Coty closed its fiscal 2026 fourth quarter with sales down just 1 percent on a like for like basis, a smaller drop than the mid single digit decline the company had guided investors to expect. For the full fiscal year, like for like sales fell 5 percent, so the fourth quarter reading counts as the closest thing to a bright spot in an otherwise rough year, helped along by stronger than expected orders in the US for prestige fragrances and mass market cosmetics.
Profit fell faster than revenue
The top line held up better than profitability did. Adjusted EBITDA dropped 26 percent in the fourth quarter and 22 percent across the full fiscal year, as lower volumes, tariff costs, and elevated write offs for excess and obsolete inventory ate into margins. Adjusted gross margin slipped 190 basis points over the year to 63 percent, a reminder that selling roughly the same amount of product for less profit is not the same as stabilizing a business.
Cash discipline is the real story
Where Coty did make visible progress was on the balance sheet. Free cash flow reached 348 million dollars for the year, up about 70 million dollars from the prior period, and net debt fell by nearly 840 million dollars to 2.9 billion dollars. For a company that has spent years working through a debt load left over from its earlier acquisition spree, that kind of reduction matters more to its long term health than any single quarter of sales.
The Gucci exit reshapes what comes next
Much of the coming year's uncertainty traces back to one deal. Coty agreed in July 2026 to sell the Gucci Beauty license back to Kering roughly a year ahead of its scheduled expiration, for 400 million dollars in total, with 250 million dollars paid at signing and up to 150 million dollars more due by September 2027. The company has said the proceeds will go toward paying down debt, reinvesting in its core prestige fragrance and beauty brands, and simplifying its organizational structure. The catch is timing, the license does not disappear from the books until fiscal 2028, so the real hit to sales and profit from losing Gucci is still ahead rather than behind the company.
Why Coty is calling fiscal 2027 a transition year
Management has been direct about what to expect next. Fiscal 2027 is being framed internally as a year to strengthen the core business and finish shaping a smaller, more focused Coty, while a strategic review of the Consumer Beauty division is expected to wrap up by the end of calendar 2026. New additions like Marc Jacobs Beauty makeup and fragrance are meant to help offset the eventual Gucci gap, but the company itself has acknowledged that fiscal 2028 will bring a step down once the license fully exits. In other words, the current quarter's narrower sales decline is encouraging, but Coty is asking investors for patience through at least one more full year of restructuring before it can prove the turnaround is durable.
