Could Coty be on sale?

Could it really be the end of an era for one of the most legendary names in the beauty industry? According to a recent article by WWD, Coty Inc. is reportedly looking for buyers and is considering a two-phase sale, according to anonymous sources. As explained in the article, negotiations are still at a preliminary stage, but the idea on the table involves the separate sale of the company’s two main divisions: the Luxury division, which includes brands such as Gucci, Burberry, Jil Sander and Hugo Boss, and the Consumer division, which includes mass-market brands like Covergirl, Max Factor and Rimmel London. When contacted by WWD, a Coty spokeswoman declined to comment. As for the Luxury segment, sources report that Coty is in talks with Interparfums, although the latter is thought to be interested only in some of the fragrance brands, particularly Burberry and Hugo Boss. The launch of Burberry Goddess in 2023 was the biggest in Coty’s history, while Hugo Boss became the second best-selling men’s line in Europe in the second half of the same year. For these reasons, a potential deal might take the form of a strategic partnership or merger, rather than a traditional acquisition, as one source suggested to the publication. A spokesperson for Interparfums SA confirmed the interest by stating: “Overall, we are always inclined to look when opportunities present themselves.” According to WWD, Interparfums has already made an offer to reacquire the Burberry license, which it held until the end of 2013.

The situation is more complex regarding the license for Gucci fragrances and beauty products, considered the most valuable asset in the company’s Luxury division. That license seems destined to return to parent company Kering, which is investing in its own internal beauty division ahead of the expiration of the original license, which, after 50 years, is set to expire around 2028. Coty CEO Sue Nabi also hinted at that date, stating in July 2023 that there would be no license renewal talks “for at least another five years.” The possible sale of the Consumer division appears more problematic as these mass brands, whose commercial performance fell by 9% in the quarter ending in March, are struggling to attract buyers. The issue is twofold: on the one hand, U.S. tariffs are deterring potential Asian buyers, who do not want to be “trapped” in a business that could turn unprofitable if tariffs increase or change; on the other hand, these brands face growing competition from direct-to-consumer brands. This division of the company’s branches is necessary, as there are no companies or groups capable of buying Coty outright (its market capitalization alone is $4.13 billion) or doing so without violating several antitrust regulations. The main issue with a potential sale is that everyone is eyeing the profitable Luxury division, while no one is interested in the mass-market one.

Several circumstances have contributed to raising the possibility of a sale. Coty’s stock has fallen 30.7% since the beginning of the year, while its main competitors have gone in the opposite direction: L’Oréal is up 9.9% and Estée Lauder has limited losses to 2.4%. There are also rumors that current CEO Sue Nabi may leave as early as this summer, and the issue of the Gucci license, whose potential loss would be a major blow, adds further complications — and not a few headaches, as any buyer today wouldn’t know if they will lose that lucrative license in just three years. In May, Coty announced a $71.1 million loss stemming from the divestiture of Skkn, Kim Kardashian’s beauty business, in which Coty had acquired a 20% stake in 2022 for $200 million — now “reabsorbed” by Kardashian through Skims. Kylie Cosmetics, another brand in the group, valued at $1.2 billion in 2019, also seems not to have lived up to initial expectations. As a result, total net revenues fell by 6% in the latest quarter, landing at $1.29 billion, slightly below analysts’ estimates, which were at $1.3 billion. Still a giant, then, but a giant in need of direction and for whom the future could hold several surprises. If the company is indeed split and acquired by other businesses, we could be witnessing one of the largest redistributions of licenses and business operations in the entire beauty industry.