COTY - Earnings call transcript Q3 2018

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Operator

Good morning. My name is Jonathan, and I will be your conference operator today. At this time, I would like to welcome everyone to Coty's Quarterly Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. to conference like Mr. over now would turn call the to I Monaco. Mr. you conference. begin Monaco, your may

Kevin Monaco

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

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

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

Camillo Pane

our Thank quarter Kevin, fiscal welcome, you, everyone, earnings and to third XXXX call.

solid trend by strong markets line division while bright offset Beauty will sales mainly performance partially Our division and of our growth continues our encouraging strong coupled QX by that we delivered very of line stabilization moment. results in its discuss division, I The positive consistent quarter spots made with again so quarter The channels, with stability healthy but new Luxury expectations, pleased and another continued our line Consumer a far. with improvements Consumer top a in were Beauty growth. we've demonstrating in once uneven progress some our China in challenges, the with supported emerging in growth, profit and Beauty. for this another represented Professional steady brands, organic generally as adjusted with cost in performance I'm resulted top operating improvements our of ongoing structure some with number modest improvement.

be However, is realize P&G seek, as continue our the results synergies we work consistent the as to I've before, the we before integration that we still done much Beauty there deliver said and Business. of

gain. Moving on net X.X% delivered revenue division consecutive performance, marking fifth divisional Luxury the sales our organic to our growth, quarter of outstanding healthy

regions including execution, stronger Our brands. most strategy, superior increasing premiumization, and and pipeline which focuses innovation across growth a on all store propelled

share position building travel gain continued category. our further to retail, upon fragrance leadership in We in the

Here for I our as Korea, consumption Thailand. we but in also trends Gucci, would and our strong key in performance call saw Bloom and Tiffany, where Asia, new levels innovation such China, out

for continued excellent also growth strategy China, as well go-to-market as in momentum travel in continued for experienced in double-digits retail in Our changes the the philosophy rollout as channel quarter. both grew business the Tiffany's recent country, the innovation recent was EMEA Luxury European key strong to Gucci. well made example, The in geographies. by driven expansion success as driven of strong of our by

fact, the propelled top Sephora it the so two In China launch to China. in position successful in Tiffany's brand was at that

Acqua key with strong Guilty Femme Pour Gucci Gucci quarter, of the a As for position Bloom enjoys the XX which launching innovation showing di very top markets during we positive and by Fiori on continued most success Gucci, results. capitalized both in Absolute

which promising has been Nomade its March weeks the in showing we results launched in first in market. Finally, Chloé

an Marc new Jacobs ad called four we in recently Love Gerber. for launch recently Daisy over our Looking announced years ahead new to Burberry have for time Kaia the and future growth, a franchise with launched Daisy a first campaign we featuring fragrance

organic division, X.X%, consecutive Beauty Professional marking of the growth. our net to quarter on sixth revenues positive increased Moving

to brands Wella Wellaplex This strength and Our in the has be but success to owners are professionals led product of best also from globally quarters. four performing that other continues to which by to line, key all strength the our past pleased grown I'm the particular Professionals, – North and with most OPI. brands which America from growth our growth channels. continued partner like solid and of salon in performance OPI Sebastian, region, benefit strategy Nioxin which the also continued hair for to have well grow was in which shown driven

of mass which In fact, Consumer restage still declined both solid new X.X% benefiting net the line, our challenged beauty Beauty, with and backdrop and relaunches. including pockets coordinated gel market encouraging with lacquers from improvement on of brands product basis quarters, from of but pressure, an our some In revenues strong color minus a competitive had includes growth the performance the gel in results a bottles. key of several organic

still some time Mexico. the of of division, full to the recovery relaunch innovation. Brazil, Clairol the emerging of Beauty Beauty Consumer Root with year. better take of we're 'n Turkey performance signs of will share results the Consumer the markets, the and In Nice fiscal Easy gain In As in was seeing improvement. latest continues stabilization Touch-Up first half UK, Europe encouraging we the observed our although I've from in it compared quarter for said the moderately before, in

been I'm most partnership has some headwinds to fast for creating feeder model, in Tier to a new retail inventory more cities levels Brazil, distribution across although structure, response readjustments Brazil, see has since a trade business Speaking opening China, in beauty X X business Coty brands, and a continuing but creating increase near-term price about aggressively Tier and with initiating been our the share the managing ultimately, in pleased In our healthy in focus our future. delivering on Alibaba. creating

most China launched a success brand imagery, In in ongoing conversion we growth year retailers now the in in in Max the best COVERGIRL in complete position Bourjois Factor the the relaunch of one East as calendar the U.S., the new quarter. encouraging of China versus just brand x showing the graphics our couple the return relaunch East maintained ago with expected received campaign, Regarding is Max by to period double-digit while products this including led Overall, UK. a months. growth Factor the number end. in and the new beginning Middle improvement sellout global phasing Middle fueled performance, its You nation-wide as well the and year the is to of wall our have of last and

