, below. All adjustments are reflected in Corporate, except for amortization and asset impairment charges on goodwill, indefinite-lived intangible assets, and finite-lived intangible assets, which are reflected in the Prestige and Consumer Beauty segments.
Net Loss, Adjusted Operating Income and Adjusted EBITDA for Coty Inc.
We believe that adjusted operating income further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” Reconciliation of reported net loss to adjusted operating income and adjusted EBITDA is presented below: | | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Net loss | $ | (405.7) | | | $ | (402.2) | | | (1) | % |
| Net loss margin | (31.7) | % | | (31.0) | % | | |
| Benefit for income taxes | (53.2) | | | (58.4) | | | 9 | % |
| Loss before income taxes | $ | (458.9) | | | $ | (460.6) | | | — | % |
| Interest expense, net | 33.7 | | | 47.9 | | | (30) | % |
| Other expense, net | 53.2 | | | 132.3 | | | (60) | % |
| Reported operating loss | $ | (372.0) | | | $ | (280.4) | | | (33) | % |
| Reported operating loss margin | (29.0) | % | | (21.6) | % | | |
| Amortization expense | 74.5 | | | 45.9 | | | 62 | % |
| Restructuring and other business realignment costs | 0.5 | | | 87.2 | | | (99) | % |
| Stock-based compensation | 6.9 | | | 12.1 | | | (43) | % |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Early license termination and market exit costs | (0.3) | | | 70.3 | | | <(100%) |
| Asset impairment charges | 362.8 | | | 212.8 | | | 70 | % |
| Total adjustments to reported operating income | $ | 444.4 | | | $ | 428.3 | | | 4 | % |
| Adjusted operating income | $ | 72.4 | | | $ | 147.9 | | | (51) | % |
| Adjusted operating income margin | 5.6 | % | | 11.4 | % | | |
| Adjusted depreciation | 54.6 | | | 56.3 | | | (3) | % |
| Adjusted EBITDA | $ | 127.0 | | | $ | 204.2 | | | (38) | % |
| Adjusted EBITDA margin | 9.9 | % | | 15.7 | % | | |
In the three months ended March 31, 2026, adjusted operating income decreased $75.5 to $72.4 from $147.9 in the three months ended March 31, 2025. Adjusted operating margin decreased to 5.6% of net revenues in the three months ended March 31, 2026 from 11.4% in the three months ended March 31, 2025. In the three months ended March 31, 2026, adjusted EBITDA decreased $77.2 to $127.0 from $204.2 in the three months ended March 31, 2025. Adjusted EBITDA margin decreased to 9.9% of net revenues in the three months ended March 31, 2026 from 15.7% in the three months ended March 31, 2025.
Segment Operating Income (Loss), Segment Adjusted Operating Income (Loss) and Segment Adjusted EBITDA
Operating Income, Adjusted Operating Income and Adjusted EBITDA - Prestige Segment
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | | | | |
| (in millions) | 2026 | | 2025 | | Change % | | | |
| Reported operating income | $ | 58.4 | | | $ | 78.7 | | | (26) | % | | | |
| Reported operating income margin | 7.0 | % | | 9.5 | % | | | | | |
| Amortization expense | 65.3 | | | 37.2 | | | 76 | % | | | |
| Asset impairment charges | — | | | 42.9 | | | (100) | % | | | |
| Total adjustments to reported operating income | $ | 65.3 | | | $ | 80.1 | | | (18) | % | | | |
| Adjusted operating income | $ | 123.7 | | | $ | 158.8 | | | (22) | % | | | |
| Adjusted operating income margin | 14.9 | % | | 19.1 | % | | | | | |
| Adjusted depreciation | 26.9 | | | 27.1 | | | (1) | % | | | |
| Adjusted EBITDA | $ | 150.6 | | | $ | 185.9 | | | (19) | % | | | |
| Adjusted EBITDA margin | 18.1 | % | | 22.4 | % | | | | | |
| | | | | | | | |
Operating Loss, Adjusted Operating Loss and Adjusted EBITDA - Consumer Beauty Segment
| | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Reported operating loss | $ | (423.3) | | | $ | (189.5) | | | <(100%) |
| Reported operating loss margin | (93.9) | % | | (40.3) | % | | |
| Amortization expense | 9.2 | | | 8.7 | | | 6 | % |
| Asset impairment charges | 362.8 | | | 169.9 | | | >100% |
| Total adjustments to reported operating income | $ | 372.0 | | | $ | 178.6 | | | >100% |
| Adjusted operating loss | $ | (51.3) | | | $ | (10.9) | | | <(100%) |
| Adjusted operating loss margin | (11.4) | % | | (2.3) | % | | |
| Adjusted depreciation | 27.7 | | | 29.2 | | | (5) | % |
| Adjusted EBITDA | $ | (23.6) | | | $ | 18.3 | | | <(100%) |
| Adjusted EBITDA margin | (5.2) | % | | 3.9 | % | | |
Operating Loss, Adjusted Operating Loss and Adjusted EBITDA - Corporate Segment
| | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Reported operating loss | $ | (7.1) | | | $ | (169.6) | | | 96 | % |
| Reported operating loss margin | N/A | | N/A | | |
| Restructuring and other business realignment costs | 0.5 | | | 87.2 | | | (99) | % |
| Stock-based compensation | 6.9 | | | 12.1 | | | (43) | % |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Early license termination and market exit costs | (0.3) | | | 70.3 | | | <(100%) |
| | | | | |
| Total adjustments to reported operating income | $ | 7.1 | | | $ | 169.6 | | | (96) | % |
| Adjusted operating loss | $ | — | | | $ | — | | | N/A |
| Adjusted operating loss margin | N/A | | N/A | | |
| Adjusted depreciation | — | | | — | | | N/A |
| Adjusted EBITDA | $ | — | | | $ | — | | | N/A |
| Adjusted EBITDA margin | N/A | | N/A | | |
Amortization Expense
In the three months ended March 31, 2026, amortization expense increased to $74.5 from $45.9 in the three months ended March 31, 2025. The increase was primarily driven by accelerated amortization related to a brand license. In the three months ended March 31, 2026, amortization expense of $65.3 and $9.2 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended March 31, 2025, amortization expense of $37.2 and $8.7 was reported in the Prestige and Consumer Beauty segments, respectively.
