COTY - Earnings call transcript Q1 2018

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Operator

Good morning. My name is Andrew, and I'll be your conference operator today. At this time, I would like to welcome everyone to Coty's Quarterly Earnings Conference Call. I will now turn the conference over to Mr. Monaco. Mr. your begin may you conference. Monaco,

Kevin Monaco

and thank results actual Good All revenue cause contain Business and we remind P&G than other today's de you with could joining Officer. forward-looking the President On differ filed net that release materially reflect many both statements. comments that Please for of factors combined acquisition are morning of Talhouët, basis the Beauty forward-looking would these Camillo may list to to Vice currency excluding Patrice in impact the statements. and press call and Pane, the us. Officer; refer commentary revenues of net Business. our where from constant Financial our on Beauty the a our you P&G reports Chief like Chief SEC, organic current acquisitions, Global on of the Executive at I Executive periods, Legacy-Coty and the comparison and prior-year to

addition, financial reflect results discussion specified of and of Measures our except our earnings in section expectations adjustments as release. certain the our where In Non-GAAP the Financial noted,

can to in reconciliation I non-GAAP in from bridge the to release. find the will the results earnings call turn the tables now over You GAAP Camillo.

Camillo Pane

cost performance and significant everyone, Thank discipline in net better improvement growth reduced strong division. first strong quarter's momentum you, Luxury, a delivered Beauty the margin fiscal a our the quarter. in driven continued welcome, Kevin, saw Professional in We earnings by in much and We on financial XXXX to revenue gross call. structure. better Consumer QX positive profits, decline and was

from ALMEA as exited our meaningful several several progress line merger TSA our was announce glad and to a positive for region. execution in-store and innovation brands, final we our increased performance behind have growth. growth X% Starting by and driven launches, We with the Luxury this X, successful consecutive the to countries. an in pipeline, organic of September Luxury, integration, basis, also excellent third best-in-class continued revenues top of I'm leading quarter third on double-digit in making that,

The We was fragrance. fragrance new in Coty major best seller launch several globally. quarter: top Tiffany's launch biggest Tiffany's Bloom retail. Macy's, has other travel launch and week including the a new successful Harrods, Gucci introduced day five in and two opening products every we launch Gucci Bloom years at the at debut key globally, the and retailer ever was and in also two product in the first top Bloomingdale's, launched ever biggest been retailers this

Our is to growth Luxury new in launches. limited not

had quarter, U.S., fact, the net very driven and both by revenues direct-to-consumer. sell-through channel In growing strong strong in philosophy in retail digits the double a

organically. and fourth of driving X% HUGO results to the of revenues Marc campaigns marked able positive quarter division, BOSS also healthy the In first These in net increasing our Additionally, pillars. these for very what Daisy, achieve. with new Professional is the new are consecutive which we growth launched Jacobs growth are quarter clear Coty

on grew regions particularly are we business momentum all across Professionals, continued hair strong Our and color. Wella seeing in

System quarter. addition, the in progress continues double growing on digits In its global making rollout, Professional good

in continued our remains by driven on an next has a X% basis markets OPI grow The combined weakness America, was continued decline declined declines Consumer revenue this of some brands, global in particularly us. international North Beauty retail for with to key market. Additionally, with of focus in being the beauty net mass hair, area organic our focus. and

to growth, this stabilizing digital see by to experience in-store We're end-to-end our Although working I'm amplify retailer transformation, achieving and on-trend business. driving signs our with drive of collections with date, accelerating efforts. time not our engaging the capital e-commerce to and to new I'm performance with products, to happy actively divisional customers market shopping on Beauty the a accelerating Consumer starting

line makeup product And, six game-changing exciting innovation has we coming Where see outperformed coupled be recent market should market, to which Clairol in with further new to space in Clairol competitor. For boost the to half, hair to instance, as its second shelf this such, our with main months. expect faster in goal available, to to allocation, a we just Crave increased able innovation Color the were brand. bring

ALMEA in to in challenges highlights several Europe, have we spots Australia, North America While Mexico, and continue with bright continues address to and Brazil.

Speaking standout success for of continues story Coty. this be a Brazil, to business

growing it's company months three is market, underlying at on and, the in segment innovations volume ago. of Brazil player global believe deodorant this story doubling confident sellout this and in our increasing strategic and years share a what as an M&A of the the in example XX local a in year-to-date of strong just we achieving rate is the remain clear focus extremely With focus largest brands, second by market. via on of what double became example, Our and after our the in accomplished our pipeline we've I'm of we execution. capable proud

is the As preparing are Coty. The statement biggest in announced strength new also of Am of What In we recently the years know, its I COVERGIRL relaunch Up, another relaunch Make reinvention brands. is history. you COVERGIRL's example brand's XX the I several of the purpose, of new

fiscal boundary are few half out Our in billion in in in XX the to X.X powerful and views the sharing and cultural agents XXXX more million result I'm astounding fixtures looking of news relaunch as stores. rolled film matter impressions featuring forward COVERGIRLs good a days. second product change breaking of six in

this of improvement communication the consumer-focused in improving to brand Beauty combination execution the strategy and in support gradual trends. expect initiatives, market We revenue Consumer

