Coty Inc. (NYSE: COTY) and Kim Kardashian West announced today
that they have entered into a strategic transaction to further
develop Kardashian West’s business globally. Together, Coty and
Kardashian West will focus on entering new beauty categories and
global expansion beyond her existing product lines. Kardashian West
and her team will lead all creative efforts in terms of product and
communications initiatives, building on her remarkable global reach
capabilities through social media.
The transaction is another step in Coty’s renewed emphasis on
its beauty business and ongoing transformation into a more agile,
focused company. Kardashian West is one of the world’s most
recognized personalities with 300 million followers across her
personal and brand social media channels, as well as being an
influential voice among beauty consumers globally. In January, Coty
acquired a 51% stake in Kardashian West’s half-sister Kylie
Jenner’s brands.
Under the terms of the agreement, Coty will acquire a 20%
ownership interest in Kardashian West's beauty business for $200M.
Coty will have overall responsibility for the portfolio’s
development in skincare, haircare, personal care and nail products,
leveraging its deep understanding of the industry and its
commercial and go-to-market expertise. Through the relationship
each party will leverage its unique strengths to further build a
high growth, direct-to-consumer beauty brand.
Peter Harf, Coty Chairman and Chief Executive Officer, added,
“Kim is a true modern day global icon. She is a visionary, an
entrepreneur, a mother, a philanthropist, and through social media
has an unparalleled ability to connect with people around the
world. This influence, combined with Coty’s leadership and deep
expertise in prestige beauty will allow us to achieve the full
potential of her brands.”
Kim Kardashian West commented: “Partnering with an established
organization like Coty will be instrumental in the advancement of
my brands as their global reach allows for faster expansion so
people around the world are able to experience new launches first
hand. This relationship will allow me to focus on the creative
elements that I’m so passionate about while benefiting from the
incredible resources of Coty, and launching my products around the
world.”
The acquisition is expected to close in the third quarter of
FY21. All the business's products will be sold through leading
luxury beauty retailers as well as owned digital channels.
Tiger Chark served as an advisor to Coty on the transaction.
About Coty Inc.
Coty is one of the world’s largest beauty companies with an
iconic portfolio of brands across fragrance, color cosmetics, hair
color and styling, and skin and body care. Coty is the global
leader in fragrance, a strong number two in professional hair color
& styling, and number three in color cosmetics. Coty’s products
are sold in over 150 countries around the world. Coty and its
brands are committed to a range of social causes as well as seeking
to minimize its impact on the environment.
For additional information about Coty Inc., please visit
www.coty.com.
About Kim Kardashian West
Kim Kardashian West is one of the world's most-influential
people on social media with a combined following of 300 million
users and counting. An entrepreneur, beauty mogul, producer and
author, she first burst onto the scene in 2007 after the premiere
of her hit E! Entertainment reality series “Keeping Up with the
Kardashians” where Kardashian West also holds an executive producer
credit. Now filming its nineteenth season, the show has been
recognized as the highest rated show on the E! Network.
Through her work with industry makeup artists, Kardashian West
developed a love and understanding for makeup artistry, and
launched her eponymous cosmetics line, KKW Beauty in June of 2017.
Since inception, KKW Beauty has introduced collections
revolutionizing the direct to consumer model by selling out
multiple launches. In November of the same year, Kardashian West
launched KKW Fragrance and continues to produce sell out
collections. In October 2019, KKW Beauty entered Ulta Beauty as the
exclusive retailer in the US.
Last year, Kardashian West launched her highly anticipated
solutionwear collection, SKIMS, as new approach to shape enhancing
undergarments which sold out in the first few minutes of
launch.
Kardashian West has been passionate about the fight for criminal
justice reform and has been studying for a law degree through the
apprenticeship program in the state of California. She is expected
to take the bar in 2022. She is also supporter of numerous
charitable organizations including the Children’s Hospital Los
Angeles, the Dream Foundation, disaster relief efforts including
the recent COVID-19 pandemic and donating to organizations focused
on making change and fighting radical injustice.
