Coty explores sale of CoverGirl, Rimmel as it pivots to fragrances

By Savyata Mishra and Alexander Marrow (Reuters) -Coty said on Tuesday it had launched a strategic review of its consumer beauty business that could lead to the sale of brands such as CoverGirl and Rimmel, as the cosmetics maker plans to focus on its more profitable fragrances unit. The New York-based company had last month projected a quarterly sales decline as demand for its beauty products softened. The firm invested heavily into its U.S. mass beauty business at the expense of fragrance, before shifting course as mass beauty struggled with rising competition from lower‑cost online rivals. The move comes as the U.S. mass-market makeup segment faces pressure, with drugstores destocking products as cost-conscious consumers tighten spending and fierce competition from newer brands building a strong following online. Anti-theft measures by U.S. retailers and recent changes in immigration policies have also hurt demand in the mass beauty category, company executives have said. More than a decade ago, Coty paid $12.5 billion for some of these brands in a deal with Procter & Gamble. "This new structure will… drive renewed momentum and sharper focus for consumer beauty, positioning it to compete more effectively in the evolving beauty landscape," CEO Sue Nabi said, adding she aims to grow Coty's prestige portfolio through blockbuster launches and brand elevation. In 2024, the prestige fragrance market was the fastest growing category, up 12%, according to data firm Circana, while the mass-market makeup category declined 3% compared to 2023. In the first half of 2025, prestige fragrance sales are up 6% in the U.S., the data showed. "Coty is signaling it's done playing drugstore beauty pageant and wants to sit exclusively at the prestige beauty table with LVMH and Estée Lauder as dinner companions, not competitors," said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors. POTENTIAL PARTNERSHIPS, DIVESTITURES AND SPIN-OFFS Coty said its review would focus on its $1.2 billion revenue mass color cosmetics segment, which includes brands such as CoverGirl, Rimmel, Sally Hansen and Max Factor, as well as its $400 million standalone Brazil business. "The review will assess a full range of alternatives including partnerships, divestitures, spin-offs and other potential strategic actions," Coty said, adding that the aim was to bolster its balance sheet. Coty's consumer beauty division, which contributed $2.07 billion to annual sales, saw like-for-like sales drop 5% year-on-year for the 12 months ending June 30, it said last month. In the same period, its ultra-premium, prestige and consumer beauty fragrances grew between 2% and 9%.  Reduced profit has eaten into Coty's free cash flow, which totaled $277.7 million for the year to June 30, while the company's total debt was just over $4 billion.  Coty's previous efforts saw it bring together hair and nail brands into professional beauty business Wella and sell a majority to stake to KKR. Coty is still working to divest its remaining 26% stake in that business.  Coty will bring all fragrance and scent brands under one business unit accounting for 69% of company sales, while aiming to maintain steady growth in cosmetics and skincare. Shares of the company, which have lost nearly half of their value this year, were up nearly 3% in early trading on Tuesday. Coty, which licences the fragrance brands of Gucci, Chloe and Burberry, has a market capitalization of about $3 billion, according to LSEG data.  The news was first reported by the Wall Street Journal earlier on Tuesday. (Reporting by Nilutpal Timsina, Shivani Tanna, Ruchika Khanna and Savyata Mishra in Bengaluru, Alexander Marrow in London and Dominique Patton in Paris; Editing by Adam Jourdan, Louise Heavens and Arun Koyyur)

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