the accelerating on to results their before, brands equity, consumers, strategy repositioning said the linked These Consumer focus quarters, time strong significant to process directly end-to-end I significantly already our I changes execution. in making building As parts in-store been of you order take up in product e-commerce, them on growth to be Beauty transformation brand even to it to done state-of-the-art reconnect ramp to our innovation will including want is driven there the division. in past closely select still with much and for digital clear our several positive the retailers work our organization more articulating to full are execution, the by recovery we've development with of still be that to collaborating faster goals. achieve

give Coty and while to results quarter-to-quarter, journey only this XXXX just uneven recovery. likely moving having issue from milestone net be revenue stabilization. cost this this important the strategy me year regards a new will trends to priority, into top have place, we make of are a growth improving regard. we And put We started full in and outlined confidence following expect control, the would the above disappointing gradually our that quarter, the to we one-off path an be With have. in fourth I a be that you of foundation After is the told fiscal Coty

which This over to improvement part meaningful signature place in cost of our of and a strategy. ghd in quarter, put positive are expected to time. in is scale, team seeing to as Brazil, deliver management pleased Professional our operating our program, we're help we our complementary that from technology number sustainable income results and initiatives is adjusted our want is products management driving lead I expense and say lacking division. to positive I'm where Hypermarcas bringing results also M&A results to highlight previously the very to

very of intersection a Coty. been key day purpose-led work our brands. M&A business to Younique the overall, reposition of best-in-class can objective criteria, for another active the empowering The central of These partnership to base, success growth, has line one, we social strong platform business Younique into our acquisition of began provides and additions on e-commerce category recent and example nearly of best category. well. expertise the example acquisition a has luxury ongoing and complements our Younique's enter fragrances, leadership prestige accelerates Burberry and the and performed new strong how customers, is XX% cosmetic the continued connect fast top growing Younique this growth our have with brands and complementary our a viability presence in our is as coupled business From several to presenter premium strategic a the continued color which Further, women. model. media a fit to our Moreover, the great positioning and testament addition is focused Coty we in since increased to a double-digit successful with in

and plans, these without worked new the at of accomplishment so nurture to culture mindset that be possible launches, All not hard would we've Coty. and

industry-leading be accountability margins one it and drive own which of sustainable execution, growth time. delivering and value keys new and the to will of focuses Our over on it,

beauty, also diversity which distinguishes to with and celebrating creates a have At have prejudice and stand inclusion. to I'm fight the discrimination and company ethnicity, sexual extremely barrier disability, decided to inequality. a that we're us Coty, on Global and partnering focus with great specific which self-expression, industry. liberating your and excited has gender a prejudice received of been by we orientation And well the the We in fight take Citizen individuality, purpose to our employees of that

improvement over turn Coty strategy lead new that deliver work much With in while I re-launch the is Patrice. to key deliver improved to revenue over net call finalize done, And continue beauty. will as second roughly year, we confident the several closing, of a top believe becoming our balance growth organic fiscal there half to I'm synergies, for comparable to our year. firmly aim to healthy expect working. XXXX, as of the will streamlining program, of remainder to this the efforts is a our In the ahead remainder an leader our challenger global well to and Looking with all portfolio year, now on margin be brands. the announced prior we to trends and brand line the our of of I

Patrice de Talhouët

Thank operating with you, margin and operating metrics, Camillo, and QX everyone. flow good and key a gross was better quarter progress. much revenues, making cash all morning

North our integration start final of on processes and exits America results, of our Transition new further elaborating portfolio. the enormous This by thrilled is us, of completion we simplified I momentum the from work let stage across Before of announce with and in our May now infrastructure, to successful am Service Europe seeing TSAs regions, optimized continue to an control as work the on the With are business now we behind and build the will combined fully systems. some for have integration in our stabilize moment very of the with third our an Coty, to ALMEA important leverage we and in July. our on over amount the P&G data, team, the After Agreement and the exit plan. following dedicated the us

As control significantly part program on mentioned, significantly efforts Camillo initiatives, the our we structure strengthening cost on with measures existing expenses, many cost consolidated increased synergy already our from as of ongoing scale gain teams to field our facilities including global and efficiency, sales the office to local a and excellence of commercial our help optimize force. of number deploying streamlining operations, centers of

to merger during our the first growth these initiatives, have of of led the of Some good to from the though have lines, across signs made synergies achieved. business already be P&G addition quarter, the strategies our Beauty when our profitability continued progress to our overall tangible progress execution yet even bulk in of

ambition Indeed, Our of say profitable margin. discipline across our our a focus best-in-class margin consistent is cost now very business, in our strong is driving decisions. fair what while growth to reaching operating maintaining is is to order business best-in-class it operating on achieve driving

Now, our to on results.