Restructuring and Other Business Realignment Costs
We incurred approximately $23.0 of cash costs life-to-date related to our previously announced Fixed Cost Reduction Plan as of March 31, 2026, which have been recorded in Corporate.
In the three months ended March 31, 2026, we incurred restructuring and other business structure realignment costs of $0.5 as follows:
•We incurred a credit in Restructuring costs of $0.4, which is included in the Condensed Consolidated Statements of Operations; and
•We incurred business structure realignment costs of $0.9, which is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
In the three months ended March 31, 2025, we incurred restructuring and other business structure realignment costs of $87.2, as follows:
•We incurred in Restructuring costs of $76.6, of which $74.4 related to the Fixed Cost Reduction Plan included in the Condensed Consolidated Statements of Operations; and
•We incurred business structure realignment costs of $10.6, which is reported in Selling, general and administrative expenses and cost of sales, primarily related to the Fixed Cost Reduction Plan.
Stock-Based Compensation
In the three months ended March 31, 2026, stock-based compensation was $6.9 as compared with $12.1 in the three months ended March 31, 2025.
Early License Termination
In the three months ended March 31, 2026, we did not incur any costs related to the early termination of a license.
In the three months ended March 31, 2025, we incurred net loss of $71.0 related to the loss on the termination of the KKW Collaboration Agreement.
Asset Impairment Charges
In the three months ended March 31, 2026, we incurred $362.8 of asset impairment charges of which $237.1 related to goodwill within the Consumer Beauty segment, and $50.6, $48.5, $22.5, $4.1 related to the CoverGirl, Sally Hansen, Max Factor, and Bourjois trademarks, respectively, within the Consumer Beauty Segment.
In the three months ended March 31, 2025, we incurred $212.8 of asset impairment charges of which $84.0, $61.0, and $24.9 related to the Max Factor, CoverGirl and Bourjois trademarks, respectively, totaling $169.9 within the Consumer Beauty segment and $42.9 related to the philosophy trademark within the Prestige Segment.
Adjusted Depreciation Expense
In the three months ended March 31, 2026, adjusted depreciation expense of $26.9 and $27.7 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended March 31, 2025, adjusted depreciation expense of $27.1 and $29.2 was reported in the Prestige and Consumer Beauty segments, respectively.
INTEREST EXPENSE, NET
In the three months ended March 31, 2026, net interest expense was $33.7 as compared with $47.9 in the three months ended March 31, 2025. The decrease in interest expense is primarily due to lower average debt balance in the current period as well as lower average interest rates.
OTHER EXPENSE
In the three months ended March 31, 2026, other expense was $53.2 as compared with other expense of $132.3 in the three months ended March 31, 2025. The decrease in Other expense of $79.1 is primarily due to an unfavorable fair market value adjustment of $53.0 in the prior year period related to our equity investment in Wella and lower net losses on forward repurchase contracts of $25.4 compared to the prior year period.
INCOME TAXES
The effective income tax rate for the three months ended March 31, 2026 and 2025 was 11.6% and 12.7%, respectively. The decrease in the tax benefit rate was primarily attributable to goodwill impairment in the current period that is not tax deductible.
The effective tax benefit rate of 11.6% for the three months ended March 31, 2026 was lower than the Federal statutory rate of 21% primarily due to goodwill impairment in the current period that is not tax deductible.
The effective tax benefit rate of 12.7% in the three months ended March 31, 2025 was lower than the statutory tax rate of 21% primarily due to a capital loss realized on the sale of the Company’s investment in KKW Holdings during the period for which no tax benefit can be recognized, the loss on forward repurchase contracts having a higher proportional impact in the current period, as well as the impact of fair value losses related to the investment in Wella taxed at a rate below the statutory rate of 21%.
The effective income tax rates vary from the U.S. federal statutory rate of 21% due to the effect of (i) jurisdictions with different statutory rates, including impacts of rate changes, (ii) adjustments to the Company’s unrealized tax benefits (“UTBs”) and accrued interest, (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes. Our effective tax rate could fluctuate significantly and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates.
Reconciliation of Reported Loss Before Income Taxes to Adjusted (Loss) Income Before Income Taxes and Effective Tax Rates: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, 2026 | | Three Months Ended
March 31, 2025 | | |
| (in millions) | Income Before Income Taxes | | (Benefit) Provision for Income Taxes | | Effective Tax Rate | | Income Before Income Taxes | | Provision for Income Taxes | | Effective Tax Rate | | |
| Reported loss before income taxes | $ | (458.9) | | | $ | (53.2) | | | 11.6 | % | | $ | (460.6) | | | $ | (58.4) | | | 12.7 | % | | |
Adjustments to reported operating income (a) | 444.4 | | | | | | | 428.3 | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Realized/unrealized loss on investment in Wella Company (c) | — | | | | | | | 53.0 | | | | | | | |
Other adjustments (d) | (1.1) | | | | | | | 0.8 | | | | | | | |
Total Adjustments (b) | 443.3 | | | 57.3 | | | | | 482.1 | | | 64.6 | | | | | |
| Adjusted (loss) income before income taxes | $ | (15.6) | | | $ | 4.1 | | | (26.3) | % | | $ | 21.5 | | | $ | 6.2 | | | 28.8 | % | | |
(a)See a description of adjustments under “Net Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc.”
(b)The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability. The total tax impact on adjustments in the prior period includes a tax benefit of $10.0 on the resolution of uncertain tax positions associated with the Company’s exit from Russia in fiscal 2022.
(c)For the three months ended March 31, 2025, this primarily represents the unrealized (gain) loss recognized for the change in fair value of the investment in the Wella Company.
(d)For the three months ended March 31, 2026, this primarily represents recovery of previously written-off non-income tax credits. For the three months ended March 31, 2025, this primarily represents recovery of previously written-off non-income tax credits, the amortization of basis differences in certain equity method investments, and net loss on the sale of an equity investment.
The adjusted effective tax rate was (26.3)% for the three months ended March 31, 2026 compared to 28.8% for the three months ended March 31, 2025. The difference is primarily due to a tax recovery benefit in Brazil recognized in the prior period.
NET LOSS ATTRIBUTABLE TO COTY INC.
Net loss attributable to Coty Inc. was $408.1 in the three months ended March 31, 2026 as compared to net loss of $405.7 in the three months ended March 31, 2025. The net loss was primarily driven by the higher asset impairment charges of $150.0, lower gross profit of $40.5, and an increase in amortization expense of $28.6, partially offset by lower other expense of $79.1, decrease in restructuring costs of $77.0, a decrease in selling, general, and administrative expenses of $50.5, and lower interest expense of $14.2 in the current period.
