Struggling Coty names P&G veteran as interim CEO in leadership shake up

Adds U.S. share reaction, beauty industry context

By Rishabh Jaiswal, Alexander Marrow and Mrinmay Dey

Dec 22 (Reuters) - Coty COTY.N on Monday named Procter & Gamble PG.N veteran Markus Strobel as chairman and interim CEO, handing him the reins from outgoing CEO Sue Nabi as the CoverGirl cosmetics owner battles pressure in its mass-market business and a steep share-price slide.

Coty shares have fallen more than 50% this year as the company struggles to revive sales amid intensifying competition from newer beauty brands and larger rivals like L'Oreal OREP.PA. Its share price-to-earnings multiple lags peers including L'Oreal, Estee Lauder and elf Beauty ELF.N.

The shares fell more than 2% after market open in New York, while its Paris-listed stock was down about 2.2%. Wall Street analysts, however, view the move as a long-term positive for Coty.

Strobel, who spent over three decades at Pantene shampoo maker Procter & Gamble PG.N and most recently led its global skin and personal care division, will take over January 1, succeeding Nabi, who steps down after five years as CEO. Coty did not say when it expected to name a permanent chief.

The leadership change is the latest in a global consumer goods industry grappling with shoppers - particularly those with lower incomes - reeling in spending due to higher prices and economic uncertainty.

Strobel previously worked with labels such as Gucci, Dolce & Gabbana, Valentino and Hugo Boss, while handling fragrances at P&G. Coty acquired the fragrance licenses of those brands, and others, in a $12.5 billion deal around a decade ago, but is now set to lose the exclusive license for Gucci fragrances and beauty products to L'Oreal in 2028.

Strobel will also become executive chairman, replacing Peter Harf, who is retiring after more than 30 years on Coty's board. Harf also stepped down this year as chair and managing partner of JAB Holding, Coty's largest shareholder.

The search for a permanent CEO is underway, a person familiar with the matter told Reuters, adding that the new chair appointment created a natural moment for leadership succession.

JAB PUSHES FOR LEADERSHIP OVERHAUL

The Financial Times reported this month that JAB planned a leadership shake-up at Coty that would see Harf and Nabi exit.

JAB, which manages more than $40 billion in assets, owns about 52% of Coty, according to LSEG data. It did not immediately respond to a request for comment but published Coty's statement on its website.

Nabi oversaw a reduction in leverage, with Coty's net debt to core earnings (EBITDA) ratio falling from more than seven times in 2020 to below three times. On Friday, Coty completed a 2020 portfolio streamlining plan by selling its remaining 25.8% stake in hair care brand Wella to KKR KKR.N for $750 million.

CONSUMER BEAUTY UNDER REVIEW

Coty said Strobel had the board's full support at a "pivotal moment", with a strategic review of its consumer beauty business underway.

The review, launched in September, could lead to the sale of brands such as CoverGirl and Rimmel as Coty shifts focus to its more profitable fragrances unit. Fragrances are increasingly popular with younger Gen Z customers, supported by the "lipstick effect" - a trend where consumers favour small luxuries over big purchases during economic uncertainty.

"I see tremendous potential to accelerate growth, strengthen our position in prestige and mass beauty, and deliver sustainable value for shareholders, partners, and consumers worldwide," Strobel said.

However, increased competition and a recent slowdown in the beauty market are more to blame for Coty's troubles than leadership, CFRA Research analyst Ana Garcia has said previously, adding that sales would remain under pressure.

Coty missed first-quarter profit estimates as retailers scaled back orders. Still, it forecast second-quarter like-for-like sales at the upper end of its previous guidance range, banking on steady demand for Calvin Klein and Hugo Boss fragrances.

CONSUMER FIRMS RESHUFFLE TOP RANKS

Consumer goods companies are swapping CEOs almost as fast as sports teams change coaches as boards grow impatient with weak growth, U.S. tariff uncertainty and the challenge of attracting younger shoppers.

Kraft Heinz recently named former Kellogg chief Steve Cahillane as CEO, while Coca-Cola KO.N and Lululemon LULU.O have also appointed new chiefs, joining peers such as Unilever ULVR.L, Nestle NESN.S and P&G in revamping leadership.

(Reporting by Rishabh Jaiswal and Mrinmay Dey in Bengaluru and Alexander Marrow in London; additional reporting by Jessica DiNapoli in New York and Savyata Mishra in Bangalore. Editing by Nivedita Bhattacharjee, Anil D'Silva and Mark Potter)

((rishabh.jaiswal@thomsonreuters.com; +91 9916719147))