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Coty’s net revenue fell 1% to $1.55 billion in the three months ended Sept. 30, 2026. The company said the Middle East conflict contributed to higher freight and material costs and a 120-basis-point drop in gross margin; it expects second-quarter like-for-like revenue to decline by a low-single-digit percentage.
Coty reported a 1% decline in net revenue to $1.55 billion for the three months ended Sept. 30, 2026, as pressure from the Middle East conflict contributed to higher costs and a lower gross margin. The beauty company said its first-quarter results were ahead of its expectations, but it expects like-for-like revenue to fall by a low-single-digit percentage in the second quarter of fiscal 2027.
Gross margin fell 120 basis points year over year to 63.3%, on both reported and adjusted measures. Coty attributed the decline partly to higher freight and material costs related to the war, as well as higher excess and obsolescence costs associated with elevated demand forecasts. The report does not quantify how much of the margin decline came from each factor.
Prestige net revenue declined 1% to about $1 billion on both reported and like-for-like bases, accounting for 68% of Coty’s total sales. Within the division, reported revenue was down $11.1 million year over year: moderate declines in prestige fragrance and skin care were partly offset by growth in prestige cosmetics. Operating income increased, primarily because of lower advertising and consumer promotion costs, which were largely offset by lower gross margin.
In consumer beauty, revenue was $10.9 million lower than a year earlier, with declines in colour cosmetics and mass fragrance partly offset by growth in mass body care. Across EMEA, revenue decreased by $44.8 million year over year, mainly because of lower sales in the Middle East and Europe, partly offset by higher sales in Africa. Coty said adjusted EBITDA was ahead of guidance and its year-over-year decline moderated to 7% from steeper decreases in fiscal 2026.
War Costs Meet a Turnaround
The results show how regional conflict can affect a multinational consumer-products company through both demand and operating costs. Coty reported lower sales in the Middle East and higher freight and material costs linked to the war; its gross margin also narrowed. Those pressures arrive as the company works to improve performance after declines in fiscal 2026.
Investors and retail partners will be watching whether the company can turn its targeted brand investment and cost controls into sustained growth. Coty described the quarter as progress against its priorities, but also said a broad-based recovery will take more work. Its forecast of another low-single-digit like-for-like sales decline in Q2 points to continuing near-term pressure.
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Coty’s Brand-Focused Reset
Coty called fiscal 2027 a “transitional year” and is pursuing a turnaround framework called Coty.Curated. Executive Chairman and Interim CEO Markus Strobel said the company had concentrated investment on six core prestige brands, which together represented 73% of prestige sales in the first quarter. Coty said those brands shifted from a 6% like-for-like decline in the first half of fiscal 2026 to 5% growth in Q1 FY2027; five of the six grew, and their combined sell-out returned to growth.
The company also cited launches including Boss Bottled Beyond for Her, Burberry Goddess Amber Vanilla, Mood Stones by Kylie Jenner and Marc Jacobs Beauty make-up as tracking ahead of plan. Coty recently extended its Marc Jacobs Beauty licence for 40 years with the brand’s co-owners, WHP Global and G-III Apparel Group. That follows L’Oréal’s agreement to take over the Gucci Beauty licence from Coty earlier than expected, a change that will affect Coty’s brand portfolio.
“Our first quarter results were ahead of expectations on sales, adjusted EBITDA and EPS, alongside a significant improvement in free cash flow.”
— Markus Strobel, Coty executive chairman and interim CEO
Coty linked part of its higher costs and weaker EMEA sales to the Middle East conflict, but it did not specify the conflict’s individual contribution to the revenue decline or the 120-basis-point gross-margin fall. The figures provided do not establish how much of the regional sales impact came from disruption, consumer demand, or other market factors.
The company described its first-quarter performance as ahead of expectations, but the source material does not provide the underlying forecast figures or a full breakdown of the factors behind that result. It also remains uncertain whether the reported improvement among core prestige brands will extend across the wider portfolio, or how quickly the company can achieve a broad-based recovery.
Q2 Forecast and Brand Investment
Coty expects second-quarter FY2027 like-for-like revenue to decline by a low-single-digit percentage, broadly in line with the previous two quarters. The company plans to build on the launch of Boss Bottled Beyond for Her to grow Hugo Boss’s women’s fragrance business, while directing investment toward core brand franchises.
Coty also plans higher marketing investment to support Burberry fragrance and make-up and deepen consumer engagement. The next reported results should show whether those initiatives, cost controls and market conditions have changed the sales trend; the company has not specified in the supplied report a date for its next earnings release.
Key Questions
How much did Coty’s revenue fall?
Coty’s reported net revenue fell 1% to $1.55 billion in the three months ended Sept. 30, 2026, the first quarter of fiscal 2027.
How did the Middle East conflict affect Coty?
Coty said the conflict contributed to higher freight and material costs and affected sales in the Middle East. The company did not quantify the conflict’s separate contribution to its total revenue or margin changes.
What happened to Coty’s gross margin?
Reported and adjusted gross margin decreased 120 basis points year over year to 63.3%. Coty cited war-related freight and material costs and higher excess and obsolescence costs tied to elevated demand forecasts.
What does Coty expect in the second quarter?
Coty expects like-for-like revenue in Q2 FY2027 to decline by a low-single-digit percentage, broadly consistent with the preceding two quarters.
Is Coty already seeing growth from its core prestige brands?
Coty said its six core prestige brands recorded 5% like-for-like growth in Q1 FY2027 after a 6% decline in the first half of FY2026. Five of the six grew, according to the company; that result does not establish a recovery across Coty’s entire business.
Source: cosmeticsbusiness.com
