Coty Faces Slower Beauty Demand: What It Means for FY26 Sales

Coty Inc. COTY is navigating a beauty market where demand is still expanding, but the pace has cooled, and promotional intensity has increased, creating a tougher setup for near-term fiscal 2026 sales trends.

In the second quarter of fiscal 2026, the prestige beauty market grew approximately 5%, reflecting a sequential slowdown from roughly 6% growth in the first quarter. The cooling was more visible in prestige fragrances, where the category moderated from 5% growth in the first quarter to 3% in the second quarter, with modest growth in both units and price mix. Coty also pointed to incremental slowing in the United States and in certain European markets such as Germany and the U.K. 

Against that backdrop, Coty characterized total sell-out as broadly flattish in the second quarter. It described weaker-than-category sell-out in the United States, Germany and the U.K., largely balanced by strong sell-out in emerging regions, including Asia Pacific, the Middle East, Latin America and Travel Retail. It also tied the gap between relatively stronger sell-out and weaker sell-in to elevated proportionality that pressured gross-to-net. 

The U.S. holiday period underscored the shift in demand. Coty noted that the U.S. prestige fragrance market slowed from 7% growth in the first quarter to approximately 3% growth in the second quarter, with much of consumer purchasing concentrated at the very end of the quarter. It also highlighted very aggressive promotional activity in prestige fragrances during the holiday season, which it said suppressed broader U.S. fragrance growth and pressured profit contribution from that key market. 

For the third quarter, Coty expects like-for-like revenues to decline by a mid-single-digit percentage, primarily due to weakening Consumer Beauty sales trends. It also expects that the fragrance market will grow at a low-to-mid-single-digit rate, consistent with second-quarter levels, while noting promotions remain elevated and are a headwind to net sales performance and gross margin. 

Coty enters fiscal 2026 facing a slower and more promotional beauty market, which is likely to keep near-term sales under pressure. However, the company is focusing on sharper execution, core brands and key markets to support a more stable recovery over time. Over the past three months, the Zacks Rank #4 (Sell) stock has tumbled 28.1% compared with the industry’s decline of 4.7%.

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