showing We time. improvement expect gradual over to continue sales

should a will quarters. several be to continue we recovery COVERGIRL over emphasize Although that evaluated time, take it

campaign our ad Nice 'n Touch-Up For Easy the launched in sellout the Easy new for improved 'n new translated technology pillars. Root recently Nice and to Clairol, trends

some other hair Vidal has of such left of reduction However, pressure. Sassoon, in color performance of the under as portfolio our brands, color our distribution hair

to driving building brand through sales focus activities. on in We our improvement continue

strong progress. presenter generates Active In growth value comparison. grew the of high smaller modestly Younique versus purchase and year very at of XXX,XXX positive as the but to last such very given recruitment per strong ago QX, to continued frequency show quarter. pace. the continued presenters compared a of Other KPIs presenters base

with that category a for new XXXX. these exciting launched first continue just trends which and On opens new note, its its Younique set of Younique Coty, an as to expect for presenters. fragrance launches joint has QX, We prepares through project fiscal first

very pivot including of the the pleased transformation as continue platform would ahead, to pillar our now to with Looking we the digital performance is for we e-commerce. key of a this end-to-end future. acceleration be growth Younique I develop like to which

digital share and of We continue our Quarterly to This their digital with wait report at technology Accelerator an on This organization. focus our realized revenues I'm more in exciting a base all the strong cannot we this this program future. ahead to new Coty's of is the business diverse milestone with to in on capabilities also three and market. our our across Digital earn brand in the growth Summit key pleased transforming truly portfolio. new accelerator program divisions allows I launch again e-commerce latest opportunity the the work in quarter that to share you innovations to And is startups transformation.

on the suited particularly to The concluded, with including Let us now Playboy. our streamlining to previously brand revenue are announced is optimization in and which me focus of drive Cerruti allow Guess, portfolio brands, program, growth. we comment our XX resulting reduction where just on long-term portfolio brands, both

our I'm confident very put we Coty integration There are the provide I that encouraged we commitment in our that relaunch the right minutes. to the what to show P&G of brands has in Patrice on Beauty fiscal working, right many growth. performance, do. our across to categories We certainly are including portfolio our is with full much creating so continue that of stabilization few and the brands. XXXX, a continued But strategy of results still continuing and further growth far I'm for that. these the recovery Business a our achieved confident and have details of the to path will believe us is fueling

year. be you second told of organic revenue aim for straight continue I recovery net As line, the last growth the quarter, a we'll to not to half revenue will modest but deliver

turn our For we most QX, deliver margin, over call the coming year the I the in to to of improvement with the will impact adjusted half a prior synergies. the as emerging healthy to operating now second continue year we of on for versus Patrice. aim in continue

Patrice de Talhouët

and you, Thank everyone. morning, good Camillo,

third net Business P&G framework the year of the rates. saw integration, optimization reached several Reported last actual The of with versus the revenues results X.X% at areas portfolio $X.X Beauty increase delivery our consistent across have including billion a provided. the in quarter further the quarter, we and progress brand

Excluding organic delivered versus one rates quality of of quarter. contribution pleased of I year at X.X% the at prior with month constant Younique, from were the the earnings revenues Burberry currency. exchange and and net am up slightly particularly this impact

benefits $XX This three in continue a operating this, to basis to year-over-year, First, improvement. an the seen tight realization XX.X%, increase future to to of resulting has the high progress rate allowed Business translated Beauty up to in partially cash earnings with expenditure a per the in divisions be the equivalent from dial will achieve synergy terms in and to or P&G combined into the a adjusted focus $X.XX. our margin due which support brand priority, flows, our mainly period and net cost a a of quarter in cash marketing XX.X% our assets planned. us tax also cost. remains of some allow of us capital revenues. decrease interest to as $XXX in and is was has income expense margin due discipline to net All our relaunch Adjusted adjusted resulted in been lower of a net income has adjusted increase realization of operating and was million This spend higher share multiple million an low all higher sustainable In XXX slightly in points program. X.X% seasonally area the of gross integration operating

our as the capital time working we ahead, management improve. generation to cash to top P&L line of expect unchanged cash focus the over continue Looking and on shape remains improve and absolutely and

We million also than to shareholders, during pay dividends return $XX more to continue cash to utilizing quarter. the

our in focus industry. challenger Let overall our timetable. in line a on progress The us in the progressing beauty integration clear with building is now

invoice. order, fine As two enhancements we changes, one scope and the ago one advance years tuned one end have more complete broadened we of integration, go-to-market made have estimate shipment, systems our the further original including and toward the

