Photographer: Jin Lee/Bloomberg
© 2013 Bloomberg Finance LP
Deal Overview
On September 30, 2025, Coty Inc. (NYSE: COTY, $4.24; Market Capitalization: $3.7 billion) announced a significant strategic realignment, initiating a formal strategic review for specific assets within its Consumer Beauty division. The company will explore a full range of options for these businesses, including potential sales, spin-offs, or other strategic transactions.
The assets placed under review include the company’s mass color cosmetics portfolio, which features brands such as CoverGirl, Rimmel, Sally Hansen and Max Factor that generates approximately $1.2 billion in annual revenue. The review also includes Coty’s distinct Brazil business, which consists of a portfolio of local brands that generate close to $400.0 million in annual revenue.
Coty Price Performance Spin-Off Details and Top 5 Shareholders
Spin-Off Research
On the other hand, the remaining Coty (RemainCo) intends to realign its business to bolster its leadership position in the global fragrance market. The company will more closely integrate its Prestige Beauty and Mass Fragrance businesses, which together account for around 69.0% of the company’s total sales, to create a unified and powerful “fragrance engine”. This strategic pivot is aimed at driving sustainable, profitable growth by concentrating resources on its most successful business segments while exploring value, unlocking alternatives for its more challenged assets.
The timeline for the completion of the strategic review and any potential transaction has not yet been announced. Any resulting transaction would be subject to customary conditions, which could include regulatory and final board approvals.
As part of the organizational redesign, Coty has appointed Gordon von Bretten, a current Board member, as President of the Consumer Beauty division. He will be responsible for driving mass cosmetics, mass skin and personal care businesses.
Citibank is advising Coty on potential transaction options, including a spinoff or divestiture.
Key Data
Spin-Off Research
Deal Rationale
Coty has launched a strategic review of certain assets within its Consumer Beauty division, including mass-market cosmetics and its Brazil portfolio. These assets were selected for review because their financial performance has not kept pace with Coty’s Prestige division, and they are no longer aligned with the company’s sharpened focus on its core fragrance operations.
More than a decade ago, Coty made a bold move by acquiring several mass market beauty brands from Procter & Gamble for $12.5 billion, aiming to strengthen its footprint in the US beauty landscape. The firm invested heavily into its US mass beauty business, prioritizing it over its fragrance segment. However, this strategy began to falter as the mass beauty category faced rising competition from lower-cost online rivals and newer brands that quickly built strong digital followings.
As consumer behavior shifted, Coty found itself grappling with a rapidly changing market. Drugstores began to destock products amid tightening consumer spending, and the mass-market makeup segment came under pressure. Compounding the issue, anti theft measures by US retailers and recent changes in immigration policies further dampened demand. Faced with these headwinds, Coty began to pivot, refocusing on its more profitable Prestige beauty and skincare lines.
As per the management, this initiative represents a critical phase in Coty’s ongoing transformation, designed to bring enhanced “clarity and focus” to the corporate strategy. Through the potential divestiture of these noncore business lines, the company is looking to optimize its brand portfolio, address underperforming segments and cultivate a more streamlined and financially compelling investment profile. The timing is favorable, as the global luxury perfume market is forecast to grow from $52.0 billion in 2025 to $79.5 billion by 2030, representing a CAGR of 8.9%.
To benefit from growth opportunity, the company intends to double down on its fragrance leadership. Coty plans to fully integrate its Prestige and Mass fragrance units to create a unified platform with scale advantages in a high-barrier, and high-margin market. This move is driven by performance differences where Prestige fragrance sales grew at a CAGR of around 10.0% from FY21 to FY25, while Consumer Beauty grew only 2.0% over the same period. Specifically, in FY25 Consumer Beauty segment’s like for- like revenue declined by 5.0% while that of Prestige fragrance was flat YoY, highlighting the stark difference in the growth prospects. The underperformance led free cash flows to decline from $369.4 million in FY24 to $277.6 million in FY25. Financial leverage too increased from 3.2x to 3.5x.
By exploring the separation of these assets management is seeking to unlock shareholder value. This action is also in harmony with the investment strategy of its controlling shareholder, JAB Holding Company, which is known for actively managing its portfolio companies through the divestment of noncore assets to improve value.
By separating the businesses under review, the remaining Coty entity will benefit from a less complex operational footprint, permitting a more intensive focus on its higher growth and higher-margin fragrance and prestige beauty portfolio. This “portfolio purification” is intended to bolster Coty’s capacity to realize synergies within its core operations, accelerate organic growth, and solidify its leadership position in its most defensible and profitable market categories.
Coty Inc. is a global beauty conglomerate that develops, manufactures, and distributes a wide array of products across fragrances, color cosmetics and skin and body care. Founded in Paris in 1904, the company has grown into one of the world’s largest beauty firms, with a presence in over 120 countries and territories. Coty operates through two primary commercial divisions: Prestige and Consumer Beauty.
