Coty is one of the biggest fragrance firms in the world and is the name behind Beyoncé and Gaga’s perfumes, but has seen celebrity scents falter in the last few quarters, as has Elizabeth Arden, another perfume rival behind the Britney Spears and Justin Bieber fragrances, who have also laid declining sales blame at this segment’s door.
The challenge for celebrity fragrances is that they are typically low-end and are largely aimed at younger consumers who get bored more quickly and move on to other products.
This is in contrast to designer fragrances which tend to be higher-end and stay in fashion longer because there is a more obvious link between them and a fragrance.
Wary
Coty has previously said that there can be no assurance that celebrity licensors will maintain the appropriate celebrity status or positive association among the consumer public, and now Bart Becht says that time might be up for this market.
“In terms of celebrity fragrances, this was a segment within the category which was very popular a number of years ago, and which has kind of seen its hay day and now is not very much in vogue either with consumer or with the trade,” he explains. “As a result, we are seeing a gradual erosion basically of this business.”
“We still have a drag basically from a legacy celebrity fragrance business, which is a drag basically on the growth of the total company.”
However, the Coty boss maintains that as it is still a highly profitable business because the investments are not always huge in this area, it would be very difficult to divest it.
As such, he says that the company will remain aware of the market and its challenges, but for now it is better to keep it than to divest it.
Q4 results
Last week, Coty pleased the financial market by revealing a strong set of fourth quarter results, beating expectations and seeing the business swing back into profit.
The company reported that revenues were flat on a like-for-like basis, at $1.02 billion, which in reported terms represented a fall of 2%. When taking into account the negative impact of currency translations on a strong dollar the constant currency comparison was up 7%.
The revenues topped expectations on Wall Streets, with six analysts surveyed by financial research company Zacks predicting that sales would come in at $1.01 billion for the quarter.
Net income swung from a loss of $20.1 million in the same period last year, to show a profit of $21.0 million for the current fourth quarter.
Speaking about the results, Becht said that the results had reflected the company focus on its power brands, while profit had been enhanced by the on-going restructuring program.