as of year-over-year, synergies consecutive point us financial chain P&G First increase, fourth tight above our organic business, A that operating even that increase adjusted an operating the net adjusted The quarter supply more from billion, were income XX% attributable Adjusted of into in to procurement XXX% Beauty Coty account well last to gross prior as resulting P&G largely year, Beauty, $X.X driven was XXX our of X% net P&G $XXX acquisition acquisition a inherited improved and million, the improvement balance This higher XX.X%, revenues a we represented generate while by operating evidence profit the X%. basis declined very the of discipline ambition of Interest incurred strategy. reflects financing versus good performance pronounced margin. a if year. QX allowed the take stand-alone revenues quarter as increase expense margin Younique in transactions. business of and million our margin with we was taking loss-making seriously. $XX part operating growth, ghd, is debt a are the is well

with expectations earnings of line equivalent $X.XX, rate adjusted or per XX% in for Our million of of expectations. share result income quarter an effective the tax ahead in of an adjusted net $XX

improvement to to working achieve capital the up cash strong to continued business. We free deleverage

we working Our there average was capital believe still negative come. working QX, and to are capital for some improvement more

return we performance in the in continued quarter, few a $XX add divisions. million details cash also During to paying to additional to dividends. to three like our shareholders, our I'd

creative First, roughly the of chain. in inherited quarter the in supply a Luxury, while first of improvement productivity year, structure, cost our an our in thanks on good prior with income to with the innovation gross margin emphasis line in strong million, $XX our P&G losses This, the adjusted has the improved, combined and operating delivered business. absorbing

year. this our and as We to investment are behind the about marketing new began campaigns fruit innovation bear positive momentum

an the million. ghd seasonality, adjusted Impacted to of Beauty, lowest operating be margin, challenges as year income a Consumer quarter success revenue grew maintained in Our as continued top QX a the revenue which to to while our the overall Younique, moderately of profitability adjusted resulting operating and being income level standpoint. Professional double-digit income the X% due in division The operating line growth, has of improving gross well margin been margin increased in $XX slightly improvement margins. gross $XX the structural million, of Despite by revenues adjusted the to accretive from continuing XX% with

expect close XXXX. to our successful the put initiative us by Finally, important To over conclude, portfolio, we to of focus revenue this exit. trajectory divestiture time. quarter help of a on behind an the fiscal should we improve continue the or X% to announce via growth has discontinuation of combined This rationalization as said to which before, milestone with X% pursuing whether TSA's

on a best-in-class ambition We new of building operating now delivering to being our foundation challenger match are and focusing serious our margin.

operating trends QX, aim thanks favorable the you. improved comparison. we the over a year net well to of more balance As revenue positive deliver margin the as in said, pronounced as of Camillo base healthy synergies year, growth remainder impact for and to the a Thank delivery with improvement

open We questions. call will for now the

Operator

Our your Lachky. then affiliation, comes first your Please Joe pose state question. question from

Joe B. Lachky

was Wells and target, weakness plan order out laid and improvement EPS be I you've since Securities. there? to you'll to might with Fargo the EPS talk EPS to also I'm long-term still achieve the using you wondering much fiscal get whether business other mean, aggressive you was hit wondering obviously, Hi. need seen underlying how how and Could expect some I I your target $X.XX to hit goal balance sheet in to you what activities you in with unexpected in M&A in goals. about consider you your XXXX? those

Camillo Pane

Thanks for the question, Joe.

said, And business time making line our focus at which achieving that our our show And how start long-term me are in best-in-class operating we Let the the decisions. with of this reiterating by we investment Patrice referred is margins. is in sustainable what this is is thesis merger. that road on then

that business of that we therefore, that fair operating know, visibility of as business not the you to believe the faced longer have take better also in challenges because with which objectives and the it's this, will a year that TSA, the our we say, to we even get the our $X.XX, in best-in-class aspect business road higher into than when the exited to since of now And combine teens. operating have us our in we of margin we the last Now, have smaller smaller it time show. at margin SG&A expectation inherited but revenues, was with of and, you

Patrice de Talhouët

teens synergies that operating objective our reinforce our high is primary reaching best-in-class the Yes. one-off And let announced there. if as not get margin are to the most and milestone me important

over the said agenda. Let balance different you And also accretive said and as me for our timetable time, achieve levers strategic order to a previous in that we we add also M&A it's use what know, EPS just in M&A. calls on including precise to difficult may put has Camillo have to our very as the sheet target,

Joe B. Lachky

And taken think your line top QX you in to or the on top emerged wonder at cost expand order And on structure? on progress least But actions fully in Thanks. XXXX plan fiscal synergies fair. the last quarter. you if maybe to in or finally Thanks. growth taking still costs? touched lines, do expect That's if a headwind be outside you reduce I in you're order fixed specific of addressing high-fixed that that you've those forward. some going issue to making then you rationalize line cost you the could along stabilization of in need And

Camillo Pane

you, Joe. Thank

that's lot So, questions. a of

So, to one take let other. try me after the

the So, on structure. first cost

you we we that make So, we told have. priority issue top and a would this

a management operating as put management expense expected our team time. to healthy sustainable This lead income program, of improvement over deliver the results in quarter, to is in initiatives number has place synergy part a meaningful adjusted to which our and of cost

significantly is So, have measures what we to on done our expenses. cost strengthen control

