Breaking Down Coty Inc. (COTY) Financial Health: Key Insights for Investors

You're looking at Coty Inc. and trying to reconcile two very different companies: the high-growth Prestige fragrance powerhouse and the struggling Consumer Beauty segment. The full fiscal year 2025 results, which closed on June 30, 2025, show this tension clearly, so we need to move past the headlines. The company's total net revenue fell to $5,892.9 million, a 4% year-over-year decline, and they reported a GAAP net loss of $381.1 million, which isn't what you want to see. Still, the underlying strategic wins are real: e-commerce revenue hit $1 billion for the year, and they delivered $140 million in productivity savings, showing management can execute on costs. The real question is the balance sheet; with total debt at approximately $4.01 billion, their financial leverage (which is just net debt divided by core profitability) stood at 3.5x at year-end, which is a defintely high number for a company in a transition phase. We're going to break down exactly what that debt load means for their ability to invest in the future and how the pivot toward fragrances will impact your investment thesis.

Revenue Analysis

You're looking at Coty Inc. (COTY) because you need to know if the underlying business is still growing, and the short answer is that 2025 was a year of consolidation, not expansion. Total net revenue for fiscal year 2025 (FY25) came in at $5,892.9 million, a reported decrease of 4% year-over-year. This slowdown was defintely a result of a complex market, but the core Prestige segment is still the engine, while Consumer Beauty faces clear challenges.

The revenue story for Coty Inc. is a tale of two segments, with Prestige carrying the weight. Prestige net revenue-which includes high-end fragrances and cosmetics like Gucci and Burberry-contributed $3,820.2 million, or 65% of the company's total sales in FY25. The Prestige segment was nearly flat, declining only 1% on a reported basis, but actually achieved slightly positive like-for-like (LFL) growth, which strips out the impact of currency changes and acquisitions/divestitures. That's a solid performance considering the headwinds.

Here's the quick math on the segment contributions for FY25:

The Consumer Beauty segment, which houses mass-market brands, saw its net revenue drop to $2,072.7 million, a significant decline of 8% on a reported basis (and 5% LFL). This segment's weakness, particularly in mass color cosmetics and body care, is the primary reason for the overall revenue dip. Coty's CEO noted that fragrances, which account for over 60% of total revenues, continue to outperform most other beauty categories, with Prestige fragrances growing at a 10% net revenue Compound Annual Growth Rate (CAGR) from FY21 through FY25.

What this estimate hides is the strategic shift now underway. Management is actively addressing the Consumer Beauty drag, initiating a comprehensive strategic review of its mass color cosmetics business, which generated approximately $1.2 billion in sales in FY25, and its Brazil business, which contributed close to $400 million. This review signals a willingness to cut or restructure underperforming assets to focus resources on the high-margin, high-growth Prestige fragrance category. This is a clear action to improve future profitability, even if it means a near-term revenue haircut. For a deeper dive into the company's valuation models, you should read the full post: Breaking Down Coty Inc. (COTY) Financial Health: Key Insights for Investors.

• Prestige fragrance sales grew 10% CAGR FY21-FY25.
• Mass cosmetics market softness is the main headwind.
• Strategic review targets $1.2 billion in mass cosmetics sales.

Profitability Metrics

You want to know if Coty Inc. (COTY) is actually making money, or if the impressive fragrance sales are just masking deeper cost issues. The short answer is that Coty's operational profitability is strong and improving, but the bottom-line reported net loss for fiscal year 2025 (FY25) is a clear red flag that you need to understand.

For the fiscal year ended June 30, 2025, Coty reported net revenue of $5,892.9 million, a 4% decrease from the prior year. The key to their health is in the margins, which show a clear split between core business efficiency and one-time financial hits.

• Gross Profit Margin: Coty's reported gross margin expanded to 64.8% in FY25. This is a strong signal of operational efficiency, driven by supply chain savings, pricing actions, and a shift toward higher-margin Prestige products.
• Adjusted Operating Margin: The adjusted operating margin was a healthy 14.5%, with an adjusted operating income of $852.9 million. This tells you the core business-selling fragrances and cosmetics-is generating solid profit before interest and taxes.
• Reported Net Loss Margin: The reported net loss was $381.1 million, resulting in a reported net loss margin of 6.5%. This loss was primarily due to a significant negative impact from an equity swap and asset impairment charges, not core operations.

