By Aditi Sebastian and Praveen Paramasivam
(Reuters) – Coty Inc <COTY.N> reported quarterly profit above expectations on Wednesday and said the recent coronavirus outbreak would have a relatively small impact on its earnings, sending the cosmetics and fragrance maker’s shares surging as much as 22%.
The virus, which has killed nearly 500 people and affected hundreds of thousands across the globe, has forced several retailers, including Capri Holdings <CPRI.N> and Ralph Lauren Corp <RL.N>, to shut stores and limit working hours.
Chief Financial Officer Pierre-Andre Terisse told Reuters the company would take a hit but it would be smaller than that of its competitors.
China, an important market for luxury brands, accounts for 3% of Coty’s overall sales.
“Investors have been on edge with beauty and personal care companies because of the impact of the coronavirus, and specifically the impact it will have to sales in the greater China area and travel retail channel,” CFRA Research analyst Arun Sundaram said.
“The tone and commentary today gives investors a bit more confidence that COTY will fare better than its peers.”
The results also highlight the CoverGirl cosmetics maker’s efforts to draw in millennial customers who are shunning mainstream cosmetics brands for niche ones that are promoted by social media influencers.
Coty spent $600 million to take a majority stake in reality TV star Kylie Jenner’s make-up and skincare businesses in November and is collaborating with American actress Lili Reinhart to promote its brands among millennials.
The company posted a 1.3% rise in its luxury unit on a comparable basis, driven by strong demand for its Tiffany & Love fragrances and glittery Gucci lipstick.
Net revenue fell 6.4% to $2.35 billion, but was still ahead of analysts’ estimates of $2.34 billion, according to IBES data from Refinitiv.
Net loss attributable to the company narrowed to $21.1 million, or 3 cents per share, in the second quarter ended Dec. 31 from $960.6 million, or $1.28 per share, a year earlier.
Excluding certain items, Coty earned 27 cents per share, beating analysts’ average estimate of 24 cents.
Share of Coty, which is majority owned by German conglomerate JAB Holdings, were up about 15% at $12.18.
(Reporting by Praveen Paramasivam and Aditi Sebastian in Bengaluru; Editing by Shailesh Kuber and Anil D’Silva)