We of of commercial script, including to to as the measures of office facilities global teams the scale consolidate and force. and deploying some taken excellence I local to our number some have streamlining said in our sales operations, a optimize help also also standard gain efficiency

and not to I'm before, good not a certain QX we some QX P&G achieved more are as a onetime. that So, non-recurring have It's Beauty some as that tangible and cost quarter of second-half-of-the-year progress our year going sure benchmark were profitability though, overall included results even make these skewed. to led the that are first initiatives say and of progress fair in signs come good said during our be make of the bulk to the the from further was will to reflected have already progress yet synergies also merger and to the we

employees example, but some TSA to not supporting the integration, to related the part were who integration, there costs who dedicated worked Coty fully of time, For a were on and we the exit. incur did number somehow

over So, have successfully business and on this the now focus really we because going driving the can is all exited forward. all we TSA, now

Operator

Faiza the your state then next your question question. from Alwy. of our line pose affiliation, comes And Please

Faiza Alwy

Bank. Hi. Thanks. Deutsche It's Yes.

confidence and So, back Camillo, bit a little expectations I for about level your wanted of to talk your half organic that. you just growth to more the in

So, a is how the this for dependent on this perhaps, of more just of how bit distribution perhaps existing of and little you relaunch, space COVERGIRL you much if about better shelf space expecting are your at or additional sort is shelf sort of velocity or are COVERGIRL, gaining points, much talk e-commerce-dependent? it could what expectations increased versus then retailers is,

Camillo Pane

answer on and order more of relaunch streamlining the you and question I'll synergies. regarding get expect second. less I'll continue brands okay? all asked deliver or the Okay. me, we in brand outlook, on the our key to relaunch the going finalize of to your several We're So, the previously-announced the to a to in portfolio

reset Beauty is just means aim all Beauty, I objective one a top we we I quite deliver; Clairol have with I programs relaunch sign net And I we off retailers. some for on the Clairol, U.S. positive also launched of the of relaunches improved launched gain take couple COVERGIRL, of from which the the roughly is very doing, expect first a within the prior an called which product, promos market and October if mentioned a these at relaunch, the which And the space shelf but we are COVERGIRL. half big the to in Beauty. the fiscal are Clairol. windows and XXXX launch Consumer trends On we Color which to said, of with product classical Crave improvement makeup to go Now, the we we the the growth trends remainder second a in the together, we able hair second we second discussed clearly this different an that improving we is, that two year, organic important; these less just reaction to when a net shelf early have comparable also product announced relaunches Consumer we of a of Plus of which with And in in have net as revenue part going therefore just we're to clearly the flat. revenue line look half revenue once and to shelf. year, that help Consumer it's expect on an roughly innovation us normal trends of

our previous And Luxury mentioned important and the the for already various area e-commerce. and Beauty that can at both same our believe calls. was sales, the innovation impact should I is second answered your we space need and annualize of other you And those also, based the I regarding at pipeline, with that from to prior market growing of we it's impacted Looking decisions focus And not question, I this and will above space they all the while, restaging of that for that confirm Consumer don't to an in we the but those key their acquisition retailers space, at important division, low rate conversations on for that of and because think I a Business to in all the disclose we base. results But us although know brands. Clairol P&G our us. we remind I our retain redo continue have the were shelf think, today had of business. in to the shelf brands that of a time. impact I decisions decisions healthy retailers were It's questions. the the shelf me half XXXX. E-commerce Beauty for COVERGIRL for made and and last e-commerce a continue most the the encouraging our sharing hope

Operator

your line the Please question. of your affiliation, Olivia question And then from our pose next Tong. comes state

Christopher M. Carey

with Bank of America Lynch. on Olivia, for everyone. Chris Hi, It's Carey Merrill

just Consumer specifically side. that Beauty, hair follow around up wanted So, retail on that color to question on I

needed remain Obviously, half, mentioned for the think planned you do get business a like just growth And return from lift this Beauty what if don't Consumer seems launches to organic that, frame you like, to turned retail connected can the maybe whole the So, get to is requisite color? it as you ability some somewhat challenged. but you to of around? category the sales back the

Camillo Pane

Talking about color, everybody. I there things. one treated couple think more is I retail of things been beauty did very, as I category category. the And mention a past has this be always that treated think that of in the to by needs And, very this a functionally

is regarding neglected And And a a years. transformation brands, for has brand. to brand lot investment this our Now, this immediate. a not didn't attention refer the many I that of in as receive this Clairol, past brand did been

lost both area and be think our part and covers are be ground the recover preview to this that's from going come positive give clearly that strong beauty on the in will kind pipeline. I back very this the So, we've few a did functional our plans over brand, of of we this months and strong, time, I that big why that which stronger category. of did performance. launches able we believe the have view, beauty brand And much I pipeline, more to and or we much we of in of I and that's the point mention a coming But second to the a a one have believe that half happened launch last XXXX.

brand both that communications of relaunch that of working communicating view way also I experience have we in half store innovation the bit and requires the you of in This to believe of the And clearly, the the second part. coming also positioning. are point or different consumers, the are from a on and So, a XXXX.

trends and Looking we I Beauty. the over place Beauty that's mentioned, have of Beauty, doing year. at because of But still solid full we're the the will as what that we this, believe said, I recovery revenue for are said, we net all of And a relaunches take aim our Consumer as about which strategy we is several why excited time Consumer you improve it for to Consumer a brands. in

Christopher M. Carey

I one prestige? talk maybe And context beauty Thanks. of mass in the it. if around up the on then, being your comments Got could, just your growth sluggish. and to just trade abilities, Can M&A, Okay. you market Thanks. capitalize the follow-up, about in opportunities portfolio

Patrice de Talhouët

that really on and its we what But some would make an operating the time, say, M&A that there the for So, of margin opportunities. on time the clearly new objective basis, our on sure for organic I delivering front, is is best-in-class the deleveraging business. being, ambition focusing are to Coty main are the

going So, that's one Younique, the is come in currently should on are point current like-for-like to priority that about working think on. you time, What also that we the is at basis.

the of is sign positively impact to clearly And in going we clearly We half going are is profile growth the year. a this second and to that shifting the anniversarize first, the the portfolio, of Younique that are partnership with the tangible portfolio.