Here's the quick math on how Coty's core profitability stacks up against a major peer and the broader industry:

The trend in profitability is a story of two halves. On one hand, the reported gross margin improved by 40 basis points (0.4%) year-over-year, which is a defintely positive sign of cost management and premiumization. They delivered $140 million in productivity savings for the year, which is a tangible action that shows operational focus. On the other hand, the reported operating income declined 56% to $241.1 million and the net loss widened, which is a consequence of non-cash charges, especially the asset impairment in their Consumer Beauty division. The core Prestige segment, which includes luxury fragrances, is the primary source of profit and is what's keeping their adjusted margins strong. Breaking Down Coty Inc. (COTY) Financial Health: Key Insights for Investors is a good place to dig deeper into the segment performance.

What this estimate hides is the quality of earnings. The adjusted EBITDA margin of 18.4% is a good measure of their core operating cash flow, and it's a number that reflects their focus on high-margin categories like fragrances. The challenge for Coty is to continue translating that strong gross and adjusted operating performance into a positive GAAP net income by avoiding large, non-recurring charges and stabilizing the underperforming Consumer Beauty segment.

Debt vs. Equity Structure

When you look at Coty Inc.'s (COTY) balance sheet, you are essentially looking at how the company chooses to fund its operations-the classic debt versus equity balancing act. For a large, established consumer goods company, this capital structure tells a clear story about financial risk and management's priorities. The quick takeaway is that Coty Inc. is still a highly leveraged company, but it is making tangible progress to push its debt maturities further out, which is a smart move in this interest rate environment.

As of the end of the fiscal year 2025 (June 30, 2025), Coty Inc. reported total debt of approximately $4,008.4 million. What's important here is the breakdown: its short-term debt and the current portion of long-term debt were minimal, at just $3.5 million. This shows that the bulk of its obligations are long-term, which buys the company time to execute its turnaround strategy. Total stockholders' equity stood at $3,542.7 million for the same period.

Here's the quick math on leverage: the Debt-to-Equity (D/E) ratio is the best measure of a company's financial leverage, showing how much debt it uses to finance assets relative to shareholder equity. For Coty Inc., the D/E ratio was 1.14 as of September 2025.

• Coty Inc. D/E Ratio (Sep. 2025): 1.14
• Industry Median D/E Ratio (2024): 1.06

To be fair, a 1.14 ratio is only slightly above the industry median of 1.06 for the Perfumes, Cosmetics, and Other Toilet Preparations sector, but the story is more complex. Coty Inc.'s management is targeting a much lower net leverage ratio-the ratio of net debt to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)-in the range of 2x to 3x over the mid- to long-term. The S&P Global Ratings-adjusted leverage, which is a more conservative measure, was still high at 4.4x as of June 30, 2025. This gap shows the company is still heavily reliant on debt financing, a legacy of its past acquisitions and restructuring, and it has a defintely long way to go to hit its target.

The company is actively managing this debt load. In October 2025, Coty Inc. executed a key refinancing move, issuing $900 million in new Senior Notes due in 2031 with an interest rate of 5.600%. The proceeds were explicitly used to redeem its higher-cost 2026 debt, including all of its 5.000% USD notes. This action extends the debt maturity runway, reducing near-term refinancing pressure and giving the company crucial breathing room for its strategic overhaul.

In terms of credit quality, S&P Global Ratings affirmed Coty Inc.'s Issuer Credit Rating at 'BB+' (which is a non-investment grade rating) with a Negative outlook in October 2025. However, they rated the new 2031 senior notes at 'BBB-', reflecting a slightly better issue-level rating and an expectation of substantial recovery in the event of default. This split rating reflects the market's view: the company's overall financial health is still speculative, but the new debt instruments are structured to be safer. Coty Inc. continues to balance debt financing with equity funding, with the potential sale of its remaining 25.8% stake in Wella still on the table as a major opportunity to permanently reduce debt. For a deeper dive into who is betting on this strategy, you might want to read Exploring Coty Inc. (COTY) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You want to know if Coty Inc. (COTY) can meet its near-term obligations, and honestly, the numbers suggest a tight squeeze. The company's liquidity ratios for fiscal year 2025 are below the typical 1.0 benchmark, which means their short-term assets don't fully cover their short-term debts. This isn't a crisis yet, but it's defintely a risk we need to map out.

