We're Adding to and Rounding Out Our Coty Position
Competitor LVMH sees no slowdown in the US beauty business.
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* Quarterly results from luxury goods firm LVMH reinforces our positive view on Coty.
* LVMH sees no slowdown in the U.S. beauty business, prestige doing well.
* Our COTY price target remains $14.
| Symbol | Transaction Type | #Shares Traded | Recent Price ($) | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
COTY | Buy | 775 | 10.70 | 14480 | 3.75 |
After you receive this Alert, we will buy 775 shares of Coty COTY at or near $10.70. Following the trade, COTY shares will account for roughly 3.75% of the portfolio.
Luxury goods company LVMH LVMUY reported its Q1 2024 results with its sales falling 2% year over year. On a currency neutral basis, revenue for the period rose 3%. We look through LVMH’s results not just because they are a barometer on luxury goods spending, but also for what they say about the fragrance and cosmetics sector, Coty’s end market.
Once again, LVMH’s Perfumes & Cosmetics business was one of the standouts, with revenue for the March quarter up 3% (+7% on a currency neutral basis). Save for LVMH’s Selective Retailing segment, which is predominantly Sephora, which posted a 5% revenue gain during the quarter, all of LVMH’s other segments – Wines & Spirits, Fashion & Leather Goods, Watches & Jewelry – saw revenue declines year over year.
We see that strength in Sephora explaining the competitive environment cited by Ulta ULTA when it reported its quarterly results. But we also see Sephora’s gains confirming the favorable demand environment for Coty’s products. To that end, on its earnings call, LVMH shared it does not see any slowdown in the US beauty market and remarked its prestige business is doing well.
Paired with Coty’s balance sheet deleveraging, this strength as well as Coty’s market share gains, bode well for favorable EPS growth in the coming quarters. With the shares back near our cost basis, we will do some modest buying to round out our position size. Our price target remains $14, and our panic point is set at $9.50.
(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the chart to sort by Purchase Date.)
At the time of publication, TheStreet Pro Portfolio was long COTY.
