Coty, Inc. shares took a plunge in November of 2016 following the company’s poor performance in the fiscal first quarter in which they reported a zero profit for the fiscal first quarter of 2017. Sales and income also took a hit even after Coty, Inc. announced it would be acquiring 44 beauty brands from Procter & Gamble. Now management seems to be blaming the poor performance on the distraction of getting the acquisition finished.
Chairman of the Board Bart Becht stated, “As expected, the extensive work over the last 15 months on closing the transaction and merging the two businesses has come at a cost … the resources which normally work on the business, have also been working on closing the transaction and setting up and preparing for the future of the combined company.” He goes on to add, “The resulting distraction as well as the recent change in management teams in our headquarters, regions and countries have contributed to a decline in Coty standalone revenues and profits” of the first quarter.
The management of Coty, Inc. also noted that the second quarter is likely to look the same in terms of low profitability. However, they are maintaining an optimistic long-term outlook. According to The Wall Street Journal, analysts seem to think the decline in sales reflects a more basic change in the business atmosphere than Coty management admits. Citigroup analyst Wendy Nicholson said in a call to discuss the staggering results, “Help us have confidence that this really negative trend isn’t going to persist throughout the year.”
Becht insists that the long-term earnings forecast remains intact and that the company can now focus on its operations with the integration of the new businesses mostly complete but the acquiring of businesses may be their demise. The New York based company has been aggressively hunting deals to improve and grow its business. The P&G acquisition came with top brands such as CoverGirl, Gucci and Clairol hair dye. In addition, the company agreed to buy hairstyle appliance maker Ghd while last year they purchased Bourjois cosmetics from Channel as well as several Brazilian skin care brands.