Current and Quick Ratios Signal Tightness

The first place any analyst looks is the Current Ratio (current assets divided by current liabilities). Coty Inc.'s Current Ratio for the period ending November 2025 (TTM) stands at 0.77. This tells you that for every dollar of current debt, the company only has about 77 cents in assets that should convert to cash within a year. A ratio below 1.0 is a red flag for short-term financial flexibility.

The Quick Ratio (or acid-test ratio), which strips out inventory-often the least liquid current asset-is even lower at 0.46. This means Coty Inc. is heavily reliant on selling its inventory to pay its immediate bills. That's a classic sign of limited operational cash cushion.

• Current Ratio (FY2025 TTM): 0.77
• Quick Ratio (FY2025 TTM): 0.46
• A ratio of 1.0 is the minimum ideal for most businesses.

Working Capital and Payment Trends

Working capital trends confirm this strain. Coty Inc.'s net working capital decreased in fiscal year 2025. This decrease was driven by a $30.4 million increase in Inventory and a $115.4 million increase in Other Current Liabilities. Here's the quick math: higher inventory and higher short-term payables mean more cash is tied up and more bills are due sooner. That's a double whammy for liquidity.

Also, payment patterns show underlying cash flow pressure. Coty Inc.'s Days Beyond Terms (DBT)-how late they pay their bills-was consistently higher than the industry average in 2025. For example, in April 2025, their DBT was 23 days, while the industry average was only 10 to 14 days. When a company consistently pays its suppliers late, it suggests cash flow strain is real, not just a balance sheet artifact.

Cash Flow Statements Overview

The cash flow statement offers a more nuanced view. For the full fiscal year 2025, Coty Inc. reported a positive Cash Flow from Operating Activities (OCF) of $492.6 million. That's a strength, showing core operations are still generating cash. But, this OCF decreased by $122.0 million in FY2025, partly due to a $119.7 million increase in Change in Inventory.

On the investing side, net cash used in Investing Activities was $128.4 million in fiscal 2025. This is largely capital expenditures (CapEx) to maintain or grow the business, which is a necessary outflow.

The financing picture is dominated by debt. Coty Inc. ended June 30, 2025, with total debt of $4,008.4 million, resulting in a financial leverage ratio of 3.5x. This high leverage is a major solvency concern, even if the short-term liquidity is managed. You can read more about the broader financial picture in Breaking Down Coty Inc. (COTY) Financial Health: Key Insights for Investors.

Near-Term Liquidity Assessment

The primary liquidity concern is the low ratio coverage. The Current Ratio of 0.77 and the Quick Ratio of 0.46 mean Coty Inc. has little buffer if sales slow down or if the inventory takes longer to sell. The positive OCF of $492.6 million is a critical strength, but the fact that it's declining and that the company is showing signs of payment strain (high DBT) suggests that operational improvements need to accelerate to manage the debt load and improve the current position. The market is watching this closely.

Valuation Analysis

You're looking at Coty Inc. (COTY) and wondering if the market has it priced right. The short answer is that, by traditional metrics, Coty Inc. appears undervalued right now, especially when you look at its assets and operational cash flow relative to its peers. But this valuation comes with a clear warning label: the company is still navigating profitability issues, which is why its stock price has been so volatile.

The core of the valuation story is a mixed bag of operational strength and accounting losses. For the 2025 fiscal year (FY2025), the company reported a net loss of -$381.1 million, which means the standard Price-to-Earnings (P/E) ratio is a negative -10.6x. A negative P/E tells you the company is losing money, so you have to look deeper at asset and cash flow multiples to get a real read.