As a original The cost $XXX approximately CapEx result, million. slight $X.X now line remain will from incur billion. of in one-off increase expect billion the we $X.X estimate approximately to to a with in

mid-single that end our allocation with of we As in communicated balance opening an in a the we towards Last end the to by portfolio important synergies EPS business brands achieve are far the XX% of XXXX. of my program. in achieve optimizing I This impact. million to of brand say our the annual of is this resources. are digit this year of rationalization fiscal fewer rationalization portfolio. progress line the and are least, milestone XX by And realization the $XXX remarks, have but objective just as fiscal not confirming concerned, achieved as previously am disciplined, mentioned synergies financially our to we very around as expect have being by we the result, and finalized pleased We with that simplifying

as market to the debt. the of to There important the refinancing, and our euro upon weighted the different been moment of rate in the steps our I take portfolio like refinancing benefits structure, of As the debt with already a base discussed, the to challenger simplifying structure pleased have including you. to down conditions net extending funding successful strength are proceeds of cash Thank global pay strengthening fixed executed debt continue to quarter highlight beauty. markets created In volatile made realized first full the maturity the now achieve the we of objectives. while dual earnings of debt Business; to result build our and right profile; cost sheet, the our offerings. we in and April, foundation number of of and properly the further our capital capital of outstanding Despite with recent solid of in This has our used refinancing balance refinancing a portion our strategic balance capital would progress all the across the Beauty during structure. increasing our a can P&G of which with including with this matching a XX% debt summary, sheet the decreasing issuance debt acquisition bond building flows. were while foundation created the a average are long-term quality which we QX diversifying of

call for We open will the now questions.

Operator

Our first Deutsche Alwy Bank. the line of question from Faiza comes from

please? question Your

Faiza Alwy

Hi, good Yes. morning.

a couple questions. So

disaggregate all, that in could the Latin you the growth versus maybe in was the negative Brazil impact of ALMEA between China? America First what and growth or from

Camillo Pane

question. Faiza, think, thanks I for the

and growth in Beauty across with regions that we very it's When continue and in ALMEA, a experiencing the and China. by Really down rest Beauty, pleased performance we look levels of Brazil, had really we Luxury growing experienced all have where actually are North Professional QX. more because pressure good quite we're positive Our we've the fair of America level our we growth actually ALMEA. is Europe, level, high Brazil slowed at we're we with Consumer in includes Beauty in to for taking and say the have ALMEA but of to region consideration of destocking in growth, That strong in not that. growth that Consumer in

Faiza Alwy

I in as generally been wanted transition business. ahead stabilize And and company you, to several great. Okay, Camillo, XXXX, the then seems look ask on you're a for to you've you to it just fiscal years track

spending you. be you your viewing to areas love are to related going time to sort how you strategic most ahead on. next hear what your of I'd So that, can And priorities what M&A look of discuss year? to and will be Thank you're as you

Camillo Pane

Yes.

of where lot previous strategy. are my at I strategic I in in seeing now terms for are good As of I When previously two a have divisions think I out they consecutive where line, happening think in they are to of that line and spend said, look of has will perform a priorities, and I well. we this continue sign stabilizations been we actually very And quarters. three of the one quarter I time, of in number discussed a also

will result innovation we of continue faster we're strengthening process lot to on because a a although stronger spend and be I in innovation in that this to progress making time innovation good area. need our will pipeline, So

e-commerce third growth, our part the the brands. in of because The spend is which I is with And second of say growth all sales one where is of thing ahead progress clearly some in the area transformation our strong definitely continued of key time digital three pleased experiencing can are level that the and divisions. I'm we the market will relaunch the that I

launch say and across work, But that couple it's continue still to some to on in been of require consumer a I think also which portfolio clearly have the the strong on brands we of past Consumer Beauty, the Clairol other to but of has put a the fair lot COVERGIRL different the Clairol with quarters. connection. of COVERGIRL focus work and

Operator

you. Thank

next question Our ...

Camillo Pane

And specifically. on comment not I M&A will

question. clearly the last to we're future closely of But the and this are the probably want said integration the our that have. completing over of focusing at results has on your moment strategy, to that although we part returning seeing, time is part that's So, that Patrice we

Operator

Thank you.

comes from Dara from Morgan the next line Our of Mohsenian question Stanley.

Your question please?

