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

Executive summary

• Leadership transition with Markus Strobel as Executive Chairman and Interim CEO, and a new strategic framework emphasizing discipline, focus, and operational improvement.

• Strategic reset in Consumer Beauty, sharper portfolio focus, and increased digital investment, while Prestige leverages new launches and channel expansion.

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

• Net revenues for Q2 FY26 up 1% reported to $1,678.6M, with significant debt reduction following the Wella divestiture.

• Ongoing strategic review of Consumer Beauty and reallocation of resources to core businesses.

Financial highlights

• Q2 FY26 adjusted EBITDA was ~$330M (19.7% margin), down 15% year-over-year; adjusted operating income $274.3M (16.3% margin), down 18%.

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

• Gross margin for Q2 declined by 290 basis points to 63.8%, pressured by promotions, tariffs, and higher costs.

• Free cash flow for Q2 was $513.1M, with FYTD at $524M, supported by working capital management.

• Leverage ratio at 2.7x, the lowest in over nine years, with significant debt reduction from Wella proceeds.

Outlook and guidance

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

• Q3 adjusted EBITDA expected between $100M–$110M, with continued gross margin headwinds and negative free cash flow due to seasonality and tax payments.

• Full-year FY26 EBITDA and free cash flow guidance withdrawn due to market complexity and leadership transition.

• Cost reduction efforts re-accelerated, targeting $80M–$200M in FY26.

• Consumer Beauty margin and profitability improvements anticipated in fiscal 2027 as innovation and cost actions materialize.