We believe that adjusted net (loss) income attributable to Coty Inc. provides an enhanced understanding of our performance. See “Overview—Non-GAAP Financial Measures.”
| | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Net loss attributable to Coty Inc. | $ | (408.1) | | | $ | (405.7) | | | (1) | % |
Convertible Series B Preferred Stock dividends (a) | (3.3) | | | (3.3) | | | — | % |
| | | | | |
| Reported net loss attributable to common stockholders | $ | (411.4) | | | $ | (409.0) | | | (1) | % |
| % of net revenues | (32.1) | % | | (31.5) | % | | |
Adjustments to reported operating income (b) | 444.4 | | | 428.3 | | | 4 | % |
| | | | | |
Realized/unrealized loss on investment in Wella Company (c) | — | | | 53.0 | | | (100) | % |
Adjustment to other expense (d) | (1.1) | | | 0.8 | | | <(100%) |
Adjustments to noncontrolling interests (e) | (1.8) | | | (1.7) | | | (6) | % |
| Change in tax provision due to adjustments to reported net income attributable to Coty Inc. | (57.3) | | | (64.6) | | | 11 | % |
| | | | | |
| Adjusted net (loss) income attributable to Coty Inc. | $ | (27.2) | | | $ | 6.8 | | | <(100%) |
| % of net revenues | (2.1) | % | | 0.5 | % | | |
| Per Share Data | | | | | |
| Adjusted weighted-average common shares | | | | | |
| Basic | 879.9 | | | 872.1 | | | |
Diluted (a) | 879.9 | | | 875.0 | | | |
| Adjusted net income attributable to Coty Inc. per common share | | | | | |
| Basic | $ | (0.03) | | | $ | 0.01 | | | |
Diluted (a) | $ | (0.03) | | | $ | 0.01 | | | |
(a)Adjusted Diluted EPS is adjusted by the effect of dilutive securities. For the three months ended March 31, 2026 and 2025, no dilutive shares of the Forward Repurchase Contracts were included in the computation of adjusted diluted EPS as their inclusion would be anti-dilutive. Accordingly, we did not reverse the impact of the fair market value losses for contracts with the option to settle in shares or cash of $40.7 and $60.1, respectively. For the three months ended March 31, 2026 and 2025, Convertible Series B Preferred Stock (23.7 million weighted average dilutive shares) was anti-dilutive. Accordingly, we excluded these shares from the diluted shares and did not adjust the earnings for the related dividend of $3.3, respectively.
(b)See a description of adjustments under “Net Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc."
(c)For the three months ended March 31, 2025, this represents unrealized (gain) loss recognized for the change in fair value of the investment in the Wella Company.
(d)For the three months ended March 31, 2026, this primarily represents recovery of previously written-off non-income tax credits. For the three months ended March 31, 2025, this primarily represents recovery of previously written-off non-income tax credits, the amortization of basis differences in certain equity method investments, and net loss on the sale of an equity investment.
(e)The amounts represent the after-tax impact of the non-GAAP adjustments included in net income attributable to noncontrolling interests based on the relevant noncontrolling interest percentage in the Condensed Consolidated Statements of Operations.
NINE MONTHS ENDED MARCH 31, 2026 AS COMPARED TO NINE MONTHS ENDED MARCH 31, 2025
NET REVENUES
In the nine months ended March 31, 2026, net revenues decreased 2%, or $103.1, to $4,537.4 from $4,640.5 in the nine months ended March 31, 2025, reflecting a decrease in unit volume of 6% (primarily due to color cosmetics from Covergirl as a result of negative market trends in the United States and body care brands in Brazil), partially offset by a positive foreign currency exchange translation impact of 4% (primarily driven by the weakening of the U.S. dollar versus the Brazilian Real and the Euro). The overall decrease in net revenues reflects declines within both Consumer Beauty and Prestige. Declines within Consumer Beauty are primarily driven by negative market trends in color cosmetics in the United States and in some European markets. The decline can also be attributed to mass body care in Brazil — primarily due to competitive pricing action in the Brazilian deodorant market. Declines in Prestige are primarily driven by Prestige fragrances as a result of reduced distribution in certain sales channels. These declines were partially offset by growth in our Prestige cosmetic and mass skincare categories. Net revenues declined across all regions despite growth in Asia travel retail. Improvements in digital and e-commerce channel sales partially offset the overall decrease in net revenues.
Net Revenues by Segment | | | | | | | | | | | | | | | | | |
| Nine Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| NET REVENUES | | | | | |
| Prestige | $ | 3,034.0 | | | $ | 3,059.6 | | | (1) | % |
| Consumer Beauty | 1,503.4 | | | 1,580.9 | | | (5) | % |
| | | | | |
| Total | $ | 4,537.4 | | | $ | 4,640.5 | | | (2) | % |
Prestige
In the nine months ended March 31, 2026, net revenues from the Prestige segment decreased 1%, or $25.6, to $3,034.0 from $3,059.6 in the nine months ended March 31, 2025, reflecting a decrease in unit volume of 4% (primarily due to negative performance for Prestige fragrance brands), and a negative price and mix impact of 1%, partially offset by a positive foreign currency exchange translation impact of 4% (primarily driven by the weakening of the U.S. dollar versus the Euro). The decrease in net revenues primarily reflects:
•Prestige fragrance sales declined by $37.0 million, primarily due to a decrease in net sales of Hugo Boss existing brand lines and decreases in Davidoff and Calvin Klein as a result of reduced distribution in certain sales channels. The category sales decline was partially offset by strong performance from Gucci, mainly due to successful innovations such as Gucci Flora Gorgeous Gardenia Intense, and by Kylie fragrances, which benefited from successful innovations in both the current and prior year.
This decrease was partially offset by:
•Prestige cosmetic sales growth of $10.5, primarily due to strong growth of Burberry makeup, particularly in Asia; and
•Prestige skincare sales growth of $0.9.
