COTY - Earnings call transcript Q3 2021

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Operator

Good morning, ladies and gentlemen. My name is Maria, and I'll be your conference operator today. At this time, I would like to welcome everyone to Coty's Third Quarter Fiscal 2021 Results Conference Call.

As a reminder, this conference call is being recorded today, May 10th, 2021. On today's call are Sue Nabi, Chief Executive Officer; and Laurent Mercier, Chief Financial Officer. remind forward-looking many statements. to today the like contain may would you of that comments I lists cause Please the from the company reports to these filed that refer Coty's with SEC, earnings forward-looking statements. where differ results to actual release and factors materially could the

over In where company's turn financial non-GAAP measures discussion of the noted, Ms. of and now financial results to the addition, expectations specified reflects call in I except release. the will Coty's certain the Coty's adjustments Nabi. as section

Sue Nabi

Ladies with again quarter results, month. complete, very shared execute a we now pleased as to our our continue shoots number on well I and with you are growth another you gentlemen, we which I'm seeing of green last to once share as as highlight with strategy,

exemplified stronger, this emerge more ensure nimble, to the with results fiscal during much which Coty focused reacted our quarter a we more our as urgency have Importantly, XXXX organization. and from COVID-XX further

cost the US. net very sequentially by under lockdown both once substantial half trends quarter our Building quarter, the remaining of quarter. as the led year. growth Our improved much to was to supported Europe progress by over last reductions. despite This continued am in say returned I on from delivered many most prestige that $XXX the gross XXXX, increased Western and during expansion we very EBITDA third this of first again adjusted revenue profit pleased strong million and from markets, notably business China QX, margin

brands. accelerate profit presented reinvesting Laurent up stepping behind start our two weeks I and ago, allowed growth I'm spending us strategy A to our over of this circle Importantly, excited today, and to little virtuous our and growth sales newly strong repositioned of and are seen planned and portfolio and media have executing a through the shoots The our all on of calendar we initial cadence ‘XX. key we you have are tell seeing encouraging, results end pillars. of that strategic green to rapidly we milestones the

trends were which spend a XX% driven an sales it by in trends let Asia to double-digits. with you third our it our wrap Pacific progress. the performance revenue Sales in the up on So, the in minutes strategic hand will take Laurent like-for-like. our pre-COVID the I increased through China. fiscal compared quarter quarter when very was rose led I to update region, Even by few financials, strong our primarily ‘XX, over reviewing then the This to me China baseline in before

strict sales in driven growth the be the we Travel by business, are lockdowns the XX% Brazil encouraged pillar mass China, which well strong consumption. on In At mass and lower result the momentum. softest our is by We quarter, declining as our business performance, quarter, X% declined our softness within strategy. Americas, like-for-like. This decline key know, sales momentum business very same returned was the the which, the time, largely as our prestige in our cosmetics of are seeing a in to you by US region sales in like-for-like. while region traffic was continued heavily to maintained in Throughout of as weighed low with EMEA much restrictions, Retail. international its the impacted our

optimistic putting inflection. However, the place in plans, an recently and region other with UK having see markets will the many soon opened reopening remain we

on by China to now. sales Moving

returned X% to with growth business sales prestige Our quarter increasing this like-for-like.

Burberry, represented revenue of quarter, across sales a The with it high growth in continued mentioned, years. brands channels, which came strong growth as spite last Gucci, the in prestige the negative active low US including, the I this performance of X delivered noteworthy Coty's digit and Marc was performance of China also business philosophy. driven strong As really the skincare. Many and focus makeup in single was our impact fragrances, Jacobs by just reduction to key and quality business in prestige double-digit in

key other year. like-for-like. that category continue cosmetics has result March. in global year, say note, to we during one we sales a the efforts mass of make March was of growth with of of have the seen progress e-commerce on XX% business pleased last This our On increasing sales, the On that the the half further decline softness of within the declined largely Beauty of the mass our to beauty demand the to strategic positive lapping I'm stemmed pillars hand, on lack building occasion. return Mass first color from in COVID-driven used of