Operator

then line Mohsenian. next of Dara Please from our affiliation, comes question pose the And your your question. state

Dara W. Mohsenian

Morgan Good Stanley. morning, It's Hey. guys.

Camillo Pane

Dara. morning, Good

Patrice de Talhouët

Good morning, Dara.

Dara W. Mohsenian

path categories last you the and release us you a from on mentioned when you on bit when growth look product your expect give a share? you trends across longer you Can the on the means to detail share a us more full give call, line what on in to recovery recovery. top So, exactly standpoint? here maintain expect categories Do full you geographies and you out based what can quarters? weighted Thanks. product basis now on And Do an couple is look a update your also, to term? category gain in

Camillo Pane

a more with exposed X% in And that of will we previous that around believe our be defining are as that's year said, comparable Look, flat. And sales less we or of year, XXXX growth. I to roughly terms in full of are second recovery, category growth, as stabilization. why half we we the believe roughly

not the going over So that timeline over-performing important course the a become that versus to well step. of over to we go a grow then put from we are generate to What to is as signs, that time, expect is similar we're giving is, exposed. next to market us, therefore level share and growth, confident we stabilizing But and time this us path. and the the there us for is business making it take so behind about XXXX can category

Patrice de Talhouët

on Yeah. about of quarters. are growing. Beauty speak two that Dara, since of we full are and recovery, growing business already of And already complement is when seeing three we and we a out growth pockets to some The couple legs have Professional already that,

You and have have momentums that Luxury we on continuing. that good momentum we is having see a commented and these very

Camillo said, focus we here we Consumer what as is good and Beauty to Now, signs. need some see also, on

the full fight a and back. better recovery shape be three means division that So, much to will the in able

So, we by recovery. that's full mean what

Operator

next And Please affiliation, the from pose question. then your comes Nicholson. of your state line question our Wendy

Wendy C. Nicholson

and questions. Hi. think, simple with I have, three Citigroup. I very straightforward

sales Burberry, inventory impact EPS couple than First, we the that as quarters? might Second say, businesses of type or how the in there did or prior to reduction with also coming XXXX, do destocking products is the your should lastly, a those brands revenues that turn Burberry X% on from going over that be to destocking our of rollout of just expect of to COVERGIRL, you next and X% distribution? of, we in to to M&A, start Thanks. rid one-in/one-out rest? to the lead think your program, of margins sort have And to from going announce in you to X% you then get when lower do negatively the returns into expect be its to new inventory that there to business or some of plans X% just is much a the let's include model

Camillo Pane

innovation visuals your So, shelf. is will some inventory of of preparing yes, COVERGIRL, there how And right. can which and which probably will why will Wendy, of taking parts well. the or and of new the cost in in implementing cut, depending this rollout going be Burberry, coming Burberry. pipeline, only became when of some to inventory for question are on implementation in it's means always expect some products, on first and imagine, terms in be owner rest the quarter, you And be then sales, a and be which new will understand arrival your inventory terms packaging, about new the destocking old more there new was the the – and out, of the all a of you in And as to can regards the phase-in terms second brand on be of we question launch, we we and the the as

are process stock is level the of market. So, we the understanding the there in in of

about comments any make to able not it. we're So

will we have give strong prepare we on when But it the And I about point, expect month you because, stock. which exact don't already to start plans. exactly, will recording a will preparing, to that be our really, all visibility asked are And do to plans be we so, the able sales. some at we you the that questions

to X%? third question, you the Regarding the the X% about one Patrice, do take to want

Patrice de Talhouët

Yes.

X%. to X% the So,

to going fiscal of finalize are So, year said, as this this we by the we XXXX. end

offset on have any ghd Burberry earnings dilution rationalization comment not only so license, made, with far we is the And we that and to potential The not thing Younique, and so did from but target the about we that the did so, on of said that we these yet profitability any EPS to Beauty intend far brands impact. we that. the acquisition this portfolio comment timing

Operator

comes And your our line of next from then question. affiliation, state Jason Gere. Please pose question the your

Jason M. Gere

Markets. it's KeyBanc Hi, Okay. Capital

Beauty. to Just if two can back Consumer we One, questions. go

COVERGIRL, the of as restages you're are going well. of peers restage Just some while through doing your

you terms you the and some from So, gives something in the And little was, seeing online? coloring cost promotional are where Is little can then bit that Professional that that having without a affiliated Professional know growth trying of side, talked confidence improvement I I Consumer business, while bit the you of secondly, engaging your do will I softer? to kind shift in on e-commerce that people what thing just Beauty talk see through wondering et in think you're the the the same? side? dynamic, technology apps to is may think But, the the the are with hair cetera, store same you're doing. in expense, the if also I doing about go Professional really of about they could actually there's actually anything while the you Luxury. that that peers driving the that merchandising comes retail Others trends that more are specialty on you a a to and new styles lot in store. of maybe with just like What into traffic was see away look

wondering Thank or that So, seeing you're you. if something actually that's something just that you're contemplating?