Dara W. Mohsenian

morning. guys, Hey good

and like were how out the quarter. much growth We've in retail mix. sounds breaking the key companies worth by e-commerce spoiled it revenue drivers China, So all beauty travel most are behind those businesses been sales to other

next us guys growth recently, areas some hoping, each You of us, be as think those haven't to provide as to your look your we if importance willing of then to their now been detail fiscal to with and generous how are year, was look percent on momentum it's revenue a but I more sales you given Thanks. mix. with there we you'd And how large as conceptually, just XXXX? the out should sustainable about as out

Camillo Pane

Dara, for question. Thanks, the

more have with [indiscernible] not one of China. quality But straight seeing of in-house of that really from we're of Consumer that. across three off, pleased we're next growing go At right fact innovation, the strong afflilate it's Professional. the the I earlier at steps the so that details move previous with Alibaba, of the the also that have store of areas. But did I we to to a can work the of in both to This digital months. Luxury, It's merger, the affiliates. Beauty are Tmall in also straight I'm already in brand took, Luxury, that on performance plan level think the have only we Beauty away to and which we an work In the are China. are very distributor with will in-house in with the time, and XX with the the doing we We the was at the three it's model, example, the with fragrance not and partnership in China say in structure setup Consumer is because that so also experiencing one add is but and what divisions, Professional, go I brand growth. moment, six but operation beginning And that into for Tmall. we to I stores calls you that we into the In our that tell Luxury fastest was company the specific that in paying mentioned size

one thing a that retail, I focusing to that I I has work also that like overall, important us. suited in And an look been say is travel strong what think on China. at delivering more quite So is pipeline focused would for on more consumers. channel strong and When the Chinese say we're this that to innovation

which the we by long different also well that on and launch travel focusing focusing is consumers, Chinese Gucci is another, we're Tiffany the fragrance retail, and very interesting how And well on leader Gucci but regions. are this it's also digitally; important are more doing, that in engaging philosophy, the travel shows important culture. growth for developing fragrance performing retail. for actually has quite therefore in been, very Tiffany again an the last that is that Asia For fits also we of a in fact for We're quite going period the thing which the retail important is in retail. Tiffany is products. element have. mentioned, I time, by Chinese we the many we level And friendly business with the Bloom, in more not of driven only in in example, companies is I And all an are the gifting travel is travel are we part And as are, which it Chinese think, It same us. the interesting the achieving at that

This that the we for e-commerce structure, a have And step market, across I ahead I the channels new strongly this focus big say mentioned performance a on these the focus is I since we've think e-commerce three a of us. that seen the to two have announced I divisions. have already across are of divisions. in renewed up growing channel, the

Operator

you. Thank

from Nicholson from next Our of question comes Wendy the line Citi.

Your question, please?

Wendy C. Nicholson

the Hi. selling Because Could I you've more it Is targeting the you in program? initially that about next already think impact but X% brands. all were on the year? only that you know bit talk impact was sales is of of EPS. mid-single some a been these of you I divestiture little digit said

XXXX both specifically can just on we So impact the you bottom as fiscal should clarify results, top our we model and the see line? what

Patrice de Talhouët

question. Wendy. Thanks, Great

the on bufferization. So

brand so years of talked when X% that in the we about and the work one the thorough portfolio review the potential within which about is with strategic these have stay to two course our (XX:XX). talk done portfolio fit ago have years and we of that see positioning, to-date, would a and to with our two to the First, performance brand X%, the we the

you decided either the said now. was So, as or have annual that mid-single that going sell are What we XX see digit an from is I to EPS to on brands. basis discontinue impact

two So X% I on the and line. give the is it Beauty to I the actually be you QX in very coming that data And the other the of in this the represents to impact modestly can in Consumer rest mainly Consumer be quarters portfolio share that didn't Inc. was Beauty accretive specifically is go. can and overall what X% top growth And the going portfolio it point Younique. Coty, on roughly the it's with excluding What represents – the will of of in you mention quarter we then month that

Wendy C. Nicholson

are of those going be... And to all brands

Patrice de Talhouët

used And proceeds the been have ...

Wendy C. Nicholson

Yeah.

Patrice de Talhouët

the pay to And down debt. a with have been share the as proceeds used whole

Wendy C. Nicholson

transactions commitments signed. to like or And those the It's get done. Okay. you're Got to not waiting in all be proceeds of are it. door

Patrice de Talhouët

Correct.

