COTY INC. 10-Q Summary: Fiscal Q3 2026
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026 (Fiscal Q3 2026). Coty Inc. is a global beauty company manufacturing and distributing fragrances, color cosmetics, and skin & body care products. The company operates under two primary segments: Prestige and Consumer Beauty. During this period, Markus Strobel served as Executive Chairman and Interim CEO following the departure of Sue Nabi in December 2025.
Key Financial Metrics
| Metric | Q3 2026 (3 Months) | Q3 2025 (3 Months) | YTD 2026 (9 Months) | YTD 2025 (9 Months) |
|---|---|---|---|---|
| Net Revenues | $1,281.6M | $1,299.1M | $4,537.4M | $4,640.5M |
| Gross Profit | $791.9M | $832.4M | $2,879.3M | $3,041.2M |
| Gross Margin | 61.8% | 64.1% | 63.5% | 65.5% |
| Operating Income (Loss) | $(372.0M) | $(280.4M) | $(38.8M) | $225.6M |
| Net Loss (GAAP) | $(405.7M) | $(402.2M) | $(447.9M) | $(280.9M) |
| Net Loss Attributable to Coty | $(408.1M) | $(405.7M) | $(463.8M) | $(299.1M) |
| Adjusted Operating Income | $72.4M | $147.9M | $587.2M | $785.2M |
| Adjusted EBITDA | $127.0M | $204.2M | $753.3M | $955.0M |
| Operating Cash Flow (YTD) | $421.8M | $409.4M | $421.8M | $409.4M |
| Total Debt (Long-term + Current) | $3,216.2M | $4,008.4M (Jun 2025) | $3,216.2M | $4,008.4M (Jun 2025) |
| Cash & Equivalents | $257.1M | $257.1M (Jun 2025) | $257.1M | $257.1M (Jun 2025) |
Material Changes vs. Prior Period
- Revenue Decline: Net revenues decreased 1% QoQ and 2% YTD, driven by volume declines in Consumer Beauty (mass fragrance and color cosmetics in the U.S. and Europe) and Prestige fragrances. Currency translation provided a 6% positive impact QoQ.
- Significant Impairments: The company recorded $362.8M in asset impairment charges for the quarter. This includes $237.1M in goodwill impairment and $125.7M in indefinite-lived intangible asset impairments (CoverGirl, Sally Hansen, Max Factor, Bourjois) within the Consumer Beauty segment, triggered by stock price declines and revised sales forecasts.
- Wella Divestiture: In December 2025, Coty sold its remaining 25.8% equity interest in Wella for $750M cash plus distribution rights, recognizing a $201.9M loss on sale included in "Other expense, net."
- Debt Reduction: Total debt decreased significantly from $4.0B (June 2025) to $3.2B (March 2026). Proceeds from the Wella sale and a new $900M bond issuance were used to redeem maturing Euro and Dollar Senior Secured Notes.
- Margin Pressure: Gross margin compressed due to increased manufacturing/material costs, freight costs (tariffs), and excess inventory obsolescence.
Guidance, Outlook, and Risks
- Q4 Outlook: Management expects Q4 fiscal 2026 net revenue to decline by a mid-single-digit percentage. Gross margins are expected to be pressured by lower sales, tariffs, and excess inventory.
- Cost Reduction: The company is re-accelerating cost reduction efforts, targeting approximately $80.0M in savings for fiscal 2026.
- Tariff Impact: Estimated operating impact from tariff increases is approximately $32.0M through Q1 fiscal 2027, with $30.0M expected in fiscal 2026. The company is pursuing refunds for IEEPA tariffs following a Supreme Court ruling.
- Share Repurchases: No shares were repurchased in Q3. The company has $796.8M remaining under its repurchase program but continues to incur costs related to forward repurchase contracts (Hedge Valuation Adjustments).
- Legal & Tax Risks: Significant exposure remains regarding cosmetic talcum powder litigation (asbestos claims) and Brazilian tax assessments totaling approximately $409M in estimated liabilities (including interest/penalties), though the company believes losses are not probable for the tax assessments.
Key Investor Verification Points
- Impairment Sustainability: Verify if the $362.8M impairment charge is a one-time event or if further goodwill/intangible write-downs are likely given the "0% excess" fair value of the Consumer Beauty reporting unit.
- Consumer Beauty Turnaround: Assess the effectiveness of the performance improvement plan for mass color cosmetics (CoverGirl, Rimmel) and mass fragrance (Nautica) given continued volume declines in the U.S. and Europe.
- Tariff Mitigation: Monitor the actual cost impact of tariffs on prestige fragrances and the success of supply chain diversification strategies.
- Debt Covenant Compliance: Confirm continued compliance with the Total Net Leverage Ratio covenant (max 4.00:1) amidst operating losses and high interest expenses.
- Forward Repurchase Costs: Track future "Hedge Valuation Adjustments" payments required under forward repurchase contracts if the stock price continues to decline.