COTY ($1.95) — The Turnaround Nobody's Watching

TL;DR: Coty is a $5.8B fragrance/beauty company trading at 6x EBITDA with a new CEO who ran an $8-10B division at P&G for 7 years. The problems are a broken consumer cosmetics division (being sold or restructured) and 8 CEOs in 16 years. The fix is straightforward: cut G&A, launch fewer/better products, and hire a permanent CEO. At 8x EBITDA (still a 33% discount to peers), the stock is $4.

The New CEO Is Actually Good

Markus Strobel joined as interim CEO in January 2026 after 33 years at Procter & Gamble. He ran P&G's Global Skin & Personal Care division — an $8-10B business with brands like Olay, Old Spice, SK-II, and Secret. P&G's beauty CEO called him "a powerfully effective leader" whose "impact on our global skin and personal care businesses is unique."

He turned around SK-II from a declining brand to Asia's #1 prestige skincare brand. He grew his hair to his shoulders in Venezuela to personally test leave-in conditioner formulas. He spent weeks filming German housewives cleaning kitchens to understand what they actually wanted from Mr. Clean.

Here's his talk where he explains how he thinks about brands — including growing his hair to his shoulders to test products and spending weeks filming German housewives to understand consumer behavior. He's not a finance guy. He's a product-obsessed marketer who also happens to understand operations.

Here's what's different this time. In December 2025, JAB (the Reimann family, worth $20B+) cleaned house. They fired the CEO AND retired their own Chairman of 30+ years simultaneously. Then they gave both jobs to Strobel — CEO AND Chairman — a dual title no previous COTY CEO has held since 2012. He's German (born and educated in Germany, like the Reimanns), spent 33 years at P&G, and was recruited directly by the family, not through a search firm.

His compensation tells you everything: 6 million stock options at a $2.22 strike price. They're worthless at current prices. If the stock goes to $5, they're worth $17M. At $10, $47M. His entire payday depends on the stock recovering. He also killed a failed brand (Orveda) in his third month that the previous CEO had been protecting for years — something a caretaker CEO wouldn't do.

He's acting like the permanent CEO, not an interim. He launched a turnaround framework (Coty.Curated) in his first earnings call. He's building FY2027 plans around it. He told analysts "there's no sugar coating it" and admitted the company had been underperforming for 18 months — the first honest self-assessment in years. His last two quarters beat profit guidance. Revenue is still declining but less badly each quarter.

Insider buying: The President of Consumer Beauty bought $200K worth at $2.41 on March 6. The CFO bought 5,000 shares at $2.65 in February. The CEO has 6M options at $2.22. These people have skin in the game.

The Valuation Is Attractive (6 EV/EBITDA)

Before we talk multiples — the liquidity situation. Yes, the stock is $1.95. But this is a $5.8B revenue company, not a penny stock about to go bust:

• Cash on hand: $270M
• Debt maturing in the next 12 months: $66M (covered 4x by cash alone)
• TTM operating cash flow: $505M
• TTM interest expense: $216M (covered 2.3x by OCF)
• No debt maturities over $1B until 2029
• No going concern warning from auditors
• JAB Holding (Reimann family, worth $20B+) owns 55% — they can and would inject capital before letting it fail

The company is not going bankrupt. The negative tangible book value means there's no liquidation value for shareholders, but this is a going concern, not a liquidation. The only thing that determines the stock price is earnings power.

Now, the multiples. Current: $1.95/share. Market cap $1.7B. Enterprise value $5.0B. FY2026 adjusted EBITDA $843M. That's 5.9x EV/EBITDA.

Historical context: COTY has traded as high as 15-18x EV/EBITDA during stable periods (2021-2023). The current 5.9x is the lowest in the company's public history. The stock was $10+ and EV was $12-14B as recently as 2023 when EBITDA was similar levels — the entire decline is multiple compression, not earnings destruction.

Peer comparison (all excluding impairment charges):

| Company | EV/EBITDA | Business Model |

|---|---|---|

| COTY | 5.9x | Fragrance licensing + mass cosmetics |

| Inter Parfums | 12.0x | Same exact business — fragrance licensing |

| Estée Lauder | 11.5x | Owned prestige brands, also in turnaround |

| e.l.f. Beauty | 15.0x | Mass cosmetics (the competitor eating CoverGirl's lunch) |

| L'Oréal | 21.9x | Global leader, owned brands, massive scale |

Inter Parfums runs the identical business model as COTY's prestige division — they license fragrance brands from fashion houses, develop the scents, and distribute them globally. IPAR has 647 employees, zero factories, and zero debt. COTY has 11,800 employees, 8 factories (including the world's largest fragrance plant), and $3.3B in debt. Same business. Different execution.

