Coty faces headwinds as it tries to sell consumer beauty line

Ageing brands and declining sales could make Coty’s makeup business a hard sell, raising the prospect of piecemeal deals or lower than expected proceeds that might complicate the group’s plans to cut debt and invest in growth.

- ALEXANDER MARROW DOMINIQUE PATTON

Coty said on Tuesday it had launched a review of its mass-market Consumer Beauty business, a prelude to a possible sale or spinoff of some brands in a bid to cut debt, reverse shrinking cash flow, and focus on more profitable fragrances.

The business, home to the CoverGirl and Rimmel brands, generates around $1.2 billion in annual revenues, but has been losing market share to competitors with faster innovation cycles and more accessible price points.

"It's hard for these brands because they don't look new to today's consumers. And newness is important, especially in colour cosmetics," said Morningstar analyst Dan Su.

Barclays analysts described the division as a "tough asset to sell". They said it could be worth anywhere between $690 million and $950 million.

Buyers this year have shown strong interest in smaller, fast-growing brands like Hailey Bieber's makeup and skincare line Rhode, snapped up by retailer Elf Beauty for $1 billion, and the vitamin Abased skincare business Medik8 bought by L'Oreal for an estimated $1 billion.