Coty Inc. is facing a securities class action lawsuit following a turbulent stretch that saw its Consumer Beauty operating income fall by more than 70% year over year, its CEO depart without explanation, and the company withdraw its full-year 2026 financial guidance. The suit, filed by national shareholders’ rights firm Hagens Berman, seeks to represent investors who purchased Coty common stock between November 5, 2025, and February 4, 2026.
What Triggered the Lawsuit
The complaint centers on a sequence of events that unfolded over roughly three months. On November 5, 2025, Coty reported its Q1 fiscal 2026 results and reassured investors that sales trends were improving in line with expectations.Â
CEO Sue Y. Nabi specifically told investors: “we remain laser focused on strengthening our profitability and balance sheet, with our fiscal year 2026 business trends steadily improving in line with our expectations.†The company reaffirmed its FY 2026 adjusted EBITDA target of $1 billion.
Just weeks later, on December 12, 2025, Coty announced Nabi’s departure without providing any explanation, sending shares significantly lower. Then, on February 5, 2026, the company’s Q2 results revealed that Consumer Beauty’s operating income had plummeted by more than 70% from the prior year, while Prestige’s operating income had fallen by more than 18%. Coty also withdrew its FY 2026 EBITDA and free cash flow guidance entirely, a move that drove shares down a further 8% that day.
What Hagens Berman Is Claiming
The lawsuit alleges that Coty made false and misleading statements while failing to disclose that the Consumer Beauty market was materially underperforming, margins were being compressed by increased marketing investments, and prestige fragrance growth was already slowing at the time of its November assurances to investors.
Reed Kathrein, the Hagens Berman partner leading the investigation, said, “We’re investigating whether Coty may have intentionally misled investors about its segment business trends and, if so, whether the year over year softness might be related to earlier reported destocking issues. We’re also looking at the circumstances surrounding Ms. Nabi’s abrupt and unexplained departure.â€
The Numbers Behind the Claims
Coty’s own Q2 results confirm the severity of the deterioration. On a fiscal year to date basis, Consumer Beauty generated reported operating income of just $10.6 million, down from $78.1 million in the prior year, leaving the segment with a reported operating margin of 1.0%, down 600 basis points year over year. On an adjusted basis, operating income for the segment fell to $28.9 million from $97.6 million in the prior year.
During the earnings call, management also warned that Q3 like for like revenue trends would decline mid single digits, driven primarily by bigger declines in Consumer Beauty, and acknowledged that “the promotional environment intensified as we moved through the holiday period and remains elevated, which is a headwind to net sales and, by extension gross margin.â€
A Leadership Vacuum at a Critical Moment
Nabi, who joined Coty in September 2020 with a mission to modernize the company and strengthen its prestige positioning, departed at the end of 2025 after five years at the helm. Markus Strobel, a Procter & Gamble veteran with over 30 years of experience, stepped in as interim CEO and executive chairman on January 1, 2026, as a strategic review of the Consumer Beauty division gets underway.
The abruptness of the transition, with no successor in place and no public explanation for Nabi’s exit, is a central focus of the lawsuit. Investors had received no signal ahead of the December 12 announcement that any leadership change was coming, making the combination of the CEO’s departure and the subsequent earnings collapse difficult for shareholders to reconcile with the positive guidance given just weeks earlier.
What Investors Should Know
The lead plaintiff deadline in the case is May 22, 2026. Hagens Berman has also noted that whistleblowers with non public information about Coty may be eligible for rewards of up to 30% of any successful recovery made by the SEC under the SEC Whistleblower program.
For beauty industry watchers, the case puts a sharp spotlight on the gap between what Coty told the market in early November 2025 and what the actual business results revealed three months later. Whether those disclosures were misleading or simply reflected a business that deteriorated faster than management anticipated is what the court will ultimately be asked to decide.
