Dear Mr. Berko: I’ve never seen you talk about Coty. I bought 1,000 shares at $31 in 2016, and it crashed before my check cleared. My Wells Fargo broker says I should sell the stock and buy a fancy annuity that actually sounds good. What do you think?
— PW, Rochester, Minn.
Dear PW: Coty (COTY-$13.48) completed its initial public offering in June 2013, selling 65 million shares at $17.50 each. Bank of America, Merrill Lynch, J.P. Morgan, “Wells Cargo” and Morgan Stanley headed the syndicate. And zip-a-dee-doo-dah, a few years later, COTY was trading between $30 and $33, with $4.6 billion in revenues and earnings of 50 cents a share. Then, in late 2016, COTY completed its overly big purchase of Procter & Gamble’s cosmetics business for $12.5 billion. This transaction crashed COTY’s market price to the low teens and blistered and traumatized normal balance sheet and income statement numbers. The purchase was too big to chew and a temporary setback. However, management on both teams has finally integrated the products. And according to one of the women at the office next door, the scents are still enchanting and seductive. You can prove it by me.
Today COTY, with a $12.55 book value, manufactures and sells Hugo Boss, Gucci, Calvin Klein, Dolce & Gabbana plus other premium lines. And to make distaff even sexier, this company aggressively encourages women to purchase its damnably expensive skin, nail, eye and hair care products, too, from such brands as CoverGirl and Max Factor. This year, estimated revenues of $9.4 billion from 77 brands should allow COTY to deposit earnings of 70 cents a share on its income statement. And the libidinous cosmetics models are so hauntingly beautiful it’s little wonder a man’s testosterone becomes highly elevated. Even famous Buffalo Bill Cody used a special fragrance by Francois Coty, who, in 1904, founded the company that is now Coty Inc. Buffalo Bill’s breath and body odor were so bad that public toilets automatically flushed when he walked by. Coty’s fragrance masked the stink from Buffalo Bill so he could engage the ladies. The company’s motto then was “sell sex appeal,” and today it’s still selling sex appeal.
COTY’s ridiculously expensive products, in collectible Lalique and Baccarat bottles, were designed for the luxury market. COTY’s other fragrances and products are mass-produced but designed to convey images of intimacy, luxury and sex. Yep, intimacy, luxury and sex are responsible for trillions of dollars of our nation’s retail sales. Sex appeal certainly sells more effectively than logic or reason. Just observe the commercials for beer, cars, clothing, mattresses, cola, recreational products and vacation packages ad nauseam. Sex appeal has the whole wide retail world in its hands.