Consumer Beauty
In the nine months ended March 31, 2026, net revenues from the Consumer Beauty segment decreased 5%, or $77.5, to $1,503.4 from $1,580.9 in the nine months ended March 31, 2025, reflecting a decrease in unit volume of 6% (primarily due to negative performance of color cosmetics and body care) and a negative price and mix impact of 3% (primarily driven by mass fragrance), partially offset by a positive foreign currency exchange translation impact of 4% (primarily driven by the weakening of the U.S. dollar versus the Brazilian Real and the Euro). The decrease in net revenues primarily reflects:
•Color cosmetics sales declines of $39.9, primarily due to negative market trends in the color cosmetics market in the United States which impacted net revenues from Covergirl and Rimmel. Negative market trends for color cosmetics in several European markets also impacted net revenues from Max Factor, Bourjois, and Rimmel;
•Mass fragrance sales decline of $33.2, primarily due to lower net sales from Nautica in the U.S. and across Asia and the expiration of a license agreement; and
•Mass body care sales declines of $13.0, primarily due to declines in sales volumes from adidas in Europe and Monange in Brazil due to competitive pricing action in the deodorant market.
These decreases were partially offset by:
•Mass skincare sales growth of $8.6.
COST OF SALES
In the nine months ended March 31, 2026, cost of sales increased 4%, or $58.8, to $1,658.1 from $1,599.3 in the nine months ended March 31, 2025. Cost of sales as a percentage of net revenues increased to 36.5% in the nine months ended March 31, 2026 from 34.5% in the nine months ended March 31, 2025 resulting in a gross margin decrease of approximately 200 basis points primarily reflecting:
(i)approximately 110 basis points related to an increase in manufacturing and material costs as a percentage of net revenues,
(ii)approximately 60 basis points related to increased freight costs as a percentage of net revenues, primarily driven by the impact of tariffs,
(iii)approximately 30 basis points increase related to excess and obsolescence costs, as a percentage of net revenues; and
(iv)approximately 10 basis points related to increased designer license fees as a percentage of net revenues.
Gross margin was negatively impacted by higher discounts and promotions in the current period which reduced net revenue. Although we achieved improvements in manufacturing efficiency, productivity, and procurement cost optimization, these benefits are offset by the impact of the reduced net revenue base.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
In the nine months ended March 31, 2026, selling, general and administrative expenses decreased 1%, or $19.8, to $2,363.0 from $2,382.8 in the nine months ended March 31, 2025. Selling, general and administrative expenses as a percentage of net revenues increased to 52.1% in the nine months ended March 31, 2026 from 51.3% in the nine months ended March 31, 2025, or approximately 80 basis points. This increase was primarily due to:
(i)100 basis points due to an increase in administrative expenses as a percentage of net revenues, which includes an increase in discretionary compensation for employees.
(ii)70 basis points due to an increase in advertising and consumer promotional costs as a percentage of net revenues;
(iii)60 basis points due to an increase in operational accruals a percentage of net revenues; and
(iv)30 basis points due to an early license termination as a percentage of net revenues.
These decreases were partially offset by:
(v)150 basis points due to the loss on the termination of the KKW Collaboration Agreement in the prior period.
OPERATING INCOME
In the nine months ended March 31, 2026, operating loss was $38.8 compared to income of $225.6 in the nine months ended March 31, 2025. Operating loss margin as a percentage of net revenues decreased to 0.9% in the nine months ended March 31, 2026 as compared to an operating income margin of 4.9% in the nine months ended March 31, 2025. The decrease in operating margin is largely driven by an increase in asset impairment charges (approximately 340 basis points), an increase in cost of goods sold (approximately 210 basis points), an increase in amortization expense as a percentage of net revenues (approximately 110 basis points), an increase in fixed costs as a percentage of net revenues (approximately 90 basis points), and an increase in advertising and consumer promotional costs as a percentage of net revenues (approximately 70 basis points), partially offset by a decrease in restructuring costs as a percentage of net revenue (approximately 160 basis points) and a decrease in other operating income as a percentage of net revenue (approximately 70 basis points).
Operating Income (Loss) by Segment | | | | | | | | | | | | | | | | | |
| Nine Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Operating income (loss) | | | | | |
| Prestige | $ | 449.2 | | | $ | 542.5 | | | (17) | % |
| Consumer Beauty | (412.7) | | | (111.4) | | | <(100%) |
| Corporate | (75.3) | | | (205.5) | | | 63 | % |
| Total | $ | (38.8) | | | $ | 225.6 | | | <(100%) |
Prestige
In the nine months ended March 31, 2026, operating income for Prestige was $449.2 compared to income of $542.5 in the nine months ended March 31, 2025. Operating margin decreased to 14.8% of net revenues in the nine months ended March 31, 2026 as compared to 17.7% in the nine months ended March 31, 2025, driven primarily by increased amortization expense as a percentage of net revenues (approximately 160 basis points); higher cost of goods sold as a percentage of net revenues (approximately 120 basis points) driven by higher manufacturing and freight expense as a percentage of revenue and impacted by higher discounts and promotions during the current period; and increased advertising and consumer promotional expense as a percentage of net revenues (approximately 90 basis points). These factors were partially offset by lower asset impairment charges as a percentage of revenue (approximately 140 basis points).
Consumer Beauty
In the nine months ended March 31, 2026, operating loss for Consumer Beauty was $412.7 compared to loss of $111.4 in the nine months ended March 31, 2025. Operating loss margin decreased to 27.5% of net revenues in the nine months ended March 31, 2026 as compared to an operating loss margin of 7.0% in the nine months ended March 31, 2025, driven by higher asset impairment charges as a percentage of revenue (approximately 1,340 basis points); higher cost of goods sold as a percentage of revenues (approximately 420 basis points) driven by higher manufacturing freight and obsolescence expenses as a percentage of revenue and impacted by higher discounts and promotions during the current year period; an increase in other operating expenses as a percentage of net revenues (approximately 140 basis points); and an increase in fixed costs as a percentage of net revenues (approximately 120 basis points).
Corporate
Corporate primarily includes corporate expenses not directly related to our operating activities. These items are included in Corporate since we consider them to be Corporate responsibilities, and these items are not used by our management to measure the underlying performance of the segments.
In the nine months ended March 31, 2026, the operating loss for Corporate was $75.3 compared to a loss of $205.5 in the nine months ended March 31, 2025, as described under “Adjusted Operating Income for Coty Inc.” below. The decrease in the operating loss for Corporate was primarily driven by a $74.0 decrease in restructuring and other business realignment costs, a loss on the termination of the KKW Collaboration Agreement in the prior period of $71.0, and a $5.3 decrease in stock-based compensation.
