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Shares in Coty were racing higher on Wednesday after the US cosmetics group bounced back from a disappointing end to 2016 with higher-than-expected revenue growth during the first three months of the year.
The stock, down by a third over the past 12 months, climbed more than 7 per cent in pre-market trading as investors took heart from the improved sales performance.
For the fiscal third quarter ending in March, revenue came in at $2.03bn – up 5 per cent compared to year ago period and ahead of the $1.94bn the market had forecast thanks to strong demand for high end perfumes such as Hugo Boss and Calvin Klein.
Shares in Coty have come under pressure in recent months as the integration of the beauty business it acquired from Procter & Gamble last year for $12.5bn proved more complicated than expected.
While the acquisition has propelled Coty into the world’s third-largest cosmetics seller, the deal came at a time of fierce competition in the mass beauty and personal care industry. Investors have been concerned about whether Coty would have the resources needed to revitalise the 41 brands it took on from P&G as well as invest in its own brands such as Rimmel.
“Q3 was a better quarter,” said chief executive Camillo Pane. “This improvement was driven by good growth performance in the Luxury division, flat performance in Professional Beauty, and some improvement but continued negative performance in the Consumer Beauty division.”
Warning that 2017 is a transitional year, Mr Pane said “the path to recovery will take some time and will not be a straight line.”
Indeed, despite the better than expected top line performance, losses widened at Coty during the first three months of the year as the company continues to book restructuring charges related to the integration of the more than 40 brands it bought from P&G.
Net loss attributable to Coty increased to $164.2m, or 22 cents per diluted share, during the quarter, compared to$26.8 million, or 8 cents per share, a year earlier.
The bulk of the losses stemmed from the $213.5m of restructuring and acquisition charges it booked during the quarter.
Excluding this, Coty earned 15 cents per share, ahead of the 12 cents the market was expecting.