Here's the quick math on the more reliable metrics:

• Price-to-Book (P/B): The most recent P/B ratio is 0.85. Since this is below 1.0, it suggests the stock is trading for less than the value of its net assets (Book Value), which is a classic signal for an undervalued stock.
• EV/EBITDA: The Enterprise Value-to-EBITDA (EV/EBITDA) ratio for FY2025 is approximately 7.2x. This is a key operational metric, and it's notably lower than the Consumer Staples sector average of 8.5x. This suggests the market is not paying as much for Coty Inc.'s core operating profit (EBITDA) as it is for its competitors.

The stock has defintely seen better days over the last year. The stock price has been on a downward trend, trading near its 52-week low of $3.28 as of November 2025. This is a sharp drop from its 52-week high of $8.04. The current price of around $3.31 reflects the market's deep skepticism following recent earnings misses and the overall negative P/E. That's a massive haircut in 12 months.

When it comes to returning capital to shareholders, Coty Inc. is not a dividend play right now. The dividend yield is 0.00%, and the payout ratio is also 0.00% for the last financial year. The company is prioritizing debt reduction and reinvestment over dividends, which is a sensible capital allocation strategy given its debt-to-equity ratio of 1.06.

Analyst consensus leans cautious, but the price targets suggest significant upside from the current level. The average 12-month price target is between $4.94 and $5.63. This implies a potential return of over 50% from the current price, which is a big opportunity if the turnaround plan works.

What this estimate hides is the execution risk. The overall analyst consensus is 'Neutral,' with a breakdown showing more caution than conviction:

The majority are on the sidelines. To get a comprehensive view of the company's prospects beyond just these numbers, you should check out the full breakdown in Breaking Down Coty Inc. (COTY) Financial Health: Key Insights for Investors.

So, the action item is clear: Coty Inc. is cheap on an asset and operational cash flow basis, but it's a value trap until the net income turns positive. The market is pricing in the risk of continued losses, but analysts see a path to a much higher share price. Your next step should be to look closely at the debt maturity schedule and the projected timeline for positive net income in the coming quarters.

Risk Factors

You need to understand that Coty Inc. (COTY) is a company in transition, and while the turnaround has delivered some impressive margin gains, the near-term is still loaded with specific risks. The core takeaway is that external market softness and internal execution issues converged in fiscal year 2025 (FY25), leading to a significant financial miss and a revised outlook for the first half of FY26. We're seeing a clear mapping of market pressures to the bottom line.

The company's full-year FY25 net revenue came in at $5,892.9 million, a 4% decrease from the prior year, and the reported net loss was a substantial $381.1 million, compared to a net income of $76.2 million in the prior year. That's a sharp reversal.

External and Industry Headwinds

The biggest external risk is the challenging market backdrop, which is hitting the mass beauty segment hard. You can see this clearly in the Consumer Beauty division, where net revenue declined 6% on a reported basis in the first half of FY25. This is not just a Coty Inc. problem, but the competition is fierce, especially from giants like L'Oreal and Estée Lauder.

• U.S. Demand Softness: Declining demand for cosmetics in the U.S. mass market is a major headwind.
• Retailer Destocking: Retailers are acting with caution, pulling back on orders to manage inventory, which directly impacts Coty Inc.'s sales, particularly in the Prestige segment where sell-in lagged sell-out.
• Geographic Pressure: The Asia Pacific region, including mainland China and Travel Retail Asia, saw an 8% reported net revenue decrease in FY25, reflecting challenging market dynamics.
• Foreign Exchange (FX): Currency fluctuations remain a constant drag, accounting for a 1% negative impact on FY25 net revenue.

Operational and Financial Risks

The internal risks center on execution, cash flow, and the sheer complexity of managing a global portfolio while undergoing a transformation. The operational weakness in the U.S. was a key factor in the disappointing Q4 FY25 results. The financial strain is also visible in payment patterns; the Days Beyond Terms (DBT)-how late the company pays its bills-was consistently higher than the industry average, hitting 23 in April 2025 compared to the industry's 10. This suggests cash flow is tight.