Wendy C. Nicholson

I it's so that just And caught Got follow-up had second brand, category fact the know not been because actually that it my question, then OPI. still I The business know tough. came – but eye a has it. nail a on actually I in huge

to because say growth of that willing shares long OPI specific sort be this category Was Just spot I you nail? some a such for were is in of wise. now a it's beginning temporarily? the you tough time in know maybe this just would something doing So been market boosted

Camillo Pane

for thanks question. the Wendy,

I I a think that can on tell things. OPI couple you

growing it's here sold a in under First retail Professional And channel that is the in the a we where be are service Because about has big a the cannot the channel, pressure in it consumers is getting tell is talking we – the soft as to not of a mass you that all, of mass prestige lot, it or is through retail. the the I But to category appealing. true nail brand. why very as the months. softening category decline decline are continues Luxury, category really last definitely although is but that continues OPI to And been – achieving And are the the result couple world. is great brand, Professional reason nail and brand good seeing the OPI absolutely mostly biggest are really very, twofold. is we in a professional a in channel. brand It's the Professional not the in care mostly in decline

of channel division with in level in being the is because of for capabilities because division attention category highest been with provide is which dealing the therefore right it's decades. the in by BXB, educate to hair service a service the hairdressers that managed that and channel course has how division having so Professional the First is skills the nail now the this on dealing professional and Beauty to has and and expertise the

and in and a culture, are ago retailers, collections January couple U.S. the is of second good helping which strong to of and getting OPI of collection. in the truly the especially pop hand key. the OPI So part Therefore, a mentioned which is launch, is consumers one very the the one And of DNA. the while the really absolutely that's professionals the is of the truly we part is a also couple second growth very right innovation propel have had that I one

I So capability, I quite of think Lisbon OPI combination driving factors, the moment. at collection growth tell performing can is And you are the well. innovation three the the

Operator

you. Thank

line comes of from the Astrachan next Our Mark question Stifel. from

Your question, please?

Mark Stiefel Astrachan

Yeah. about and everyone. afternoon or flow. ask cash good free morning Thanks, Wanted to good

general, little in I a bit maybe expected. been just weaker it's So guess than

we So years helpful sort ago in takes? how operations you think roadshow just broadly cash You'd commented what and some on the debt just today, had about think and a terms to relative, actual of you of it to on ability the impact couple the of give you And And was then that outlined the of cost puts guess, What's from debt? do on about the going should generation. think from divestitures about but be I on a level repay whatever to reductions the reasonable that from how forward? as too. if would could proceeds the

Patrice de Talhouët

Thank you, Mark. you. Yeah. question. Thank Great

for and firm currently it's clear all priority So cash to a us that we to of very remains intent deleverage the the corporation the business. top is and have

the scene. really that's to just set So

intentionally cash the have consolidation. one. some we generation for a prepare quarter, have Point is quarter standpoint. low a This seasonal up, DC to quarter built up two, we inventory for built this That's from point

So working that had on an impact capital. the

quarter some costs accrued one-off quarter. have the for a this we integration the Third, that impact cash in previous significant into had

be a aiming as and clearly back zero we target. capital I But remains low to have industry from this our as to from the and QX, a the to course next to ability down So already you is we already are debt. the debt. fiscal that to mentioned coming will of were On exact clearly at means in costs, firm a this and but proceeds, the of top I've as to the which to the XXXX and cash not is sorry, result, said a as at while have deleverage a normal deleverage going the a normally now that credit flow we able in has key and gearing of significantly priority. leverage reduce in capital that amount and a are most that's and have But increase business. it weigh I to X.X – business remind going I focus quarter will before want been not know, we pay generation we organization working working I used I'm X. one-off year, the you I'm to pay at incurred which give level not the say these the disclose as you I all that closer performance in give would said and roadshow, so down to and was this that abnormally will you of is best-in-class lower I've we to is that. we this of do already intention that continues have up but also as and am

Operator

Thank you.

line comes Securities. Fargo from question next Our the Wells Joe of Lachky from

please? question Your

Joe B. Lachky

on not debt QX? Just impact cash one last was paid a on anything I'm in in and I QX divestitures seeing the down that a clarification that proceeds. guess and the the statement. the Is flow

Patrice de Talhouët

Correct.

Joe B. Lachky

in Or And any early guess it the the I through view the been of Are given guess during we how restages me. the all discounting Okay. All really in finally, and guess all any? I acceleration walk if see I excuse restages. on quarter the QX, go to the I fixtures simply this didn't that then seen older sell-through to the too benefit or success right. the of to in place? shelf? impact could Are restages? is degree has tell you can Thanks. date? you've And if guess back Was new from would you QX, merchandise you there there products

Camillo Pane

on focused the Look, restages the Thanks, top are ones. Joe.

