Coty Americas LFL Sales Up 6% in Q4, But Overall Thesis Unchanged

What happened

Coty's Americas segment like-for-like sales rose 6% in fiscal Q4, driven by strength in the U.S., Brazil, and travel retail. This regional improvement is a positive signal against a backdrop of a 4% overall revenue decline in FY25 and ongoing losses in Consumer Beauty. It aligns with a key watch item: whether prestige fragrance sell-out translates into reported revenue growth, particularly in the U.S. However, one quarter of regional strength does not address structural challenges such as high leverage, weak APAC, and the need to rationalize Consumer Beauty. As a result, while the news is encouraging, it is insufficient to alter the overall WAIT judgment on the stock.

Implication

Investors should monitor whether Americas LFL growth sustains beyond a single quarter and contributes to positive company-wide reported revenue. If U.S. and travel retail strength persists and spreads to other regions, and if Consumer Beauty shows signs of stabilization, the thesis could shift toward a potential buy. Conversely, if the improvement proves transitory or is offset by weakness elsewhere, the balance-sheet and earnings risks remain elevated, keeping the stock speculative. Near-term stock reactions may be positive on this news, but a durable margin of safety has not yet been established given net debt/EBITDA of 4.2x and interest coverage of just 1.1x. Until there is clearer evidence of deleveraging and consistent revenue growth, maintaining a wait-and-see approach is prudent.

Thesis delta

The Americas LFL rise provides early evidence that the U.S. region is stabilizing, which was one of the key watch items in the master report. However, a single quarter of regional growth is insufficient to confirm a durable improvement, especially with ongoing balance-sheet and Consumer Beauty challenges. The overall judgment remains WAIT, with no change in the investment thesis at this time.