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Coty reported first-quarter fiscal 2027 net revenue of $1.55 billion, down 1% year over year, while its gross margin fell 120 basis points to 63.3%. The company attributed part of the margin pressure to higher freight and material costs related to the Middle East conflict, and forecast a low-single-digit like-for-like revenue decline for the second quarter.
Coty’s net revenue fell 1% to $1.55 billion in the three months ended September 30, 2026, as the beauty company reported a difficult start to fiscal 2027 and said the Middle East conflict added pressure to gross margin. Gross margin declined 120 basis points year over year to 63.3%, with Coty citing higher freight and material costs related to the war, as well as higher excess and obsolescence costs.
The company said prestige net revenue was $1 billion, down 1% on both a reported and like-for-like basis. Prestige accounted for 68% of Coty’s total sales. In the broader EMEA region, revenue decreased by $44.8 million year over year, mainly because of lower sales in the Middle East and Europe, partly offset by growth in Africa.
Within prestige, revenue fell $11.1 million year over year, as moderate declines in fragrance and skin care outweighed growth in prestige cosmetics. Operating income increased, mainly because Coty spent less on advertising and consumer promotions; the company said that benefit was largely offset by lower gross margin. In consumer beauty, revenue was down $10.9 million compared with the previous quarter, with declines in colour cosmetics and mass fragrance partly offset by mass body care growth.
Executive Chairman and Interim CEO Markus Strobel said first-quarter sales, adjusted EBITDA and earnings per share were ahead of Coty’s expectations, with free cash flow also improving. Coty said adjusted EBITDA was ahead of its guidance and its year-over-year decline moderated to 7%, from steeper declines in fiscal 2026. These are company-reported results and comparisons; the source material does not provide the dollar value of adjusted EBITDA or free cash flow.
War Costs Meet Coty’s Recovery Plan
The results show how regional conflict can affect both sales and manufacturing economics for a global beauty company. Coty linked lower revenue in the Middle East and Europe to the EMEA decline, while identifying conflict-related freight and material costs as contributors to a lower gross margin. The company also cited higher excess and obsolescence costs tied to elevated demand forecasts, another pressure on profitability.
The quarter matters to investors and the wider beauty industry because Coty is trying to revive growth after weaker performance in fiscal 2026. Its results offer early measures of that effort: the company reported improved like-for-like sales trends and a slower adjusted EBITDA decline, but revenue and margin remained under pressure. Coty cautioned that sustainable improvement will take time, so the quarter does not establish that a broad recovery is in place.
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Coty’s Brands and FY27 Priorities
Coty described fiscal 2027 as a “transitional year” and is using its Coty.Curated framework to concentrate investment behind key brands. Strobel said the six largest prestige brands represented 73% of prestige sales in the quarter. Together, those brands moved from a 6% like-for-like decline in the first half of fiscal 2026 to 5% like-for-like growth in Q1 FY27; five of the six grew, according to Coty.
The company also said launches including Boss Bottled Beyond for Her, Burberry Goddess Amber Vanilla, Mood Stones by Kylie Jenner and Marc Jacobs Beauty makeup were tracking ahead of plan. Coty has extended its Marc Jacobs Beauty license for 40 years with brand co-owners WHP Global and G-III Apparel Group. That agreement follows the planned end of Coty’s Gucci Beauty license after Gucci owner Kering reached a deal with L’Oréal; Coty had expected the license to end in 2028.
For the rest of FY27, Coty said it plans to support Hugo Boss’s female fragrance business and invest in Burberry fragrance and makeup. The company’s next-quarter outlook remains cautious despite its reported improvements in several brands and financial measures.
“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
How Long Will Cost Pressure Last?
Coty identified higher freight and material costs related to the Middle East war but did not quantify how much those expenses reduced revenue or gross margin. The report also does not specify how much of the EMEA sales decline was directly attributable to the conflict, as it includes lower sales in both the Middle East and Europe and an offset from Africa.
The results cover one quarter and do not establish whether the improvement in Coty’s major prestige brands will continue. The source material provides no detailed regional breakdown of the conflict’s effects, no full-year revenue forecast and no timing for a broad-based recovery. Coty’s view that the first-quarter results were ahead of expectations is the company’s assessment, not an independently stated benchmark.
Coty’s Second-Quarter Sales Outlook
Coty expects second-quarter FY27 like-for-like revenue to decline by a low-single-digit percentage, broadly in line with the prior two quarters. Its next results will show whether sales trends and the slower adjusted EBITDA decline reported in Q1 continue, and whether pressure from conflict-related costs eases or persists.
For the remainder of the fiscal year, the company says it will focus investment on core brand franchises, support Hugo Boss’s female fragrance launches and increase marketing behind Burberry. The source material does not give a date for Coty’s next earnings release or a specific timeline for improvement in the Middle East-related pressures.
Key Questions
How much did Coty’s revenue fall?
Coty reported $1.55 billion in net revenue for the three months ended September 30, 2026, down 1% year over year on a reported basis.
How did the Middle East conflict affect Coty?
Coty said the conflict contributed to higher freight and material costs and lower sales in the Middle East. It did not quantify the conflict’s separate effect on revenue or margin.
What happened to Coty’s gross margin?
Gross margin fell 120 basis points year over year to 63.3%. Coty cited conflict-related costs and higher excess and obsolescence costs associated with elevated demand forecasts.
What does Coty expect in the second quarter?
Coty expects second-quarter fiscal 2027 like-for-like revenue to decline by a low-single-digit percentage, broadly consistent with the last two quarters.
Is Coty’s turnaround showing results?
Coty reported that its six largest prestige brands shifted to 5% like-for-like growth in Q1 FY27, after a 6% decline in the first half of fiscal 2026. The company called the progress encouraging but said more work is needed for a broad-based recovery.
Source: cosmeticsbusiness.com