really Canada. So in the Clairol the U.S., U.S., UK in COVERGIRL and

mention The world, a launch the restage had year. and Factor low words. losses for weeks versus improvement far, share that only we're performance of we And encouraged not the positive also really We gains primarily has to single-digit And of in which prior the we COVERGIRL, which March to we we're stand have the couple early so brand April. Max we not signs declines a rest the couple I seen to quite but Starting starting brand and in also launch, and also of prior long the stabilization. have prior growth share from double-digit in actually of decline gone COVERGIRL time. seeing I to a say can had in by with a of are in share had sellouts, actually to

when a So these example results, and things like other and COVERGIRL. future improvements are of seeing positive encouraged I look sellout as conversations encouraging, there that's are keep for and the we're seeing few that on we mentioned, at opinion. the organic is They online a by growing consumer we double-digit how indicator our this normally forming encouragement And that connection. are we're

has or can I much how that is you think X,XXX a the did in What over This product shelf changes you doors. about tell new asked the – with I over COVERGIRL. product, I this. is for the reached SKUs big XX,XXX mention undertaking

the now new have almost wall a so, do year. the basically the point we on by product contributor packaging. shelf new So and for XXX% is view, today of from an by end Only expect all shelf XX% XX% be retailers new new full, products now new XX%, for the product also new received of calendar of the (XX:XX) to of the graphic or the or execution on

well, phasing this. packaging, has the in there we're in. imaging but results. that, Despite are some encouraging from the been said, wall the So, middle I as it's as The of changed,

Nice some Easy done innovation momentum new has 'n in the with and technology investment, temporary Looking an us also product. starting a would we're we're faster, that future. has is much Touch-Up focused been with declining the we're I relaunching actually And week improvement we've In which optimism not a in and Touch-Up relaunch. which although so UK U.S. declining and Root Root we Root initial say, Clairol, transition sellout performance experiencing Nice we're What give phase the still (XX:XX), a in will share over of at was but Touch-Up declining this week the as our Canada, our as we seeing some X%, 'n were on the growth, which before where both new has of second, our positive Easy relaunch. major of both

the part Sassoon pressure and that bit offsetting are other is And say portfolio, than bit a and Root less like are longer and a that hair overall they the it brand in little our of of a buy packaging, bit frequency the big in also seeing on lot of category, category to fair middle. therefore piece of than with under takes parts pressure take of longer. Vidal also we're it's is color there because going This cosmetic is consumers of Now, Clairol – on which last brand is slower it's the a under to a COVERGIRL the are a color which Clairol, new and terms Defy we're still a improvements product Age 'n because therefore and This bit. the Easy Touch-Up. Nice implementation

And well. wall imager the where mention changed one changed creative. Factor that not we're in the have So, but to the the the want we I of new and middle is as last have a packaging, positioning we Max with the

a and new as growth course and actually in positioning markets have of for double creative, new strong this China encouraging well. Middle and East including this us driving is digit We several is

Operator

Thank you.

of of line the from Lynch. Olivia Bank Merrill Tong comes question America next Our from

Your question, please?

Olivia Tong

Great. Thanks.

how that Beauty where margins inventory? second of And said of case? compared steady Do in Consumer terms COVERGIRL, half. have of a up you sequential the COVERGIRL? to line in, revamp last First you you think should gets you still improvement the the do quarter that that's old think on of when in then through it are to state, sell do And legacy

Camillo Pane

Olivia. Thanks,

I inventory, said In middle. terms are as through we in sell of the

that's mentioned So, I what before.

new packaging are but still around standard products, rest the and also which shelf of for products, the innovation, the XX% classic, (XX:XX) we New at includes to come.

So expect the calendar I we complete end at have this to be of – feel fully XXXX. we really

old innovation a launched of previous tell can quarters innovation what performing we few bringing ago. is we're the innovation better I than that terms that you that actually In are margin,

there So in that's new previous call also innovation or line developed And that from meaning impact a being it, very the encouraging because accretive new team, this point the is innovation. new margin really the is by that is by can first Coty. let's we view, no say versus of innovation the the is that bundle,

of of really as view XXXX, terms In our said, versus we're changing estimate not QX. an second I for half our

deliver continue impact second prior terms of of with we versus because of And QX modest the we So the aim revenue in in really year organic aim growth to of in the to operating most synergies. the the for of improvement year a of delivery for half the our year. healthy second half margin, the

Olivia Tong

Got question synergies. thanks. second on it, And then a

of You around on spend's track already talked about synergies. being XX%, for achievement sales. Ad XX% of the

You talked digital the some investments about that already. made you've of

into see savings synergy you Are do go how or that plans other more think next through? as about we investment So there start flow should of year? of flow-through the we to

Patrice de Talhouët

have most consumer a of have So business distressed and used as have negative the have the What synergies. smaller because we beauty from said, is – year more mitigate impact. by of we we this XX% the realized end we synergies that the a some have inherited already of will the fiscal of financial from to business, we done

the being of remaining of bottom This the fiscal XXXX see said, in to you forward, further and XX% fiscal being synergies, this dial we bulk fall So should these up said investments the top I've going quarters, that between line. might always said, the generate XXXX, will fuel line. to now we

the should one forward So line. speaking, that's of But of that And synergies the quarter generally the that margin. might operating achieve pull ambition way quarter. going to versus to the one achieve in our teens other higher value bulk

Operator

you. Thank

comes Jonathan Consumer Feeney the Research. of Edge Our from next from question line

question, Your please?