Adjusted Operating Income by Segment
We believe that Adjusted Operating Income by segment further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported Operating income to Adjusted Operating Income is presented below, by segment: | | | | | | | | | | | | | | | | | |
| Nine Months Ended March 31, 2026 |
| (in millions) | Reported
(GAAP) | | Adjustments (a) | | Adjusted
(Non-GAAP) |
| Operating income (loss) | | | | | |
| Prestige | 449.2 | | | $ | 160.4 | | | $ | 609.6 | |
| Consumer Beauty | (412.7) | | | 390.3 | | | (22.4) | |
| Corporate | (75.3) | | | 75.3 | | | — | |
| Total | $ | (38.8) | | | $ | 626.0 | | | $ | 587.2 | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended March 31, 2025 |
| (in millions) | Reported
(GAAP) | | Adjustments (a) | | Adjusted
(Non-GAAP) |
| Operating income (loss) | | | | | |
| Prestige | 542.5 | | | $ | 156.0 | | | $ | 698.5 | |
| Consumer Beauty | (111.4) | | | 198.1 | | | 86.7 | |
| Corporate | (205.5) | | | 205.5 | | | — | |
| Total | $ | 225.6 | | | $ | 559.6 | | | $ | 785.2 | |
(a)See a reconciliation of reported net income to operating income (loss) to adjusted operating income (loss) and adjusted EBITDA for Coty Inc. and reconciliations of segment operating income (loss) to segment adjusted operating income (loss) and segment adjusted EBITDA for the Prestige, Consumer Beauty and Corporate segments with a description of the adjustments under “Net (Loss) Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc.” and “Segment Operating Income (Loss), Segment Adjusted Operating Income (Loss) and Segment Adjusted EBITDA”, below. All adjustments are reflected in Corporate, except for amortization and asset impairment charges on goodwill, indefinite-lived intangible assets, and finite-lived intangible assets, which are reflected in the Prestige and Consumer Beauty segments.
Net Loss, Adjusted Operating Income and Adjusted EBITDA for Coty Inc.
We believe that adjusted operating income further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported operating income to adjusted operating income is presented below: | | | | | | | | | | | | | | | | | |
| Nine Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Net loss | $ | (447.9) | | | $ | (280.9) | | | (59) | % |
| Net loss margin | (9.9) | % | | (6.1) | % | | |
| (Benefit) Provision for income taxes | (72.5) | | | 9.6 | | | <(100%) |
| Loss before income taxes | $ | (520.4) | | | $ | (271.3) | | | (92) | % |
| Interest expense, net | 121.7 | | | 164.1 | | | (26) | % |
| Other expense, net | 359.9 | | | 332.8 | | | 8 | % |
| Reported operating (loss) income | $ | (38.8) | | | $ | 225.6 | | | <(100%) |
| Reported operating income margin | (0.9) | % | | 4.9 | % | | |
| Amortization expense | 187.9 | | | 141.3 | | | 33 | % |
| Restructuring and other business realignment costs | 16.6 | | | 90.6 | | | (82) | % |
| Stock-based compensation | 39.3 | | | 44.6 | | | (12) | % |
| | | | | |
| | | | | |
| Early license termination and market exit costs | 19.4 | | | 70.3 | | | (72) | % |
| Asset impairment charges | 362.8 | | | 212.8 | | | 70 | % |
| | | | | |
| Total adjustments to reported operating income | $ | 626.0 | | | $ | 559.6 | | | 12 | % |
| Adjusted operating income | $ | 587.2 | | | $ | 785.2 | | | (25) | % |
| Adjusted operating income margin | 12.9 | % | | 16.9 | % | | |
| Adjusted depreciation | 166.1 | | | 169.8 | | | (2) | % |
| Adjusted EBITDA | $ | 753.3 | | | $ | 955.0 | | | (21) | % |
| Adjusted EBITDA margin | 16.6 | % | | 20.6 | % | | |
In the nine months ended March 31, 2026, adjusted operating income decreased $198.0, to $587.2 from $785.2 in the nine months ended March 31, 2025. Adjusted operating margin decreased to 12.9% of net revenues in the nine months ended March 31, 2026 from 16.9% in the nine months ended March 31, 2025. In the nine months ended March 31, 2026, adjusted EBITDA decreased $201.7 to $753.3 from $955.0 in the nine months ended March 31, 2025. Adjusted EBITDA margin decreased to 16.6% of net revenues in the nine months ended March 31, 2026 from 20.6% in the nine months ended March 31, 2025.
