Coty Inc.’s share prices slumped more than 22% on Wednesday as the makers of CoverGirl cosmetics were hit by an unparalleled supply chain disruption in two of its major markets, the U.S. and Europe, resulting into a steeper-than-expected decline in its first-quarter revenue and profit.
The multinational cosmetics and fragrance maker reported a decline of 9.2% in its first quarter sales to stand at $2.03 billion. The net loss for the quarter for Coty stood at $12.1 million compared to a loss of $19.7 million in the same period last year. However, excluding items, the company reported an adjusted profit of 11 cents a share for the quarter, beating analysts’ estimate of 7 cents a share. The company’s gross margin also took a hit during the quarter and stood at 60.2% after declining by 70 bps.
Grappling to digest the acquisition of a large portfolio of beauty brands from Procter & Gamble in 2016, the company first flagged the supply chain issue in August when it struggled with shortages of packaging products at its key suppliers. The problem was further aggravated by the Hurricane Florence which hindered shipping of products, especially the luxury fragrances unit to retailers in the quarter.
The supply chain fiasco has cost $60 million in the first quarter alone, way beyond Coty’s estimate of $50 million for the full year.