Jonathan Feeney

Thanks.

the delivery. on Just to follow the up on synergy last –

and about by talked by then all synergy XXXX and of the of of XX% last on it was it think captured end I then the quarter's call XX% XXXX. you

I could you XX%-XX% capture? Thank the mix in of all over you think synergy I issue? that years. the think Is me XX% two profit still track make expansion XXXX versus in on by I XX%-XX% Forgive talking said for realize to Impressive. by And comments heard you about capture that you a in XX% about XXXX? being you're it would if secondarily, operating the next and earlier your very just of you'd talk end Professional. but comments you addition synergy margin wrong. that, if Is Any in much. there. could get

Patrice de Talhouët

Yeah. question. Great

clarify. So let me

of XX% by XXXX. XX% phasing and by XXXX XXX% the of following: are of the synergies fiscal end the synergies, fiscal So the of fiscal the end the remains following end this the the and year, by

we'll in end should the some in this the we see synergies of will synergies year, XXXX, is you so benefit that this what phasing QX. loaded back have said of So is also the that and fiscal be fiscal and

point has admit margin. Professional absolutely regarding by point XXX the of on the starting Now premiumization was basis elements; this low, is question the But margin. has been first being because it one was your two on back year. of gross correct. you Professional The the operating are division, the must main of to the division profitability Well, said, increased I breakeven the X.X% last it

pulse gross allows us really my the further it's and invest priority what of the to brands. in a script, said I've corporation, margin is the of as So our corporation in

gross cost be our Professional And attacked So interesting have some been to the done profitability have boost to and margin. there on successfully. able development have the also they Beauty in that they structure quite

two driving the basis that point XXX the that's improvement. are elements So

Operator

Thank you.

question next comes from from JPMorgan. Teixeira Andrea Our the of line

Your question please?

Andrea F. Teixeira

you. thank Hi,

afternoon So, hi. there. Good

but all I points lose the So your cover the sequential doesn't U.S. in a know continue distribution looks Beauty. some as data on to Consumer Nielsen businesses, like just basis for you

last call reposition you on And the guiding year wondering if I wondering were said course in was of if U.S. for in last this the for you COVERGIRL. call you on the I that the can flat was recall comment call you I can – distribution So of

plans you're quarter question fiscal. fourth starting about you on to starting if how talk year? the the Wendy's of just a question. the back mid-single to you flatten and your at looking it can half in a in So it now rationalization, is you're you're And second the clarification EPS said seeing the portfolio see And digit on impact relative in

clarify. $X.XX those assuming to get EPS over the next on looking of And in a EPS, you're cent like or percentage $X.XX four you that impact? just want is like a impact I type a the were business? margins higher. quarters, margins at what So that, I'm does this to mean

will there So, Thank pointed the in out margin impact also I'm as you past. you. be a assuming

Camillo Pane

the for Andrea, looking you months, has last that distribution, is at in relatively happened what looking COVERGIRL question. distribution Thanks, can flat. few the tell I stayed at Yeah, what

based would view, the space shelf of on the point COVERGIRL, to have the that improvement expect of we from we majority on retain U.S. in so, in that seen vast our And performance the

know, However, discretion decisions partners. retail at you the as of our shelf are space

has spring, there at Clairol, and bit in been the Root rightsizing also total Now shelf because reset. so distribution flat Clairol the look situation it's a at similar the has over what Clairol the brand, actually Sassoon, within when had declines nonproductive Defy we segments. or sub-brands the a stayed of because like level, we Touch-Up some March you but January, But had between ancillaries time Vidal gains Age in happened same sub-brands different at

expectation, with segments. the retailer clearly so we're performance, overall, our the are shift seeing bit less working in So, or a within terms our a flat, we the but but in of has these are overall partners, future. course distribution discussion with of ongoing improvement of And stayed Clairol more for

You want to talk...

Patrice de Talhouët

Yeah.

optimization. portfolio on clarification regarding question the So the

a because So you analysis impact portfolio this completed and May, in correct optimization mid EPS a we the basis, EPS sense annual mid-single that should an of full-year two-month realized on basis. the single-digit your have digit is on is the early and have feedback

year. You corresponding next should impact QX, in three and quarters have of also the in

the were than detail, in of what before, these don't profitable, level say that that usually it of margin, Consumer we to now we've brands also So, fair profitable of more that Beauty. is to said operating average go terms normally but

should So corresponding P&L. impact the of have shape the the you on

Operator

Thank you.

Patrice de Talhouët

percentage, an on not cents. on And EPS, the digit EPS on mid-single on the impact

Operator

you. Thank

question Lieberman from Our of Barclays. line comes next Lauren the from

Your question, please?

