The early exiting of Coty’s Gucci license was viewed as generally positive by analysts, especially since it ended a period of uncertainty. But big questions remain.

On Tuesday, Gucci and L’Oréal formally entered into a 50-year exclusive beauty license, effective in mid-2027, one year ahead of schedule, as the Italian brand’s fragrance and beauty license with Coty Inc. was meant to expire on June 30, 2028.

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In a note, Sydney Wagner, an analyst at Jefferies, said: “While the loss of Gucci Beauty (Coty’s third-largest fragrance franchise) remains a meaningful long-term portfolio headwind, we view the announced transaction as a more favorable outcome than a standard 2028 expiration. The agreement provides Coty with an upfront cash payment that can be redeployed toward debt reduction and investment behind core brands, while also resolving ongoing litigation.”

Coty is to receive about $400 million for the early redemption of the license agreement rights. The cash payments should be made in two phases — $250 million this year and up to $150 million in 2027. 

But Lauren Lieberman, an analyst at Barclays, said while announcing the one-year early termination of the Gucci License takes uncertainty on the timing off the table, “it still does not solve for the issue of Coty being able to fill the gap from lost EBITDA once L’Oréal assumes the license.”

Compared to estimates in October, Barclays is now estimating Coty’s total company sales in fiscal year 2028 will be 4 percent lower, while its estimate for total company adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] is fully 32 percent lower. 

“If we assume Gucci Beauty declines in line with the rest of prestige in FY26 and FY27 and 20 percent EBITDA margins, the loss of the Gucci Beauty license could be [approximately] $115 million to adjusted EBITDA in FY28 or [approximately] 15 percent of total company profits,” she said.

Lieberman expects the company to shed more light on this when it releases its fourth-quarter earnings next month. 

As for the stock market, it appears to have taken the early exit announcement in its stride, with Coty’s stock changing little during after-hours trading Tuesday. On Wednesday, Coty’s shares closed down 4 percent to $2.14.

Coty’s net revenue for the third quarter ended March 31 came in at $1.28 billion, a decrease of 1 percent compared with a year ago. Coty’s like-for-like sales declined 7 percent in the quarter, including an estimated 1.4 percent negative impact from the Middle East, driven by the escalation of the conflict in the region.