Camillo Pane

questions. the for Jason, Thanks,

of So, a COVERGIRL, imagine, it's competitive you restage can restage. regarding the as

U.S., where over XX,XXX in the have the doors COVERGIRL We in just is distributed. U.S.

is well being so are it's the ensure it's and And, because said I right arrival yes, to in we're going everything one, absolutely all what an as we're confident before in productivity has going mean, in of products preparing direction. paste our see packaging fit us reaction course the relevant we the will have the preparing far market to complex very positive. previous in in can that freedom reduction since to anything telling new confident this that bring been have we're of retailers, our to once about talk stores this version over reaction more well. truly having as makes is when also and partners. right but and increased have the the do me I the will announced the other And one visuals about and this we to look, reactions. guess an by answer self-expression, able So, we that that creating you to that is the with is restage terms the they new truly done they been But has the customers, that's going and from the faster the are positioning talk we're did my I going And brands. absolutely tell ones visibility we and makeup, the have of that They why positioning is, Coty prepared before a are makes is and new inventory the superior truly, that I what we we're what me any yourself faster way but when the new into the with of also something absolutely the confident billboards, we are that the reaction the of walls. new of news

actively have area at so have well. going so second want I something market Beauty we're above some engage did I Professional which very of our Beauty, shift a growing as on shade an well. Beauty the with at this of e-commerce able could of Consumer business some focused also healthy we Your the this to very because growth And about so Professional in there you Luxury app at blurring, as working look, and Beauty it's manicurists was But clearly you have good. way on that's consumers and channels on salon and because, and to absolutely technology look look right choose well Professional and that to professionals, is absolutely we on, are some as been brands rate and one because in we imagine, the you as mentioned being yes, mention like that smaller is how brand, it hairdressers, in therefore e-commerce is so question a look absolutely on. think yourself well has In Clairol, mostly because new

Operator

question our from the Lieberman. And affiliation, question. Lauren your state then of your pose Please next line comes

Lauren Rae Lieberman

I It's curious. sequentially. The Good Barclays. like Thanks. over went up debt morning. $XXX was million

so, not I'm why. sure And

that. love I'd So, get to color on some

million have October. happened think I would $XXX and around in is Burberry it

on comment So, super is general just much you be delivering? curious negative there. the capital some that debt so, can being of color able how not Thank delever. already is of about just other level. to impressive, then, source kind but So, And love which Working sure you. us any a of can more give I'd

Patrice de Talhouët

Yes.

to mainly that the answer and acquisition first was actually, to to your this so transaction. the related related costs really question, of So, Burberry

Burberry-related. So, mainly that's really

Camillo Pane

Yeah.

also I which confident proud. already net have But we we're it. on think second This is was that strong bit go very is achievement, about working capital we very capital, negative, question, and working we're keep working net your Lauren, more the and on a a to good.

we as putting actions of ideas and still a improve think, said, journey, I at series our of beginning to this. we're and in place the we're

to So, more I think, there is a come. bit

Patrice de Talhouët

more little a about give to color And Lauren. that, Yeah.

So, synergies have as you working we capital. know, million $XXX on the

of third so far. a roughly that achieved have We

payables, to of more on basis. mainly the is this levers long-term two-third still and So, come which using was by a

also to We inventory our level. on have work

we on for this but negative improvement say still is – we our Clearly, about And I'm some think, that margin average, So, capital. working we is there is, I what have cash to capital, in to flow on that generation. fair working continue a QX, achieved plan topic. quite still in positive

Operator

your And from comes your Wissink. Please pose our question next the affiliation, then Steph of question. line state

Stephanie Wissink

Jefferies. One the with organic just is clarification half. on comments morning, in the A question. Good Hi. growth second two-part

of beginning I think, February. in that organic the you Younique mentioned becomes Patrice,

Just QX, secondly, out clarity might variability-wise you're release willing just then give to the in year? comments you how and variability made, us the And including quarter-to-quarter comments give that the in QX QX like play Maybe quarter-to-quarter. us some if some color stable more I'm bit just on then, clarity on this the is a see Thank a that performance mentioned Younique? on organic of sounds to QX-focused. some bit expect you more what you. balance you wondering

Patrice de Talhouët

Yeah.

the questions, thanks So, Steph. for

So, I the the will and first leave answer for question. to second one I can start part the then, of Camillo

So, you are correct. absolutely

to at of time at is like-for-like time, the the the our point going one M&A in include anniversary. So,

QX impact So, forward. clearly for Younique, it's to going going

months It's correct. the this, that full going QX absolutely to on is QX. two impact of and then So,

Camillo Pane

Yeah.

to is, can net you to year. the your growth think our more roughly it's I line, improved comparable regards What an we in the to do. second aim top said, I see we the year. as of of And a remainder quarterly for flattish or aim question second don't tell which be we really revenue the previous outlook, half, we trends

we we improvement, balance this QX expect to impact a Now, when where year. in aim a lower over the of more aim, to given the you is of year, have look on which last margin the pronounced base have we healthy

Patrice de Talhouët

also in And the impact QX. synergy of the

Camillo Pane

Yeah.