Lauren R. Lieberman

on just about little competitive you if guys into last because talked to quarter pricing I go I in a Thanks. recall, pressure more bit Brazil. Brazil wanted on detail

in And meaning talks quarter then being still Brazil aggressive and but were or about share. you you suggests the that call destocking. up pricing talked gaining on this inventory competitors pricing in you've it you pretty on had So about that were then release taken the

just us you kind last in more give brands. of bit I little a Clairol a if Brazil, a love but I success connecting could big threads. those bit And of QX, know of a big versus I'd quarter of local discussion guess a was little So also three was QX benefit, then the

putting So, having pieces together. trouble the all Thank I'm just you.

Camillo Pane

connect to dots. the I'll Lauren. try Thanks,

experience So, what we happen speed Brazil is in that thing say most is, the been continue very strong first the of play. of growth share the growing more brands of all, across and to important we sell in I think most out to in market the than twice we've which categories

inventory QX steps base me the our of healthy important that need Similar going wanted of a that is, it's is it's to P&L in and view, reduction markets what think and can is in effect – that's experienced mentioned of type you out from so managing from in result which this point better And Brazil economic a consumers. have really headwinds and had business of to healthier a after and before quarter consumers to dots, a conditions in to of can to we through have steps had But connections the pricing much What went a to They from positive, previous increased indication portfolio that at these a this increase. and from view, large business. have continue a by which something to we that sellout happened point when that are the price the in point point that view, Connecting short-term the the And actions current of a healthier to and quarter, be is in strong we series most the from destocking the continue to we're overall that the we tough a with I given If effort immediately that increase very of I the manage, our consumer we actions we're the we including felt this that is taking really quite retailers, trade need a retailers clearly, continues way. and beginning, something forward. happen what price. taken. manage really that some I quarter business clearly we create point a a reaching between our right going investing for business margin So creating a have strong have. this to moment. view, so the QX very is at we

Operator

you. Thank

line Our comes the Steph Jefferies. next from from question of Wissink

Your question please?

Stephanie Wissink

like I'd into Thanks, Hi. the guys. step-up. dig marketing to

that I last think couple quarters. called the out you of

you're over seeing should where of If marketing And brand talk an should overall if temporary years the portfolio. Thank think focusing just your the some that little step-up about you you're could this the to next support bit spend. to fiscal of this as a we you. as if about couple relaunches just a or elevated support level we model

Camillo Pane

Thanks, Steph, for the question.

had the quarter the start last releasing so to beginning kick you month performing that fuel, Clairol what's while, and the the the we're few In that's I require March, a brands which clearly terms COVERGIRL tell and more especially like when of marketing what in can towards part you been not happening, at for engine today. especially of spend, you relaunch do that of

approximately a setup, long-term percentage XX% a to we investment. normal within overall deserve. a company and marketing we you setup. you bring remain this I your of level what an our being have in can to we that different phasings to this of we basis, success it On When terms confident as several In in Coty that as have our the brands, want temporary relaunch always is marketing right the XX%, that tell is you revenues is need

Stephanie Wissink

you. Thank

Operator

you. Thank

of Weiser D.A. from the Our comes question next Linda from Bolton Davidson. line

please? question, Your

Linda Bolton Weiser

be why Estée mentioned guess was could Hi. on think wondering at that call, on if is declining, Lauder, you speculate earnings the trading I could they in or mass U.S. their market up. that consumers a venture the color least And

there's think the going you think mass about the on Thanks. on you and just supressees comment trade-up what (XX:XX) you market? do trends can from So in

Camillo Pane

retailer and in softness. continued And Yeah. some Thanks, It's previous prestige. in-store mentioned one this partnership point element question. From market are But well doing the that Germany to experience. also innovation some we mass there We're key with retailer to answers are think U.S. driven a by Linda, the the experience. trade-up as big of UK improve general, European of our of partners, mass rate my in And like in experiencing growth retailer to experience lot is as partners Younique, for which mass I better the some in in I general our personalized but that in work increasing new the digital But with of is I are one for think the partners. a consumers. agree Yeah, e-commerce. of also selling of is significantly consumers channel of it's true the a high platform And a of which course, our productive I presenters. this do is for on is of that the channel. more direct continue we'll effort markets with us looking e-commerce, growing also thousands provides also view, all to

Operator

Thank further question-and-answer to hand This like the program Pane I'd session. the remarks. you. to for Camillo any back does conclude

Camillo Pane

for much. you of Thank call and we'll having the all speak thank soon. to like attended would you I very

Operator

conclude today's call. conference does This

You may now disconnect.

Coty (COTY) 9 May 182018 Q3 Earnings call transcript