Segment Operating Income (Loss), Segment Adjusted Operating Income (Loss) and Segment Adjusted EBITDA
Operating Income, Adjusted Operating Income and Adjusted EBITDA - Prestige Segment
| | | | | | | | | | | | | | | | | |
| Nine Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Reported operating income | 449.2 | | | 542.5 | | | (17) | % |
| Reported operating income margin | 14.8 | % | | 17.7 | % | | |
| Amortization expense | 160.4 | | | 113.1 | | | 42 | % |
| Asset impairment charges | — | | | 42.9 | | | (100) | % |
| Total adjustments to reported operating income | $ | 160.4 | | | $ | 156.0 | | | 3 | % |
| Adjusted operating income | $ | 609.6 | | | $ | 698.5 | | | (13) | % |
| Adjusted operating income margin | 20.1 | % | | 22.8 | % | | |
| Adjusted depreciation | 83.5 | | | 83.2 | | | — | % |
| Adjusted EBITDA | $ | 693.1 | | | $ | 781.7 | | | (11) | % |
| Adjusted EBITDA margin | 22.8 | % | | 25.5 | % | | |
Operating Loss, Adjusted Operating (Loss) Income and Adjusted EBITDA - Consumer Beauty Segment
| | | | | | | | | | | | | | | | | |
| Nine Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Reported operating loss | (412.7) | | | (111.4) | | | <(100%) |
| Reported operating loss margin | (27.5) | % | | (7.0) | % | | |
| Amortization expense | 27.5 | | | 28.2 | | | (2) | % |
| Asset impairment charges | 362.8 | | | 169.9 | | | >100% |
| Total adjustments to reported operating income | $ | 390.3 | | | $ | 198.1 | | | 97 | % |
| Adjusted operating (loss) income | $ | (22.4) | | | $ | 86.7 | | | <(100%) |
| Adjusted operating (loss) income margin | (1.5) | % | | 5.5 | % | | |
| Adjusted depreciation | 82.6 | | | 86.6 | | | (5) | % |
| Adjusted EBITDA | $ | 60.2 | | | $ | 173.3 | | | (65) | % |
| Adjusted EBITDA margin | 4.0 | % | | 11.0 | % | | |
Operating Loss, Adjusted Operating Loss and Adjusted EBITDA - Corporate Segment
| | | | | | | | | | | | | | | | | |
| Nine Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Reported operating loss | $ | (75.3) | | | $ | (205.5) | | | 63 | % |
| Reported operating loss margin | N/A | | N/A | | |
| Restructuring and other business realignment costs | 16.6 | | | 90.6 | | | (82) | % |
| Stock-based compensation | 39.3 | | | 44.6 | | | (12) | % |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Early license termination and market exit costs | 19.4 | | | 70.3 | | | (72) | % |
| | | | | |
| Total adjustments to reported operating income | $ | 75.3 | | | $ | 205.5 | | | (63) | % |
| Adjusted operating income | $ | — | | | $ | — | | | N/A |
| Adjusted operating income margin | N/A | | N/A | | |
| Adjusted depreciation | — | | | — | | | N/A |
| Adjusted EBITDA | $ | — | | | $ | — | | | N/A |
| Adjusted EBITDA margin | N/A | | N/A | | |
Amortization Expense
In the nine months ended March 31, 2026, amortization expense increased to $187.9 from $141.3 in the nine months ended March 31, 2025. The increase was primarily driven by accelerated amortization related to a brand license, partially offset by completed amortization term for certain license agreements and the termination of the KKW Collaboration Agreement in the previous fiscal year. In the nine months ended March 31, 2026, amortization expense of $160.4 and $27.5 was reported in the
Prestige and Consumer Beauty segments, respectively. In the nine months ended March 31, 2025, amortization expense of $113.1 and $28.2 was reported in the Prestige and Consumer Beauty segments, respectively.
Restructuring and Other Business Realignment Costs
We incurred approximately $23.0 of cash costs life-to-date related to our previously announced Fixed Cost Reduction Plan as of March 31, 2026, which have been recorded in Corporate.
In the nine months ended March 31, 2026, we incurred restructuring and other business structure realignment costs of $16.6 as follows:
•We incurred restructuring costs of $4.4, which is included in the Condensed Consolidated Statements of Operations; and
•We incurred business structure realignment costs of $12.2 which is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
In the nine months ended March 31, 2025, we incurred restructuring and other business structure realignment costs of $90.6, as follows:
•We incurred restructuring costs of $78.7, of which $74.4 related to the Fixed Cost Reduction Plan, included in the Condensed Consolidated Statements of Operations; and
•We incurred business structure realignment costs of $11.9 which is reported in Selling, general and administrative expenses and cost of sales, primarily related to the Fixed Cost Reduction Plan.
Stock-based compensation
In the nine months ended March 31, 2026, stock-based compensation was $39.3 as compared with $44.6 in the nine months ended March 31, 2025.
Early License Termination
In the nine months ended March 31, 2026, we incurred costs related to the early termination of a license of $19.7, of which $6.7 is reported in costs of sales, and $13.0 is reported in selling, general and administrative expenses.
In the nine months ended March 31, 2025, we incurred a net loss of $71.0 related to the loss on the termination of the KKW Collaboration Agreement and recognized a gain of $(0.7) related to our decision to wind down our business in Russia.
Asset Impairment Charges
In the nine months ended March 31, 2026, we incurred $362.8 of asset impairment charges of which $237.1 related to goodwill within the Consumer Beauty segment, and $50.6, $48.5, $22.5, $4.1 related to the CoverGirl, Sally Hansen, Max Factor, and Bourjois trademarks, respectively, within the Consumer Beauty Segment.
In the nine months ended March 31, 2025, we incurred $212.8 of asset impairment charges of which $84.0, $61.0, and $24.9 related to the Max Factor, CoverGirl and Bourjois trademarks, respectively, totaling $169.9 within the Consumer Beauty segment and $42.9 related to the philosophy trademark within the Prestige Segment.
Adjusted Depreciation Expense
In the nine months ended March 31, 2026, adjusted depreciation expense of $83.5 and $82.6 was reported in the Prestige and Consumer Beauty segments, respectively. In the nine months ended March 31, 2025, adjusted depreciation expense of $83.2 and $86.6 was reported in the Prestige and Consumer Beauty segments, respectively.
INTEREST EXPENSE, NET
In the nine months ended March 31, 2026, net interest expense was $121.7 as compared with $164.1 in the nine months ended March 31, 2025. This decrease is primarily due to lower average debt balance in the current period, foreign exchange gains as compared to losses in the prior year, as well as lower average interest rates.
OTHER EXPENSE
In the nine months ended March 31, 2026, other expense was $359.9 as compared to other expense of $332.8 in the nine months ended March 31, 2025. The increase in Other expense of $27.1 is primarily due to a net loss on sale of equity investments of $201.9, partially offset by lower net losses on forward repurchase contracts of $108.5 and an equity investment related fair market value adjustment of $85.0 in the prior year period that did not repeat in the current period.
INCOME TAXES
The effective income tax rate for the nine months ended March 31, 2026 and 2025 was 13.9% and (3.5)%, respectively. The increase in the tax benefit rate is primarily attributable to the Company’s sale of its remaining interest in Rainbow JVCO LTD and subsidiaries (together, “Wella” or “Wella Company”).
The effective tax benefit rate of 13.9% for the nine months ended March 31, 2026 was lower than the statutory tax rate of 21% primarily due to goodwill impairment in the current period that is not tax deductible partially offset by the benefit recognized on the Company’s sale of its remaining interest in Wella and the release of uncertain tax positions.
The effective tax benefit rate of (3.5)% for the nine months ended March 31, 2025 was lower than the statutory tax rate of 21% due to a capital loss realized on the sale of the Company’s investment in KKW Holdings during the period for which no tax benefit can be recognized, the loss on forward repurchase contracts having a higher proportional impact in the current period, as well as the impact of fair value losses related to the investment in Wella taxed at a rate below the statutory rate of 21%.
The effective income tax rates vary from the U.S. federal statutory rate of 21% due to the effect of: (i) jurisdictions with different statutory rates, including impacts of rate changes, (ii) adjustments to our unrecognized tax benefits and accrued interest; (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes. Our effective tax rate could fluctuate significantly and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates.