Here's the quick math on the financial surprise: In Q4 FY25, the company reported an adjusted loss of -$0.05 per share, starkly missing analyst expectations for an adjusted profit of $0.01 per share. That unexpected dip into the red is a major concern. Still, the company has made progress on its debt, reducing its financial leverage ratio (net debt to adjusted EBITDA) to around 3.5x in FY25, down from 6.8x in FY21.

Mitigation and Action Plans

Coty Inc. is defintely not sitting still. Their primary mitigation strategy is the next phase of the 'All-In to Win' program, which is a major restructuring effort. They are targeting approximately $130 million in new fixed cost savings and eliminating around 700 positions globally. This is a clear action to offset revenue pressure with cost discipline.

The goal is to achieve nearly $500 million in total savings between FY25 and FY27. Plus, they are implementing a nimbler regional model with new U.S. leadership to fix the Prestige sell-out gap and accelerating the use of Artificial Intelligence (AI) across demand planning and procurement. The company expects a return to positive growth in the second half of FY26, fueled by new product launches and efficiencies. You can learn more about the context of these risks in the full analysis: Breaking Down Coty Inc. (COTY) Financial Health: Key Insights for Investors.

The next concrete step for you is to monitor the Q1 FY26 earnings release for any signs that the retailer destocking has stabilized and the new U.S. leadership is closing the Prestige sell-out gap.

Growth Opportunities

You're looking past the noise of a challenging year, and that's the right move. Coty Inc. (COTY)'s growth story is now a focused play on fragrance and financial discipline, not a broad-market bet. The core takeaway is this: the company is doubling down on its most profitable segment-scenting-while actively fixing or shedding its underperforming mass cosmetics business.

The company is strategically repositioning as a 'fragrance and scenting powerhouse.' This means a closer integration of its Prestige Beauty and Mass Fragrance units, which together already account for approximately 69% of total sales. This move leverages their scale in R&D and distribution to accelerate innovation, particularly in high-growth areas like fragrance mists, which are booming across all price points. That's a smart, clean strategy.

• Fragrance Focus: Fragrance is the cornerstone, driving over 60% of sales.
• New Categories: Capturing the 'treatonomics' trend with a multi-brand push into fragrance mists.
• Prestige Skincare: Aiming to double skincare sales to between $500 million and $600 million by FY25.

Future Revenue and Earnings Trajectory

While the company saw a difficult fiscal year 2025 (FY25), the underlying profitability improved, and the outlook is for a return to growth. Full-year FY25 net revenue was $5,892.9 million, a 2% decrease on a like-for-like (LFL) basis, but adjusted EBITDA expanded to $1,082 million, reflecting an 18.4% margin. That 60-basis-point margin improvement shows disciplined cost management, even with a revenue dip. Here's the quick math on profitability:

The near-term risk is real: Coty projects continued sales declines in the first half of FY26 due to headwinds like retailer inventory adjustments and U.S. market softness, but they are confident in returning to profitable sales growth in the second half of FY26. You need to watch that H2 FY26 number defintely.

Strategic Actions and Competitive Edge

The biggest strategic move is the comprehensive review of the Consumer Beauty business, which includes mass color cosmetics brands like CoverGirl and Rimmel, generating about $1.2 billion in annual revenue. This strategic review, which began in September 2025, is exploring all options-partnerships, divestitures, or spin-offs-to maximize long-term value and strengthen the balance sheet.

What this estimate hides is the power of their competitive advantages. Coty is in a unique position as the only global player to actively target both the high-end and low-end of the scenting market, with products ranging from $5 to $500. Their Prestige division holds iconic licensed brands like Gucci, Burberry, and Hugo Boss. Plus, the 'All-in to Win' transformation program continues to deliver efficiency, targeting over $120 million in productivity savings for FY25 and aiming for aggressive deleveraging to a 2x debt/EBITDA target by 2026 from the Q4 FY2025 total debt of approximately $4.01 billion.

For a deeper dive into the financial health that underpins these growth strategies, you should read the full analysis here: Breaking Down Coty Inc. (COTY) Financial Health: Key Insights for Investors. Your next step should be to model a scenario where the Consumer Beauty divestiture is successful; that cash injection changes the deleveraging timeline dramatically. Finance: draft a new 13-week cash view by Friday incorporating a potential asset sale.