Prestige
The Prestige division is Coty’s primary driver of growth and profitability, focusing on luxury beauty products. This segment’s portfolio is heavily concentrated in fragrances, where it holds a leading global market position with iconic licensed brands such as Gucci, Burberry, Hugo Boss, and Calvin Klein. Products are distributed through premium retail channels, including high-end department stores, specialty retailers like Sephora and global travel retail outlets. While fragrances are its cornerstone, the division is also expanding its presence in the high-margin prestige skincare and color cosmetics categories. Brands like Lancaster (skincare) and the cosmetics lines from Gucci and Kylie represent key growth vectors in this effort. The consistent strong performance of this division, particularly in fragrances, has made it a clear strategic priority for the company’s future.
Consumer Beauty
The Consumer Beauty division manages Coty’s portfolio of mass-market brands, which are designed for broad consumer accessibility and sold through channels like supermarkets, drug stores, and e-commerce platforms. The product offerings are diverse, spanning color cosmetics, body care, mass market fragrances, and hair care. The portfolio includes heritage brands with significant global recognition, such as CoverGirl, Rimmel, Max Factor in color cosmetics, and Sally Hansen in nail care. Despite the strength of its brands, this division has encountered market challenges, slower growth rates and intense competitive pressure, particularly in the US mass cosmetics market, which has contributed to its underperformance relative to the Prestige division and serves as a primary impetus for the current strategic review.
In fiscal year 2025, the Prestige division accounted for 64.8% of total revenue, and the Consumer Beauty division contributed the remaining 35.2%.
Revenue Trend Adjusted EBITDA vs Margin Trend
Spin-Off Research
4QFY25
Total revenue fell 8.1% YoY to $1,252 million (+3.8% vs. consensus) due to decline in both Prestige and Consumer Beauty division. Consumer Beauty revenue fell 12.3% YoY to $491.8 million, primarily due to lower sales in color cosmetics and body care. Prestige revenue fell 5.3% YoY to $760.6 million, due to the company’s underperformance in the key US market relative to the Prestige beauty category and a proactive intervention to right-size retailer inventory levels to align with current demand trends. The segment was also impacted by a drop in prestige makeup and skincare sales during the quarter.
Adjusted EBITDA fell 23.1% YoY to $126.7 million (-3.1% vs. consensus), and the corresponding margin contracted ~195bps to 10.1%, primarily driven by lower sales and a decrease in gross profit, as well as lower profitability in the Consumer Beauty segment. Adjusted operating income declined 37.3% YoY to $67.7 million (-7.3% vs. consensus), , and the corresponding margin contracted ~252bps to 5.4%. Adjusted net loss came in at $44.9 million (loss of $23.9 million in 4QFY24), primarily due to a negative impact of $59.6 million from the mark-to-market on the equity swap. Adjusted diluted loss per share came in at $0.05 (4QFY24: $0.03), against the consensus estimates of $0.01.
Revenue 4Q25
Spin-Off Research
FY25
Total revenue fell 3.7% YoY to $5.9 billion (+0.7% vs. consensus) due to decline in both Prestige and Consumer Beauty division. Consumer Beauty revenue fell 8.3% YoY to $2.1 billion, driven by lower sales in color cosmetics and body care, which were impacted by ongoing weakness in the global mass color cosmetics market, particularly in the US. Prestige revenue fell 1.0% YoY to $3.8 billion, due to lower net revenue in the prestige makeup and skincare categories. The decrease was also attributed to Coty’s underperformance in the key US market and a proactive effort to correct retailer inventory levels to align with current demand trends.
Total revenue 2025
Spin-Off Research
Adjusted EBITDA fell 0.9% YoY to $1,082 million (-0.3% vs. consensus), and the corresponding margin expanded ~52bps to 18.4%. Adjusted EBITDA fall was primarily driven by lower sales and margin growth was driven by fixed cost savings and continued gross margin expansion. Adjusted operating income declined 1.2% YoY to $852.9 million (-1.2% vs. consensus), and the corresponding margin expanded ~36bps to 14.5%. Adjusted net income declined 41.6% YoY to $188.8 million (-22.0% vs. consensus), and the corresponding margin contracted ~208bps to 3.2%. Adjusted net income declined primarily due to a $248.1 million negative impact from the mark-to market on the equity swap. This represents a significant increase in the headwind compared to the $103.8 million negative impact from the same item in the prior year. Adjusted diluted earnings per share came in at $0.22 (FY24: $0.37), missing the consensus estimates by 37.5%.
Company Description
Coty Inc. (Parent)
Founded in Paris in 1904, Coty Inc. is a global beauty company with a portfolio of iconic brands across fragrance, color cosmetics, and skin and body care. The company’s products are sold in over 120 countries and territories, serving both the prestige and mass market segments. Coty’s headquarters is in New York, and the company had 11,636 employees as of mid-2025. Coty operates primarily through two segments: Prestige and Consumer Beauty.
Consumer Beauty Business (Spin-Off)
SpinCo would comprise Coty’s mass-market Consumer Beauty portfolio, including color cosmetics, retail hair, and select personal care brands. As a standalone entity, SpinCo would be positioned to pursue a more tailored strategy, with greater agility to focus on its consumer base, optimize distribution, and invest in brand revitalization.
Organization Structure
Spin-Off Research