Forward Looking Statements
Certain statements in this release are “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect the
current views of Coty Inc. (the “Company”) with respect to, among
other things, the impact of COVID-19, the Company’s turnaround plan
announced on July 1, 2019 (including the cost reduction program
announced on May 11, 2020, the “Turnaround Plan”), strategic
planning, targets, segment reporting and outlook for future
reporting periods (including the extent and timing of revenue,
expense and profit trends and changes in operating cash flows and
cash flows from operating activities and investing activities), the
strategic review of its Professional Beauty business, associated
consumer hair and nail brands and Brazilian operations and any
transaction related thereto, including the strategic partnership
with KKR (the “Strategic Review”), including timing of such
Strategic Review and any transaction and the use of proceeds from
any such transaction, the issuance of preferred shares to KKR, its
future operations and strategy, ongoing and future cost efficiency
and restructuring initiatives and programs, strategic transactions
(including their expected timing and impact), investments, licenses
and portfolio changes, synergies, savings, performance, cost,
timing and integration of acquisitions (including the strategic
partnerships with Kylie Jenner and Kim Kardashian West), future
cash flows, liquidity and borrowing capacity, the availability of
local government funding or reimbursement programs in connection
with COVID-19 (including expected timing and amounts), timing and
size of cash outflows and debt deleveraging, the timing and terms
of equity financing transactions, the performance of launches or
relaunches, the timing and impact of current or future destocking
or shelf spaces losses, impact and timing of supply chain
disruptions and the resolution thereof, timing and extent of any
future impairments, and synergies, savings, impact, cost, timing
and implementation of the Company’s Turnaround Plan, including
operational and organizational structure changes, segment reporting
changes, operational execution and simplification initiatives, the
move of the Company’s headquarters and the priorities of senior
management. These forward-looking statements are generally
identified by words or phrases, such as “anticipate”, “are going
to”, “estimate”, “plan”, “project”, “expect”, “believe”, “intend”,
“foresee”, “forecast”, “will”, “may”, “should”, “outlook”,
“continue”, “temporary”, “target”, “aim”, “potential”, “goal” and
similar words or phrases. These statements are based on certain
assumptions and estimates that we consider reasonable, but are
subject to a number of risks and uncertainties, many of which are
beyond our control, which could cause actual events or results
(including our financial condition, results of operations, cash
flows and prospects) to differ materially from such statements,
including risks and uncertainties relating to:
- uncertainties as to the timing of the strategic partnership
with Kim Kardashian West (the “KKW Transaction”);
- the risk that closing conditions for the KKW Transaction are
not satisfied;
- litigation, arbitration, including the complaint filed by Seed
Beauty, LLC and MM Cosmetics, LLC against KKW Beauty, LLC, or
investigations relating to the KKW Transaction;
- the Company’s ability to achieve its global business strategy,
compete effectively in the beauty industry and achieve the benefits
contemplated by the partnership with Kim Kardashian West within the
expected time frame;
- inherent risks associated with joint ventures and partnerships,
including relating to control and decision-making, compliance,
financial accounting and tax considerations, transparency and
customer relations;
- managerial, integration, operational, regulatory, legal and
financial risks associated with acquisitions generally and the KKW
Transaction specifically, including risks related to the entry into
a new distribution channel, the potential for channel conflict,
risks of retaining customers and key employees, difficulties of
integration (or the risks associated with limiting integration),
risks related to regulation of multi-level marketing business
models, ability to protect trademarks and brand names, litigation
or investigations by governmental authorities;
- changes in law, regulations and policies that affect the
Company’s or KKW Holding, LLC’s (“KKW Holding”) business or
products, including risk that direct selling laws and regulations
may be modified, interpreted or enforced in a manner that results
in a negative impact to the Company’s or KKW Holdings’ business
model, revenue, sales force or business;
- the impact of COVID-19, including demand for the Company’s and
KKW Holdings’ products, illness, quarantines, government actions,
facility closures, store closures or other restrictions in
connection with the COVID-19 pandemic, and the extent and duration
thereof, related impact on our ability to meet customer needs and
on the ability of third parties on which the Company and KKW
Holdings rely, including their suppliers, customers, contract
manufacturers, distributors, contractors, commercial banks, joint-
venture partners, to meet their obligations to the Company and KKW
Holdings, in particular, collections from customers, the extent
that government funding and reimbursement programs in connection