Reconciliation of Reported (Loss) Income Before Income Taxes to Adjusted Income Before Income Taxes and Effective Tax Rates: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended
March 31, 2026 | | Nine Months Ended
March 31, 2025 |
| (in millions) | Income Before Income Taxes | | (Benefit) Provision for Income Taxes | | Effective Tax Rate | | Income Before Income Taxes | | Provision
for Income Taxes | | Effective
Tax Rate |
| Reported (loss) income before income taxes | $ | (520.4) | | | $ | (72.5) | | | 13.9 | % | | $ | (271.3) | | | $ | 9.6 | | | (3.5) | % |
| | | | | | | | | | | |
Other adjustments to reported operating income (a) | 626.0 | | | | | | | 559.6 | | | | | |
| | | | | | | | | | | |
Realized/unrealized loss on investment in Wella Company (c) | 200.9 | | | | | | | 85.0 | | | | | |
Other adjustments (d) | (1.8) | | | | | | | 0.4 | | | | | |
Total Adjustments (b) | 825.1 | | | 147.7 | | | | | 645.0 | | | 97.2 | | | |
| Adjusted income before income taxes | $ | 304.7 | | | $ | 75.2 | | | 24.7 | % | | $ | 373.7 | | | $ | 106.8 | | | 28.6 | % |
(a)See a description of adjustments under “Net Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc.”
(b)The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability. The total tax impact on adjustments in the prior period includes a tax benefit of $10.0 on the resolution of uncertain tax positions associated with the Company’s exit from Russia in fiscal 2022.
(c)For the nine months ended March 31, 2026, this primarily represents the realized loss on the sale of the investment in Wella. For the nine months ended March 31, 2025, this primarily represents the unrealized (gain) loss recognized for the change in fair value of the investment in the Wella Company.
(d)For the nine months ended March 31, 2026, this primarily represents recovery of previously written-off non-income tax credits. For the nine months ended March 31, 2025, this primarily represents recovery of previously written-off non-income tax credits, the amortization of basis differences in certain equity method investments, and net loss on the sale of an equity investment.
The adjusted effective tax rate was 24.7% for the nine months ended March 31, 2026 compared to 28.6% for the nine months ended March 31, 2025. The difference is primarily due to a higher limitation on the deductibility of interest expense in the prior period.
NET LOSS ATTRIBUTABLE TO COTY INC.
Net loss attributable to Coty Inc. was $463.8 in the nine months ended March 31, 2026, as compared to net loss of $299.1 in the nine months ended March 31, 2025. This increase in net loss was primarily driven by the realized loss on the sale of Wella of $200.9, lower gross profit of $161.9, an increase in asset impairment charges of $150.0, and an increase in amortization $46.6, partially offset by an increase in benefit for income taxes of $82.1, lower restructuring costs of $74.3, lower interest expense of $42.4, and a decrease in selling, general, and administrative expense of $19.8.
We believe that adjusted net income attributable to Coty Inc. provides an enhanced understanding of our performance. See “Overview—Non-GAAP Financial Measures.”
| | | | | | | | | | | | | | | | | |
| Nine Months Ended
March 31, | | |
| (in millions) | 2026 | | 2025 | | Change % |
| Net loss attributable to Coty Inc. | (463.8) | | | (299.1) | | | (55) | % |
Convertible Series B Preferred Stock dividends (a) | (9.9) | | | (9.9) | | | — | % |
| | | | | |
| Reported net loss attributable to common stockholders | (473.7) | | | (309.0) | | | (53) | % |
| % of net revenues | (10.4) | % | | (6.7) | % | | |
Adjustments to reported operating income (b) | 626.0 | | | 559.6 | | | 12 | % |
| | | | | |
Realized/unrealized loss on investment in Wella Company (c) | 200.9 | | | 85.0 | | | >100% |
Adjustment to other expense (d) | (1.8) | | | 0.4 | | | <(100%) |
Adjustments to noncontrolling interests (e) | (5.2) | | | (5.1) | | | (2) | % |
| Change in tax provision due to adjustments to reported net income attributable to Coty Inc. | (147.7) | | | (97.2) | | | (52) | % |
| | | | | |
| Adjusted net income attributable to Coty Inc. | 198.5 | | | 233.7 | | | (15) | % |
| % of net revenues | 4.4 | % | | 5.0 | % | | |
| Per Share Data | | | | | |
| Adjusted weighted-average common shares | | | | | |
| Basic | 876.5 | | | 870.4 | | | |
Diluted (a) | 878.7 | | | 875.5 | | | |
| Adjusted net income attributable to Coty Inc. per common share | | | | | |
| Basic | $ | 0.23 | | | $ | 0.27 | | | |
Diluted (a) | $ | 0.23 | | | $ | 0.27 | | | |
(a)Adjusted Diluted EPS is adjusted by the effect of dilutive securities. For the nine months ended March 31, 2026 and 2025, no dilutive shares of the Forward Repurchase Contracts were included in the computation of adjusted diluted EPS as their inclusion would be antidilutive. Accordingly, we did not reverse the impact of the fair market value losses/(gains) for contracts with the option to settle in shares or cash of $105.8 and $188.9, respectively. For the nine months ended March 31, 2026 and 2025, Convertible Series B Preferred Stock (23.7 million weighted average dilutive shares) were anti-dilutive. Accordingly, we excluded these shares from the diluted shares and did not adjust the earnings for the related dividend of $9.9, respectively.
(b)See a description of adjustments under “Net Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc.”
(c)For the nine months ended March 31, 2026, this primarily represents the realized loss on the sale of the investment in Wella. For the nine months ended March 31, 2025, this represents unrealized (gain) loss recognized for the change in fair value of the investment in the Wella Company.
(d)For the nine months ended March 31, 2026, this primarily represents recovery of previously written-off non-income tax credits. For the nine months ended March 31, 2025, this primarily represents recovery of previously written-off non-income tax credits, the amortization of basis differences in certain equity method investments, and net loss on the sale of an equity investment
(e)The amounts represent the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interests based on the relevant noncontrolling interest percentage in the Condensed Consolidated Statements of Operations.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our primary sources of funds include cash expected to be generated from operations, borrowings from issuance of debt and lines of credit provided by banks and lenders in the U.S. and abroad.