What gets us to $4: Coty just needs to stop being a crisis. Not grow. Not beat the market. Just stop declining.

| Scenario | EV/EBITDA | Stock Price |

|---|---|---|

| Today | 5.9x | $1.95 |

| Stabilized business, permanent CEO | 8.0x | $3.91 |

| Consumer Beauty sold, debt paid down | 10.0x | $5.83 |

| Peer multiple (IPAR at 12x) | 12.0x | $7.75 |

At 8x — still a 33% discount to IPAR, below COTY's own 10-year average — the stock is $4. You don't need a heroic turnaround. You need management to stop shooting themselves in the foot.

The Business Is Simple

Coty makes perfume. They license brand names from fashion houses (Burberry, Hugo Boss, Calvin Klein, Marc Jacobs, Chloé), develop the fragrance, manufacture it in their own factories, and distribute it globally. 85% of their brands are either owned or have 7+ years remaining on their licenses. The fragrance market grows 5-7% annually. People are wearing more perfume, not less.

The problems are all in one division. Consumer Beauty — CoverGirl, Rimmel, Max Factor — is ~35% of revenue and declining. These are drugstore cosmetics brands losing to e.l.f., NYX, and DTC competitors. The division is under strategic review (sell or restructure) and already wrote down $362M in goodwill last quarter.

The rest of the business is fine. Prestige fragrances (65% of revenue) grew 10% annually from 2021-2025. Burberry grew 140%. Hugo Boss grew 33%. Marc Jacobs grew 50%. These are premium products with 55-65% gross margins and genuine consumer loyalty.

Yes, the employee reviews are terrible. Glassdoor and Indeed are full of "toxic culture," "worst career choice," "morale at all-time low." When you've had 8 CEOs in 16 years and 700 layoffs announced, the good people leave and the survivors get cynical. This is a real problem. But the products themselves are still good — I went on TikTok and looked at the rollouts. BOSS Bottled Beyond is killing it. Burberry Goddess was the biggest launch in company history. Marc Jacobs Beauty just relaunched to strong reviews. The creative talent that makes the products hasn't disappeared — it's just been badly managed. A credible CEO who actually stays for more than 2 years can fix the culture. The products don't need fixing.

This is not an AI disruption risk. Coty's business is physical products people spray on their bodies. Their AI use case is reducing marketing costs (70-80% cheaper ad production), not replacing the product. If anything, AI helps them.

What Could Go Right

1. Strobel named permanent CEO. The "interim" label is the single biggest overhang. Analysts keep saying "we need leadership certainty." One board decision removes it.

1. Consumer Beauty sold or restructured. The strategic review has been going for 9 months. If they announce a sale (even at a low price), the anchor is gone. The remaining business is a pure-play prestige fragrance company that should trade at 10-12x.

1. The Gucci situation. Yes, Gucci leaves in 2028 — L'Oréal has the 50-year deal with Kering. But Coty sued for commercial impairment (Kering publicly discussing the transition before the license even expires). Analysts estimate an early settlement could be worth $600-800M. That goes straight to debt paydown if it happens. And Gucci is ~8-10% of revenue — the remaining 90%+ of prestige brands are still here and growing.

1. SG&A reduction — the anchor thesis. Even in a worst-case scenario where prestige growth stays flat and consumer beauty keeps declining, simply normalizing the bloated cost structure drives the stock higher. G&A is at 26% of revenue. Inter Parfums runs the same business at ~15%. Getting COTY to 20% — still generous — adds $0.30/share in earnings. At 8x EV/EBITDA, that alone takes the stock to ~$4 without a single dollar of revenue growth. The new CEO has 33 years at P&G (the company that defined consumer goods cost discipline) and already announced a restructuring program targeting exactly this.

1. Marc Jacobs Beauty. Relaunched May 2026. Early reviews are strong. TikTok views at 35M+. September Sephora rollout.

The Bear Case

• 8 CEOs in 16 years. The culture may be unfixable.
• Revenue is still declining (-7% like-for-like last quarter).
• $3.3B in net debt at 3.9x EBITDA — high but serviceable.
• JAB Holding controls 55% and has been a terrible steward (they allowed the previous CEO to funnel millions to her partner's company).
• Negative tangible book value — no asset floor on the stock.
• The permanent CEO question — if the board hires someone else and the strategy changes again, the thesis resets to zero.

Sources: SEC filings (8-K, 10-K, 10-Q), earnings call transcripts via FMP, WWD, YouGov fragrance consumer survey, NielsenIQ Innovation Vitality Report.