with COVID-19 are available to the Company and KKW Holdings, and
the ability to successfully implement measures to respond to such
impacts;
- the Company’s ability to successfully implement its multi-year
Turnaround Plan, including its management headquarters relocation,
management realignment, reporting structure changes, and segment
reporting changes and the expansion of such plan to further reduce
the Company’s cost base, and to develop and achieve its global
business strategies (including mix management, select price
increases, more disciplined promotions, and foregoing low value
sales), compete effectively in the beauty industry and achieve the
benefits contemplated by its strategic initiatives (including
revenue growth, cost control, gross margin growth and debt
deleveraging) within the expected time frame or at all;
- the timing, costs and impacts of the Strategic Review, and the
amount and use of proceeds from the Strategic Review;
- the issuance of preferred shares to KKR;
- the Company’s and KKW Holdings’ ability to anticipate, gauge
and respond to market trends and consumer preferences, which may
change rapidly, and the market acceptance of new products,
including new products related to Kylie Jenner’s and Kim
Kardashian’s existing beauty business, any relaunched or rebranded
products and the anticipated costs and discounting associated with
such relaunches and rebrands, and consumer receptiveness to its
current and future marketing philosophy and consumer engagement
activities (including digital marketing and media);
- use of estimates and assumptions in preparing the Company’s
financial statements, including with regard to revenue recognition,
income taxes, the assessment of goodwill, other intangible assets
and long-lived assets for impairment, the market value of
inventory, and the fair value of assets and liabilities associated
with acquisitions or divestitures;
- the impact of any future impairments;
- managerial, transformational, operational, regulatory, legal
and financial risks, including diversion of management attention to
and management of cash flows, expenses and costs associated with
the Company’s and KKW Holdings’ response to COVID-19, the
Turnaround Plan, the Strategic Review and any related transaction,
including divestiture, the integration of the strategic
partnerships with Kylie Jenner and KKW Holdings, and future
strategic initiatives, and, in particular, the Company’s ability to
manage and execute many initiatives simultaneously including any
resulting complexity, employee attrition or diversion of
resources;
- future divestitures and the impact thereof on, and future
acquisitions, new licenses and joint ventures and the integration
thereof with the Company’s business, operations, systems, financial
data and culture and the ability to realize synergies, avoid future
supply chain and other business disruptions, reduce costs
(including through its cash efficiency initiatives), avoid
liabilities and realize potential efficiencies and benefits
(including through its restructuring initiatives) at the levels and
at the costs and within the time frames contemplated or at
all;
- increased competition, consolidation among retailers, shifts in
consumers’ preferred distribution and marketing channels (including
to digital and luxury channels), distribution and shelf-space
resets or reductions, compression of go-to-market cycles, changes
in product and marketing requirements by retailers, reductions in
retailer inventory levels and order lead- times or changes in
purchasing patterns, impact from COVID-19 on retail revenues, and
other changes in the retail, e- commerce and wholesale environment
in which the Company and KKW Holdings do business and sell their
products and the Company’s and KKW Holdings’ ability to respond to
such changes;
- the Company, its joint ventures’, business partners’ and
licensors’ and KKW Holdings’ abilities to obtain, maintain and
protect the intellectual property used in its and their respective
businesses, protect its and their respective reputations (including
those of its and their executives or influencers), public goodwill,
and defend claims by third parties for infringement of intellectual
property rights;
- any change to the Company’s capital allocation and/or cash
management priorities, including any change in the Company’s stock
dividend reinvestment program and dividend policy;
- any unanticipated problems, liabilities or integration or other
challenges associated with a past or future acquired business,
joint ventures or strategic partnerships which could result in
increased risk or new, unanticipated or unknown liabilities,
including with respect to environmental, competition and other
regulatory, compliance or legal matters;
- the Company’s and KKW Holdings’ international operations and
joint ventures, including enforceability and effectiveness of their
joint venture agreements and reputational, compliance, regulatory,
economic and foreign political risks, including difficulties and
costs associated with maintaining compliance with a broad variety
of complex local and international regulations;
- the Company’s and KKW Holdings’ dependence on certain licenses
(especially in the fragrance category) and our ability to renew
expiring licenses on favorable terms or at all;
- administrative, product development and other difficulties in
