Coty Inc. (NYSE: Coty) today announced that in response to the rapidly evolving global situation brought on by COVID-19, Coty has implemented a number of key initiatives focusing on the safety of its key stakeholders while also providing for business continuity and opportunity. The Company is also taking appropriate financial measures, including recommending to the Board that shareholders be given the option to receive up to 100% of their quarterly dividend in kind for the coming two quarters. Additionally, Coty’s largest shareholder, JAB, has notified the Company that it has decided to fully repay the loan it used to finance the tender offer in 2019.
The Company's first and foremost priority is the safety of its employees, customers, consumers and partners Coty is taking appropriate measures in all countries in which it operates, in compliance with local public recommendations. A global response team has been set up and is operational. And alongside other industry players, Coty is taking initiatives to begin manufacturing and supplying hand sanitizer to medical and emergency services where needed.
Coty has been adjusting its business focus as part of its response to COVID-19. First, the open channels and markets are being prioritized, with the acceleration of a number of initiatives, in particular e-commerce. These include activations on Amazon, with sales in the U.S. nearly doubling in recent weeks, as well as launching Kylie skin-care Europe in the coming weeks. The teams are also getting prepared for an increase in demand post-COVID 19 disruptions, starting in Asia. Second, management has increased further its focus on cost control and cash-flow, and is taking a number of additional measures, temporary or structural, to adjust its expenses and protect its cash flow. In light of the impact of COVID-19 on its business, Coty now expects its net revenues for the third quarter of FY20 to decline roughly 20% like-for-like, with a meaningful impact on profit. As the situation evolves, Coty intends to continue actively adjusting its priorities, and has decided to withdraw its guidance for FY20, so as to have the necessary flexibility.
The Company has reviewed its financial position in view of the current market conditions, which are expected to amplify moving into Q4. Coty confirms that following the amendment of its financing arrangements in 2019, it has ample and sufficient liquidity and headroom to meet its covenants based on management’s current view of market conditions. The Company is continuing to pursue with confidence the strategic review of its Professional hair and Brazilian businesses.
Pierre-André Terisse, Chief Operating Officer and Chief Financial Officer of Coty, stated: “The work performed by Coty over the past 18 months has been incredibly helpful given the current exceptional circumstances, not only because our brands have been improved, but also because we have considerably strengthened our cost and financial structures. To further strengthen it, we will propose to the Board of Directors, to increase from 50% to 100% the option for shareholders to receive their $0.125 quarterly dividend in kind for the coming two quarters. Having faced several financial crises in my career, I know they always contain opportunities as well, and we will look to seize them and accelerate our transformation for the benefit of our stakeholders.”
Peter Harf, Founding Partner of JAB and Chairman of Coty, declared: “We are very confident in Coty’s ability not only to navigate well through this crisis, but also to exit stronger, as the management continues to reduce its costs aggressively and to accelerate top line initiatives. We support management’s proposal to adjust the dividend in Q3 and Q4, and JAB will elect for full payment in shares. Having decided to repay in full the loan we used to finance the tender offer in 2019, we are more than ever standing by Coty and its transformation agenda.”
Cottage Holdco B.V., an affiliate of JAB, holds 461,299,223 or 60.7% of the outstanding shares of Coty.
Coty plans to participate in an RBC hosted investor call at 10:00am EST today. To access the call, please contact your RBC account representative.
About Coty Inc.
Coty is one of the world’s largest beauty companies with an iconic portfolio of brands across fragrance, color cosmetics, hair color and styling, and skin and body care. Coty is the global leader in fragrance, a strong number two in professional hair color & styling, and number three in color cosmetics. Coty’s products are sold in over 150 countries around the world. Coty and its brands are committed to a range of social causes as well as seeking to minimize its impact on the environment.
For additional information about Coty Inc., please visit www.coty.com.
Forward-Looking Statements
Certain statements in this communication are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company's current views with respect to, among other things, the impact of COVID-19, the Company’s strategic planning, targets, segment reporting and outlook for future reporting periods (including the extent and timing of revenue, expense and profit trends and changes in operating cash flows and cash flows from operating activities and investing activities), the Company’s capital allocation strategy and payment of dividends, changes to its Dividend Reinvestment Program for the election of stock dividends, its future ability to return cash to shareholders, the strategic review of its Professional Beauty business, associated hair and nail brands sold by the Consumer Beauty division and Brazilian operations and any transaction related thereto, including divestiture (the “Strategic Review”), including timing of such Strategic Review and any transaction and the use of proceeds from any such transaction, the Company’s turnaround plan announced on July 1, 2019 (the "Turnaround Plan"), its future operations and strategy, ongoing and future cost efficiency and restructuring initiatives and programs, strategic transactions (including their expected timing and impact), investments, licenses and portfolio changes, synergies, savings, performance, cost, timing and integration of acquisitions (including the strategic partnership with Kylie Jenner), future cash flows, liquidity and borrowing capacity, timing and size of cash outflows and debt deleveraging, the performance of launches or relaunches, the timing and impact of current or future destocking or shelf spaces losses, impact and timing of supply chain disruptions and the resolution thereof, timing and extent of any future impairments, and synergies, savings, impact, cost, timing and implementation of the Company’s Turnaround Plan, including operational and organizational structure changes, segment reporting changes, operational execution and simplification initiatives, the move of the Company’s headquarters, the priorities of senior management, and the Company’s ability to support its planned business operations in the near-term and long-term basis. These forward-looking statements are generally identified by words or phrases, such as “anticipate”, “are going to”, “estimate”, “plan”, “project”, “expect”, “believe”, “intend”, “foresee”, “forecast”, “will”, “may”, “should”, “outlook”, “continue”, “temporary”, “target”, “aim”, “potential” and similar words or phrases. These statements are based on certain assumptions and estimates that we consider reasonable, but are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual events or results (including our financial condition, results of operations, cash flows and prospects) to differ materially from such statements, including risks and uncertainties relating to:
When used herein, the term “includes” and “including” means, unless the context otherwise indicates, “including without limitation”. More information about potential risks and uncertainties that could affect the Company’s business and financial results is included under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019 and other periodic reports the Company has filed and may file with the SEC from time to time.
All forward-looking statements made in this communication are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this release, and the Company does not undertake any obligation, other than as may be required by applicable law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.
Non-GAAP Financial Measures
In this communication, the Company uses period-over-period comparisons of net revenues on an organic like-for-like basis, which is a non-GAAP financial measure. The Company believes that organic like-for-like better enables management and investors to analyze and compare the Company's net revenues performance from period to period. The term “like-for-like” describes the Company's core operating performance, excluding the financial impact of (i) acquired brands or businesses in the current year period until we have twelve months of comparable financial results, (ii) the divested brands or businesses or early terminated brands, generally, in the prior year non-comparable periods, to maintain comparable financial results with the current fiscal year period and (iii) foreign currency exchange translations to the extent applicable.
To the extent that the Company provides guidance, it does so only on a non-GAAP basis and does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for restructuring, integration and acquisition-related expenses, amortization expenses, adjustments to inventory, and other charges reflected in our reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.
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