Patrice de Talhouët

that's mentioned in why the reason That's we more the pronounced impact the a So, of two. combination QX. with

Camillo Pane

On the margin. Yeah.

Operator

Please line Andrea the comes of Teixeira. question pose affiliation, next then state your our And your question. from

Andrea F. Teixeira

Yeah. It's Thanks. JPMorgan.

So, – I give don't but like clarify circle what about destocking just of on to want the that us commentary you understand just the on back to cadence, just mentioned your to COVERGIRL. you

you're fair seems So, like the the being the it private could destocking question if thinking cosmetics, especially or general than brands to some of to Is trying $XX,XXX if into to And you say first line. second specific to that related about behind implying And it industry, that that and can be retailers and this label. of quarter, quarter. the push the of worse it restaged? part your more be my top deceleration color on related comment would the money also then is

about you're primarily the should end. we Can quarter the P&G you integration So, XX the about this here? second quarter talk was the first a the fourth related So, than the saw and SG&A to in percentage particular? this lapping of and now. initial is Was still be little TSA? growth higher bit going between thinking understand third growth delta we even that in I about how to points then And here drivers quarter SG&A the

trying So, of bridge there. kind just to you. Thank the make we're

Camillo Pane

true have in re-launches it's which from to QX. division question, the first year your destocking, expect some the trend this and Beauty in refers of starting on still Consumer over some as clearly the improve the next we a activities the the trends quarters, to Consumer we revenue will mostly and of is the but QX, net we're Andrea So, in in destock doing Beauty

mentioned so way a e-commerce, a characteristic. been be you has brands, for propositions, always brands more for with question, Regarding a players channel, shop the color strong consumer your and shift mass will this of U.S. the all which clearly there specialty the some there beauty Mass But, really about with question store in so value important second place is cosmetics. for is and channel channel the beauty on. products

and a create and truly ensure to is so, we customers online. focus consumer retail build our experience, closer an amazing And partnership in that store with the

means faster means means It on. yes, speed right It So, to this market yes, and so innovation. assortment.

in we're So, traffic this. that's doing bring with retailer through store partners is and up our back our focus the really working where to

some the things called a around One The see And in there, we to experiential go can in to digital that interacting in consumer lot experiential trying store. these recently of New to what of we're do we let's have of this say back is which ideas this which store is a the classical of STORY, test did the York now of is playground because concept standard new we learnings cosmetics sort color environment. innovation retailing

really well change are we working to So, try to this.

Patrice de Talhouët

XXXX we that structure, have cost top QX if actually, our we much fiscal think with And behind quarter anticipate can that the of structure it's a is are very so, between an on the last in of should not a the into declining, are QX in give fiscal support, and momentum. benchmark. because I entering even And the very don't seeing and in keep versus XXXX fixed on much your last that investments. What level SG&A of what SG&A, so was the I good our should usually more you NCP because within don't level overall decrease the line level split you brand share a question, cost QX course of and a important we season of is increases we to the but heavy fuel

in this the in line. overall expect some should second you increase quarter So,

Operator

And the Astrachan. from affiliation, your line state your comes then question. pose Mark our of Please question next

Mark Stiefel Astrachan

Yes. ask take maybe a And back. I Thanks. it's or step to Stifel. wanted

especially on seem margin, to to heard push exclude far, surprised from think past. fact, even best-in-class EBIT spend guess the the A&P more the generally business the just and directionally, of standpoint, focused your for maybe willing also I in in mentions growth modest number if to So, U.S. the And globally I've you and in that I'm regarding in be by the achieving given margin so category improvement, travel don't slower revenue seem as a Europe be I competitors retail. than

here, So, when I why missing think the driver still of on intently focus something. I maybe right guess, the to business? will strategy margin, EBIT I so is I'm be mean, that line that ultimately top

your curious better I'm thinking months that than has at do, You show. but last know XX business just least that sort how over road recall the of I I evolved since

Camillo Pane

great a Mark, question. so Thanks,

reiterate still for that me to very So investment thesis actually, it's our valid. a good opportunity is

between basis of of right but position what that gross should usually have achieve and our bottom in and That's should level industry. level we is at right points which to margin best-in-class there be be Why? some to EBIT the The geographies, difference that the demonstrate So, a have might industry overall FMCG segments. is where that the across on our margin. between we the investment investment. to be operating This to beauty investment margin. quarters the in the we of investment want There there, $XXX is best-in-class see of we according between that correlation direct Coty, million is fall represents XXX here level thesis between line. we is synergies one, us overall, between of and currently a XXX of Inc. a about roughly margin. Because boundaries, the operating operating means roughly that business And level

Patrice de Talhouët

time. Over

Camillo Pane

time. Over

Operator

Edwards. question affiliation, Please our from And comes your next your pose of Rosie state question. line the then

Rosie Edwards

morning. It's Good Berenberg. Yes.