meeting the expected timing of market expansions, product launches
and marketing efforts;
- global political and/or economic uncertainties, disruptions or
major regulatory or policy changes, and/or the enforcement thereof
that affect the Company’s or KKW Holdings’ business, financial
performance, operations or products, including the impact of Brexit
(and business or market disruption arising from a “hard Brexit”),
the current U.S. administration, changes in the U.S. tax code, and
recent changes and future changes in tariffs, retaliatory or trade
protection measures, trade policies and other international trade
regulations in the U.S., the European Union and Asia and in other
regions where the Company and KKW Holdings operate;
- currency exchange rate volatility and currency
devaluation;
- the number, type, outcomes (by judgment, order or settlement)
and costs of current or future legal, compliance, tax, regulatory
or administrative proceedings, investigations and/or litigation,
including litigation relating to the tender offer by Cottage Holdco
B.V. (the “Cottage Tender Offer”);
- the Company’s and KKW Holdings’ ability to manage seasonal
factors and other variability and to anticipate future business
trends and needs;
- disruptions in operations, sales and in other areas, including
due to disruptions in the Company’s or KKW Holdings’ supply chain,
restructurings and other business alignment activities, the move of
the Company’s headquarters to Amsterdam, implementation of the
Strategic Review, manufacturing or information technology systems,
labor disputes, extreme weather and natural disasters, impact from
COVID-19 and the impact of such disruptions on the Company’s and
KKW Holdings’ ability to generate profits, stabilize or grow
revenues or cash flows, comply with their contractual obligations
and accurately forecast demand and supply needs and/or future
results;
- restrictions imposed on the Company through their license
agreements, credit facilities and senior unsecured bonds or other
material contracts, their ability to generate cash flow to repay,
refinance or recapitalize debt and otherwise comply with their debt
instruments, and changes in the manner in which the Company finance
their debt and future capital needs;
- increasing dependency on information technology, including as a
result of remote working in response to COVID-19, and the Company’s
ability to protect against service interruptions, data corruption,
cyber-based attacks or network security breaches, costs and timing
of implementation and effectiveness of any upgrades or other
changes to information technology systems, and the cost of
compliance or the Company’s failure to comply with any privacy or
data security laws (including the European Union General Data
Protection Regulation and the California Consumer Privacy Act) or
to protect against theft of customer, employee and corporate
sensitive information;
- the Company’s ability to attract and retain key personnel and
the impact of senior management transitions and organizational
structure changes, including the co-location of key business
leaders and functions in Amsterdam;
- the distribution and sale by third parties of counterfeit
and/or gray market versions of the Company’s and KKW Holdings’
products;
- the impact of the Cottage Tender Offer and of the Turnaround
Plan, and the Strategic Review and any related transactions, on the
Company’s relationships with key customers and suppliers and
certain material contracts;
- the Company’s relationship with Cottage Holdco B.V., as the
Company’s majority stockholder, and its affiliates, and any related
conflicts of interest or litigation;
- future sales of a significant number of shares by the Company’s
majority stockholder or the perception that such sales could occur;
and
- other factors described elsewhere in this document and in
documents that the Company files with the SEC from time to
time.
When used herein, the term “includes” and “including” means,
unless the context otherwise indicates, “including without
limitation”. More information about potential risks and
uncertainties that could affect the Company’s business and
financial results is included under the heading “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in the Company’s Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 2020 and other periodic
reports the Company has filed and may file with the SEC from time
to time.
All forward-looking statements made in this release are
qualified by these cautionary statements. These forward-looking
statements are made only as of the date of this release, and the
Company does not undertake any obligation, other than as may be
required by applicable law, to update or revise any forward-looking
or cautionary statements to reflect changes in assumptions, the
occurrence of events, unanticipated or otherwise, or changes in
future operating results over time or otherwise.
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version on businesswire.com: https://www.businesswire.com/news/home/20200629005326/en/
Investor Relations Olga Levinzon,
+1 212 389 7733 olga_levinzon@cotyinc.com
Media – for Coty Andra Mielnicki,
+33 7 76 14 69 58 Andra_Mielnicki@cotyinc.com
Lisa Kessler, +1 917 348 3373 Lisa_Kessler@cotyinc.com
Media – for Kim Kardashian West
Christy Welder, +1 212 995 2147 cwelder@fullpic.com
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