Why Coty (COTY) Stock Is Down Today

What Happened?

Shares of beauty products company Coty (NYSE:COTY) fell 19.4% in the morning session after the company reported a surprise loss for its second quarter as key profitability metrics declined. The beauty products company posted an adjusted loss of $0.05 per share for its second quarter, missing Wall Street's expectation for a $0.02 profit. While revenue of $1.25 billion topped analyst estimates, it still represented an 8.1% decline year-over-year. Furthermore, the company's operating margin decreased to 1.2% from 2.5% in the same period last year, and it burned through $131.8 million in cash. Organic revenue, which removes the effects of currency fluctuations and acquisitions, also fell by 9% year-over-year. Looking ahead, analysts expect revenue to remain flat over the next 12 months, an underwhelming projection that suggests demand challenges may persist. Overall, the surprise loss and weakening profitability metrics overshadowed the revenue beat, disappointing investors.

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What Is The Market Telling Us

Coty’s shares are quite volatile and have had 16 moves greater than 5% over the last year. But moves this big are rare even for Coty and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 7 days ago when the stock dropped 3.2% on the news that markets pulled back amid hotter-than-expected inflation data. The main concern for investors was the July Producer Price Index (PPI), a measure of wholesale inflation. The higher-than-expected reading suggests that companies could face squeezed profit margins due to rising costs. This also reduces the likelihood of the Federal Reserve cutting interest rates, which could further dampen economic activity. Compounding these inflation fears are multiple reports signaling a weakening consumer.

Coty is down 44.1% since the beginning of the year, and at $3.83 per share, it is trading 62.2% below its 52-week high of $10.13 from August 2024. Investors who bought $1,000 worth of Coty’s shares 5 years ago would now be looking at an investment worth $1,011.

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