Coty's Turnaround Efforts and Post-Pandemic Makeup Recovery Give it a Promising Outlook

Having had three CEOs in two years, Coty's strategic direction has been in limbo, but we are optimistic that Sue Nabi, a successful 20-year veteran of wide-moat L’Oreal who took the reins in September 2020, has the qualifications to right the ship. We think her strategic priorities are on target, as she seeks to increase Coty’s exposure to high-growth markets where it has been underexposed. Specifically, she looks to accelerate Coty's prestige division by expanding from its core fragrance portfolio into makeup, build a skincare portfolio across mass and prestige, enhance its digital capabilities, further penetrate China, stabilize its mass-beauty business, and become an industry leader in sustainability. We are impressed by the progress Coty has realized to date, with improvement in each objective despite the challenges presented by the pandemic, and we expect further progress in the years to come.