Our cash flows are subject to seasonal variation throughout the year, including demands on cash made during our first fiscal quarter in anticipation of higher global sales during the second fiscal quarter and strong cash generation in the second fiscal quarter as a result of increased demand by retailers associated with the holiday season.
Our principal uses of cash are to fund planned operating expenditures, capital expenditures, interest payments, dividends, share repurchases, any principal payments on debt, and from time to time, acquisitions, and business structure realignment expenditures. Working capital movements are influenced by the sourcing of materials related to the manufacturing of products. Cash and working capital management initiatives, including the phasing of vendor and tax payments and factoring of trade receivables from time-to-time, may also impact the timing and amount of our operating cash flows.
We remain focused on deleveraging our balance sheet using cash flows generated from our operations. We continue to take steps to permanently reduce our debt, in order to reduce interest costs and improve our long term profitability and cash flows.
Recent changes in U.S. and international trade policies—particularly tariff increases—and the ongoing uncertainty surrounding such policies may present challenges to our business operations and financial condition. These challenges may include supply chain disruptions and commodity price volatility, resulting in increases in our cost of goods sold. Under the current tariff framework, the biggest areas of potential challenges for us are prestige fragrances shipped to the U.S. from our Barcelona plant, and the sourcing of various components and marketing materials from China. We currently estimate that our operating results will be impacted by approximately $32.0 in costs related to tariff increases, after mitigating actions, through the first quarter of fiscal 2027. Of this amount, approximately $30.0 is expected to be reflected in our fiscal 2026 operating results, with the remaining amount of approximately $2.0 expected to be reflected in the first quarter of fiscal 2027. In the first nine months of fiscal 2026, approximately $23.0 of net tariff costs are reflected in our operating results. Despite our efforts, reductions in consumer confidence and discretionary spending could impact demand for our products and negatively affect our sales. We are closely monitoring developments, evaluating potential impacts, and proactively taking steps to mitigate adverse effects on our business.
On February 20, 2026, the U.S. Supreme Court issued a decision addressing the scope of tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). This ruling may allow for the recovery of IEEPA tariff amounts previously paid. The ruling leaves uncertainties regarding the timing and administration of any potential IEEPA tariff refunds by the U.S. government and may be subject to further legal and regulatory developments. Following the U.S. Supreme Court ruling, an executive order was issued imposing a new global tariff, in addition to any existing non-IEEPA tariffs. The Company is actively pursuing refund recovery activities related to IEEPA tariffs.
In fiscal 2025, we announced a plan to strengthen our operating model and simplify our fixed cost structure (the “Fixed Cost Reduction Plan”). Cash costs associated with the program include restructuring and business structure realignment costs and are expected to be approximately $80.0, roughly evenly split between fiscal 2026 and fiscal 2027. We incurred approximately $23.0 of cash costs life-to-date as of March 31, 2026, which have been recorded in Corporate.
Debt Financing
We have been actively taking steps to reduce our leverage and optimize the maturity profile of our debt. As part of these ongoing efforts, we plan to continue pursuing opportunities, which may include refinancing existing debt, issuing new notes, and redeeming or repurchasing outstanding debt with near-term maturities, from time to time as market conditions permit.
On April 15, 2026, we repaid €250.0 million (approximately $294.7) of the remaining 2026 Euro Senior Secured Notes using proceeds from the 2023 Coty Revolving Credit Facility.
On December 18, 2025, we completed the sale of our remaining 25.84% equity interest in Wella to an entity affiliated with KKR. We received $750.0 million in cash consideration. On December 30, 2025, we used proceeds from the sale of the Wella investment to redeem €500.0 million (approximately $588.9) of the 2028 Euro Senior Secured Notes. The 2028 Euro Senior Secured Notes were redeemed at a price in excess of their carrying amount, resulting in a premium on redemption of €14.4 million (approximately $16.9).
On October 15, 2025, we issued an aggregate principal of $900.0 of 5.600% senior notes due 2031 (the “2031 Senior Secured Notes”) in a private offering. We received net proceeds of $888.0 in connection with the offering of the 2031 Senior Secured Notes. On October 17, 2025, we used proceeds from the offering to redeem the remaining $350.0 outstanding under the 2026 Dollar Senior Secured Notes and €450.0 million (approximately $526.8) of the 2026 Euro Senior Secured Notes. Refer to Note 9 — Debt.
We have taken action to reduce variability in our interest payments including paying down variable interest rate debt and issuing fixed rate bonds. While our revolving credit facility, which we draw on from time to time, is subject to variable interest rates, all of our non-revolving credit facility long-term debt outstanding as of March 31, 2026 is fixed rate debt.
Share Repurchases
In connection with our Share Repurchase Program, we entered into forward repurchase contracts in June 2022, December 2022, and November 2023 with three large financial institutions to hedge for $200.0, and a potential $196.0 and $294.0 of share repurchases in 2024, 2025 and 2026, respectively. We physically settled the June 2022 forward repurchase contracts by delivering approximately $200.0 cash in exchange for 27.0 million shares of our Class A Common Stock during fiscal 2024.
Our remaining forward repurchase contracts permit a net cash settlement alternative in addition to the physical settlement. We will continue to incur costs associated with the remaining forward repurchase contracts before settlement. Cash costs incurred in the current fiscal year to date for all forward repurchase contracts amounted to $208.7.
Reductions in the price of Coty’s Class A Common Stock during the nine months ended March 31, 2026 triggered additional payments under our remaining forward repurchase contracts. During the nine months ended March 31, 2026, the Company paid Hedge Valuation Adjustments in connection with its forward repurchase contracts of $53.9 in August 2025, $13.7 in November 2025, $10.1 in December 2025, $50.3 in February 2026, and $66.4 in March 2026. This resulted in a downward adjustment to the initial price at acquisition for these forward repurchase contracts. Future reductions in the price of Coty’s Class A Common Stock may trigger additional payments under our remaining forward repurchase contracts.
See Footnote 13—Equity for additional information on the Company's forward repurchase contracts.
Factoring of Receivables
From time to time, we supplement the timing of our cash flows through the factoring of trade receivables. In this regard, we have entered into factoring arrangements with financial institutions.
The net amount factored under the factoring facilities was $189.6 and $211.8 as of March 31, 2026 and June 30, 2025, respectively. The aggregate amount of trade receivable invoices factored on a worldwide basis amounted to $1,083.7 and $1,148.9 during the nine months ended March 31, 2026 and 2025, respectively.