Coty Inc. is facing claims that its efforts to position itself as a prestige-driven beauty powerhouse were underpinned by a misleading account of its actual performance. In a newly filed lawsuit, Suvega Srinivasan, a Coty shareholder, alleges that the New York-headquartered beauty group touted “improving” trends, a “pipeline of new brand launches and innovations,” and a “return to sales and profit growth in the second half of FY26” – even as key parts of the business were already showing signs of strain.
According to the complaint filed in the U.S. District Court for the Southern District of New York on March 23, Srinivasan alleges that between Coty, its former CEO Sue Nabi, and CFO Laurent Mercier issued “overwhelmingly positive statements” about the company’s growth prospects and fiscal 2026 outlook during a period between November 2025 to February 2026. Coty struck a consistent tone in late 2025, per Srinivasan. telling investors that it expected “a gradual improvement in sales trends” and that like-for-like sales would “return to growth in 2H26,” alongside a “return to adjusted EBITDA growth in 2H26,” with a target of $1 billion for the full year.
Executives reinforced that message, the complaint contends, with Nabi stating that “underlying business trends are already improving” and pointing to strength in prestige fragrances, including “mid-to-high single digit” growth in U.S. sell-out.
Behind the Growth Narrative
This narrative unraveled in early February 2026, Srinivasan alleges, when Coty reported below-expectation results, cited worsening performance in Consumer Beauty, and pointed to weaker trends in Prestige fragrances. At the same time, the company acknowledged that “operational discipline has slipped across the organization” and that performance had been “inconsistent” relative to the market, rolled out its “Coty. Curated.” strategy, and withdrew its prior fiscal 2026 guidance for EBITDA and free cash flow.
As part of that disclosure, Coty – which holds the beauty licenses for the likes of Gucci, Burberry, Calvin Klein, and Marc Jacobs and owns Kylie Cosmetics, CoverGirl, Max Factor, Rimmel, etc. – stated that its recent financial performance “has been disappointing” and that future success will hinge on “disciplined execution, operational effectiveness and sufficient multiyear marketing support.”
The market reaction was swift: Coty’s stock fell from $3.43 on February 4, 2026 to $2.66 on February 6, 2026, Srinivasan asserts.
The crux of the issue, according to Srinivasan, is that Coty, Nabi, and Mercier (the “defendants”) created a “false impression” that they possessed reliable information about Coty’s projected growth – driven by launches, operational improvements, and AI initiatives, while minimizing risks from slowing growth in the beauty market. Specifically, the complaint maintains that Coty failed to disclose that Consumer Beauty was “underperforming,” margins were “compressed by increased marketing investments,” and growth in Prestige fragrances was slowing.
The complaint also points to Coty’s February 2026 rollout of its “Coty. Curated.” strategy, including statements that its recent financial performance “has been disappointing” and that future success will hinge on “disciplined execution, operational effectiveness and sufficient multiyear marketing support” – remarks that Srinivasan says underscore the gap between the company’s earlier assurances and its later disclosures.
With that in mind, Srinivasan asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5, arguing that Coty and its executives made materially false or misleading statements, or omitted key facts necessary to make those statements not misleading, and did so knowingly or with reckless disregard for the truth. The complaint further claims that Nabi and Mercier, by virtue of their senior roles, exercised control over the company’s public statements and can therefore be held liable as “controlling persons” for Coty’s alleged violations.
In addition to seeking damages and equitable remedies, Srinivasan is seeking to have the case certified as a class action, representing all those who purchased or acquired Coty securities during the November 5, 2025 to February 4, 2026 class period.
THE BOTTOM LINE: As pleaded, the lawsuit will turn on whether the challenged statements from Coty and its execs were materially false or misleading when made and whether the defendants acted with scienter. The outcome will hinge on whether the plaintiffs can demonstrate that Coty’s executives knowingly or recklessly made statements that inflated the company’s prospects, to the detriment of shareholders.
The case is Srinivasan v. Coty Inc. et al., 1:26-cv-02343 (S.D.N.Y.).
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