top this certainly just of QX noticeable line. group performance, the fairly fiscal the XXXX. It's sort in and talking at But if optimistically of of regarding, low declines look sort you're again single-digit QX about that are more quarter, so versus underlying the growth Just much at the we range. similar

are So, the that outline confidence trying level gives sell-in, to recovery? confidence what to of share? idea of market this I'm sort the perhaps get you future there. orders, you of Is data not it we're an seeing that just

Camillo Pane

Professional Luxury already quite a growing two I As and divisions, Beauty, mentioned, Rosie, we for that have been while. have

in have of Professional BOSS launch in been but Gucci We the seen the of it's brands. see Consumer Daisy our performance market. So, and Bloom Tiffany product Jacobs of share the not their market launch from in key growth that the brands comes just confidence The successful and Marc I and new focus the these my in Beauty. of in several mentioned attention Luxury other having far, so two script is HUGO launches. Beauty and

the the continue to is share, expect to performance that Wella of where category So because our quite first course, in that part I Beauty, that business. we that for of the are been the this This we and, classic overall, in terms is performing Beauty, it innovation in there this and, in some we the positive regarding philosophy, believe are strength professional we're is capabilities business. and which of Luxury bulk results Professional is positive positive. it's ALMEA. of professional has the in, in portfolio really, now brings well core it especially our the to the growing growth And we're Professional hair, Consumer also spring the pillars but And confidence. also is market of momentum is all, actually seeing quarters. in of look us the having market, business, in work service we that both includes that excellent at gives we some of especially And have Beauty, and color, our two of which Professional. in brands, several When And one of strength the have in but

other, continues Middle also Europe, but Russia, I have but Australia, so, Bourjois East. Mexico, grow And market in to mentioned we Brazil, some in also share both

We several have growth countries. market share Rimmel in having

of But largest the will several we So, said, examples are a clearly, full clearly improving confidence This I is, take gives time recovery. before there have. trends. as Consumer us that division this Beauty

some faced challenges. have We

We implement to recovery. continue going face the some to actions to challenges continue to all why we're and our that's implement

Rosie Edwards

And QX about just XX% on sort again, noticeable any QX one of talked QX nearly average Clearly, marketing from improvement million, headwind you on the performance. Are improved spend the sort able of headwinds of of, XXXX? And in question in idea cost on think, fixed certainly because, you. cost marketing SG&A and sales. think, those give following of, I Thank I the above around two you to certainly, the earlier just just, a Okay. profitability. us also and spend $XXX of the fixed elements follow-up

Patrice de Talhouët

No.

question this off the are see momentum in to in start we them structure. decline some that that using when So, the when is and some the give cost see What see to fuel is activities don't compare usually going has that because we and What also SG&A down previous QX paid cost season. I've we very and the is cost one what targeting is can discipline. structure tell telling true structure high QX, on to mentioned made line in QX, the split very gone our also quarter of more the some and were said, further has on in deliberately What and, I lot investment any forward, QX. brand significant is think, But, a we say back top QX as this. of results, clear that we order a in of progress money fair made about top division clearly we where our are a between to of you QX I of say a Luxury I results significantly financial and also overall the fixed are you you very in the to clearly, is line our put investment that the and that tight brands quarter it's behind the of

Operator

Feeney. pose of your Please from affiliation, question. line the Jonathan And question comes our state your next then

Jonathan Feeney

the you. partnership Research. growing. Thank It you at was question Consumer My morning. Good time Younique. Edge on million said the of $XXX is

you're that? And think of any strong active any around frame the Coty presenters to that having other kinds, very team, sorry as for a greater in if us closely competitors companies. anything all XXXX within said Any a maybe management and Can for big your contribute much. missed anywhere. better know maybe within that comments, double success leading much in the direct and I small, at Thanks for how Does detail and the you the role I about in set of here I does that's selling future? future and you've number digits. you tell and looked a here, us direct selling indicators beyond success

Camillo Pane

pleased double So, to it Jonathan, are grow strategic acquisition very with, clearly digits. and continues acquisition, a that Younique we an is very

time to clearly it's performance the the the we the of now So, at acquisition be partnership with that continues true mentioned under that us.

that the terms XXXX us QX you with one in In of presenters over KPIs alone. additional now, which we is ask, presenters is XXX,XXX joined the right presenters. there And XXX,XXX basic totally, that so of very are overall, is telling, that recruitment sign-ups, approaching

of So, the combining the think that double-digit clearly revenue, I performance. net presenters, the and makes guess, I us growth satisfied growth the with

have terms with can Younique. what acquisition a we and In of that made I role the successful strategic would very selling direct I play within call Coty, that think

clearly is in the with of on talk but out But play within because the role presenters performance a is individualized of customized basis, has relevant current of virtual an seeing consumers consumers, I key growing daily and basis, to believe to to on to consumers in who time do and having brand the this ambassadors, most are Younique. is why direct XXX,XXX it, I link We also approach our very, of sometimes are to parties basis, individual because with other the millions a And and few we're who a believe big that size and trend. given me very very individual between the direct presenters there is is satisfied they selling people, almost so a that Younique. the this reason the the where market is relevant Coty

Operator

This call. concludes today's conference

You may now disconnect.

Coty (COTY) 9 Nov 172018 Q1 Earnings call transcript