Earlier this week, Michele Scannavini, Chief Executive Officer of Coty Inc., announced he was leaving the company for personal reasons. And now the industry awaits who will be named to the top spot.

Michele, who assumed the CEO role in 2012 after 10 years as President of the Prestige Division following the 2012 departure of Bernd Beetz, had successfully led Coty through its initial public offering and was well regarded. However, the company has reported losses in three out of five of its past quarters.

One industry watcher said the financial slips didn’t sit well with company Chairman, Bart Becht, who is acting as interim CEO while a search is on for Michele’s successor. Bart joined Coty in 2011 as non-executive Chairman. Formerly he was CEO of Reckitt Benckiser.

“Bart is a very hard-charging, efficiently-driven person,” said one expert on the company. “Good, creative people may leave since Bart runs a very tight ship, but the company wasn’t delivering results and that isn’t something he swallows well.”

And there is opportunity for Coty to improve performance.

Coty Delivers Miracle Gel To Revive Nail Sales

A downturn in the nail category, coupled with ongoing malaise in the fragrance business, especially mass scents, has affected Coty’s results. The mass market, in particular, has not fully recovered from the economic downturn, prompting many big box retailers to de-stock items and consolidate brands.

While the mass nail business had declined as much as 13% earlier this year, IRI data for multi-unit outlets for the 52-week period ended August 10 reveals the category showed some improvement, with just a 6% dip over last year. Coty’s new Miracle Gel looks to put it back on top of the nail business. Already the gel-like polish that doesn’t require a lamp to “set” the color has helped Coty achieve its highest share in two years, according to Coty, citing IRI.

Scents See Uphill Battle

Fragrances, however, will be harder to fix. IRI data shows men’s scents are down 4% while women’s are off by 4.6%. Some key Coty brands are lagging – Stetson is down 7.8%, Calvin Klein Eternity is off 8.5% and Adidas Moves declined 18%. Coty has worked to reduce its reliance on fragrance, which was once 60% of total sales, and now accounts for 54%.

Color, Skin Show Promise

Color cosmetics produce 31% of sales, while skin and body care contribute 15%—and a few brands are seeing growth.

Rimmel’s powder items show a 16% sales spike; Rimmel Professional Eye Brow Makeup generated 23% gains; Coty branded lipsticks plumped up almost 14% for the period ended August 10 in all mass outlets tracked by IRI.

Additionally, Coty’s N.Y.C. Color value cosmetics brand just named Demi Lovato as its spokesperson, a move that will likely help it compete with others in the space, such as Wet n Wild, who is armed with Fergie as its spokesperson.

What The Future Holds

Coty was quick to say the departure of Michele doesn’t indicate any upcoming issues. The financial community agreed that Coty is caught in a down cycle. “Coty is hardly unique in dealing with sluggish categories,” according to JP Morgan analyst notes.

In July, Coty streamlined its organization to gain efficiencies by focusing on product categories and geographic regions, while still maintaining Prestige and Mass differentiation in brand building and product development. The transformation was also enacted, according to Coty, to push sales from emerging markets to closer to one-third of sales, up from about 26% now.

During its fourth quarter results call, Coty said the company was aiming to return to revenue growth in fiscal 2015. Although shares dropped as much as 3% on the announcement of Scannavini’s departure, analysts have mixed views on Coty’s current outlook. JP Morgan said the company still has potential as an M&A story. The company has been aggressive in purchases over the past several years, nabbing Del Laboratories, OPI and Philosophy. In 2010, Coty bought China’s TJoy, but discontinued it earlier this year. At that time, Coty announced a deal with Hong Kong-based Li & Fung Ltd, in which the latter will distribute some of Coty’s global brands in Chinese market, including Adidas, Rimmel and Playboy.

Other financial experts, however, said Coty faces challenges of category growth at a time when it’s over-indexed in the troubled fragrance category.

Industry consultant Allan Mottus suggested Coty sell off or close brands and make it a much smaller, focused company. Writing for Seeking Alpha, investor Nitin Gulati suggests Coty “rebalance its product portfolio to close gaps in the marketplace.”

No matter the future direction of Coty, it will be under a new CEO. In a parting note to business contacts, Michele called it a “fantastic ride” to watch Coty develop from a “regional challenger in fragrances to a global leader in beauty.”