Yann Pencolé
Vice President, Beauty and Wellbeing Advisory
Corporate strategy talk has dominated one of the biggest legacy players: Coty. The company has been reported to be exploring a two-part selloff or split, separating its prestige/luxury fragrance and beauty licenses from its mass-market consumer business. This is a response to the underperformance in its consumer arm, valuation pressure, as well as the complexity and value of its licensed luxury portfolio.
Coty is currently in a complex “transition” phase, focused on a strategic overhaul to stabilize its business and return to consistent growth, following a challenging full fiscal year 2025. The situation is mixed, defined by a strong focus on Prestige Fragrances as the primary profit driver, while the Consumer Beauty segment faces significant headwinds.
A Look Back at Coty’s Boldest Moves
As noted in Kline’s previous coverage, Coty made one of its boldest moves in 2015, acquiring more than 40 beauty brands from Procter & Gamble. This transaction positioned Coty among the world’s largest beauty players, expanding its reach across both prestige and mass channels.
However, integrating such a vast and diverse portfolio proved challenging. In 2020, Coty sold a majority stake in its Professional Beauty and Retail Hair divisions—including Wella, Clairol, OPI, and ghd—to KKR. Today’s potential split or selloff reflects a continuation of Coty’s restructuring journey as the company seeks to balance profitability, focus, and long-term brand equity.
Coty’s Key Financial and Operational Challenges Today
- Overall Sales Decline: Coty’s full-year fiscal 2025 net revenue declined, primarily due to weakness in the U.S. market, retailer inventory reductions (destocking), and ongoing softness in the mass cosmetics category.
- Earnings Misses: Coty reported an unexpected adjusted loss per share in Q4 FY25, significantly missing analyst expectations, which led to a sharp stock decline.
- Cautious Outlook: Coty projects continued sales declines in the first half of FY26, with a return to growth expected only in the second half of FY26.
- Asset Impairment: A significant non-cash asset impairment charge was taken in the Consumer Beauty color cosmetics business, reflecting the challenges in that category.
The Problem Child: Coty’s Consumer Beauty
Coty’s Consumer Beauty division, including mass cosmetics brands such as CoverGirl, Rimmel, and Max Factor, continues to be a source of drag on the overall performance, driven by intense competition and market softness.
In September 2025, Coty announced a comprehensive strategic review of this business, which includes brands with $1.2 billion in revenue. This review will assess a full range of alternatives, including partnerships, divestitures, and spin-offs, with the goal of maximizing long-term value.
Coty’s Strategic Focus: Doubling Down on Fragrances
Fragrances are Coty’s strongest asset, generating nearly 70% of total sales, according to the company. Building on this heritage, Coty is leveraging its strength in scenting across all price points, moving to integrate its Prestige and Mass Fragrance portfolios more deeply.
This integration aims to solidify Coty’s position as a “scenting powerhouse” by leveraging greater scale, synergies in R&D and distribution, and accelerating innovation in its core, high-growth categories. Growth is being driven by blockbuster launches and expansion into adjacent categories, such as fragrance mists in both the prestige and mass-markets, a move aligned with the growing “treatonomics” trend that blurs the line between everyday indulgence and accessible luxury.
Coty isn’t alone in betting on fragrances. L’Oréal’s recent acquisition of Kering Beauté signals continued confidence in the category, one of the few areas showing consistent strength despite broader beauty market headwinds.
Coty’s Wella Stake and Other Key Initiatives
Coty remains committed to deleveraging, with a focus on strengthening its balance sheet and reducing its debt load. As of its latest reported financials for Fiscal Year 2025 (ended June 30, 2025), the company’s total debt stood at approximately $4.01 billion at the close of Q4 FY2025.
Coty still retains a 25.8% stake in Wella, and the potential sale of this holding is viewed as a major opportunity to unlock value, further reduce debt, and potentially fund share repurchases.
At the same time, the company is investing in future growth drivers, including the highly anticipated Marc Jacobs Beauty line, slated for calendar year 2026, which is expected to bolster Coty’s prestige portfolio and reinforce its focus on high-margin categories.
The Implication of Coty’s Next Move on Beauty Leadership
If Coty ultimately parts ways with its Consumer Beauty division, it could mark a return to the focused, prestige-driven model that first defined its success before acquiring Procter & Gamble’s beauty brands in 2015. Such a move would not only simplify operations but also re-position Coty as a sharper rival to L’Oréal Luxe, Estée Lauder, and Puig, all vying for dominance in the fragrance-led luxury segment.
Meanwhile, a divestiture could open opportunities for mass-market specialists to gain ground in accessible beauty, reshaping the competitive balance across both ends of the market. Coty’s next move may well redefine what beauty leadership looks like in a rapidly evolving global landscape.
Kline’s Beauty Business Strategy Support
As beauty companies reassess portfolios and sharpen their strategic focus, M&A activity continues to shape the competitive landscape. Learn how Kline’s Business Strategy advisory supports beauty brands and investors through market evaluations, acquisition screening, and strategic positioning. Connect with an industry advisor to explore our work and discover how we can support your transformation.
