© Reuters. FILE PHOTO: Covergirl makeup, owned by Coty Inc., is seen for sale in Manhattan, New York City, U.S., February 7, 2022. REUTERS/Andrew Kelly
By Praveen Paramasivam and Ananya Mariam Rajesh
(Reuters) -Cosmetics maker Coty (NYSE:) Inc raised its full-year profit outlook on resilient demand for its high-end fragrances and skincare products even at a time inflation in most countries has soared to multi-year highs.
The company’s shares rose 4% to $7.48 in premarket trading on Monday.
Demand for luxury goods has held up as higher prices of everyday essentials have not affected the spending power of the affluent, updates from cosmetics group L’Oreal and Birkin bag maker Hermes have shown in recent days.
Revenue at Coty’s prestige division, that houses cosmetics and fragrances from the Hugo Boss, Gucci and Burberry brands, rose 21% to $726.4 million for the third quarter ended March 31.
“(Coty’s) prestige brands are seeing phenomenal growth, which means that consumer confidence to buy our brands is intact,” Chief Executive Officer Sue Nabi said.
Coty, which has also raised prices to combat higher costs, saw its gross margin rise to 64.3%.
On an adjusted basis, the company earned 3 cents per share in the reported quarter, beating estimates of a profit of 1 cent per share, according to Refinitiv IBES data.
The CoverGirl cosmetics maker increased its adjusted earnings per share forecast for fiscal 2022 to between 23 cents and 27 cents, from its previous outlook of 22 cents to 26 cents.
However, rival Estee Lauder (NYSE:) lowered its earnings forecast partly due to lost sales from pandemic-related lockdowns in China, which account for 36% of its overall business.
Coty brought in only 4% of its sales from China last year, although the company is investing heavily in growing its brands there.
The implied forecast for fourth quarter is of a per-share loss between 1 cent and 5 cents, according to Reuters calculations, as Coty deals with the impact of higher raw material costs, the Ukraine conflict and COVID-19 curbs in China.