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Burberry, Coty Inc (COTY) to Team Up on Fragrances and Cosmetics

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Burberry has announced that it is teaming up with Coty Inc (NYSE: COTY ) on fragrances and cosmetics.

Burberry, Coty Inc (COTY) to Team Up on Fragrances and Cosmetics

Burberry says that it will be licensing its fragrances and cosmetics business to Coty Inc for $162 million. The luxury brand will also be selling its inventory to COTY for $63 million. The deal will also have the company paying royalties to Burberry.

Burberry notes that it will continue to have creative control over its fragrances and cosmetics business. The advantage is that the deal gives it access to Coty Inc's global distribution network. It expects that this will allow it to expand the business.

Burberry also says that it expects the deal to be largely neutral to its adjusted profit before tax in its 2017/2018 year. However, after this it expects it to be accretive to its adjusted profit before tax. The business has recently made up a declining part of the company's revenue, reports Reuters .

"Working with a global partner of their scale and expertise will help drive the next phase of Burberry Beauty's development and position this business for future growth," Burberry CEO Christopher Bailey told Bloomberg .

The decision to sell off its fragrances and cosmetics business was also positively received by analysts. Luca Solca, a Exane BNP Paribas analyst, said that the company didn't have the scale to compete in the industry. However, letting Coty Inc manage the brand's distribution will likely help it overcome this issue.

COTY stock was down 2% as of Monday afternoon.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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