I single saw During results. level. performance take importantly, across & sets Consumer in regions two year-to-date. percent Beauty digit third e-commerce we over and as quarter, XX%. the The to sales mid Coty that these important categories. both strong Overall, e-com increased equally based XX% broad a year-to-date channels. the was strategic to and with strength now and work nearly call And now closely customers across brands our penetration level the of QX, a we increased players you financial of consumer both stands our represent the click, Laurent reaching to sales in XX% e-com high e-commerce improve fiscal and over with saw Luxury experience percentage fairly will high-teens in penetration pure grew XX%, brick e-commerce sales through sales sales we elevate hand year-to-date. our

Laurent Mercier

you, Thank Sue.

increased cost our brands. has expansion performance of profit reductions, another gross gross quarter third period enabling Our growth successful delivery with margin profit delivery. behind Starting to be investment robust margin with by marketing proven and fueled

chain gross gross quarter, the points our of we margin supply this XX% category efforts contributors a This rate. COGS various steadily of as XXX with reflecting delivered regional through better management that year-over-year point there margin improvement, well improvement to mix ahead are two margins of a latter key were was improvement drivers Of being demand primarily external expectations, the strong XX% and this adjusted channel, of XX.X% These coming mix, approximately basis revenue with basis first QX improvement gross run maintained. of and as XXXX multi-pronged Our XXX and half were expansion, confident can - and and therefore and is planning improve our structural obsolescence. and lower from half is related the excess be efforts. part versus

process strategic as highest nimble detailed our update, part have in ROI assuring we discipline and our resource for as allocation. recent As pay during implemented greater we our go as AnCP

concentrated Our investments more in have fewer, also bigger been initiatives. but

XX% of XX% sales, was improved, increasing in ‘XX. begun we As up a already our AnCP AnCP close ratio as HX have percentage from to and our sequentially. have sales in profit QX

AnCP commitments This media expect QX significantly for our ‘XX, to is QX with the pre-COVID at strong delivery time, support the We deliver levels. right absolute step profit strong providing on working same while the remainder year-to-date, beauty above by year. both is inflecting enabled ‘XX fuel step-up which allowing the and as profit up the to year, our initiatives in in further the for our more brands, us planned of of for market is dollars

EBITDA by million QX margin for Turning growth. $XXX $XXX EBITDA an quarter reaching year-on-year, increased delivering and of the adjusted to XX.X%. The million profit

marketing supported a, which profit quarter, I cost growth While investment, gross mentioned c, substantial cover was next. margin sales strong reduction, somewhat fixed declined this and by, will during very as earlier, improvement, the strong focused b,

years. certain we full a evidence robust the third Coty, of results to growth impact QX our profit. In the that as and the with our quarter, strategy. cost in begun business is is expect we reminder, the marking continue Focus and across a we - a services momentum the discipline Wella further by in the separation in build resulting ex-Wella, have As various fairly delivering in on to to for which on principally first Wella strategy basis, IT yielding transitional have for largely of aligned plus compensated added summary, achieved key provide Wella, we to quarter In the this we activities our transition been to profit agreement. part neutral strong services coming

$XXX key contributors decreased has program additional of This brands capital the the to streamlining year-to-date contributor we our us In real been accelerate year-to-date achieved In update, services, on our largest in management been quarterly and costs. The allowed organization. over has savings. savings QX, approximately the costs savings redirect prior focus have brings business estate million. line million recruiters, year-on-year, during to profit cost fixed fixed facility to with savings IT, XX% $XXX consultants, Our delivery. our including QX of XXXX, reduction and and

fragrance and is As footprint summer be mentioned, to manufacturing consolidation the completed of expected previously by our ‘XX. ongoing

business changes these easy modernize Coty not to long-term for to Some a growth. necessary are make, sustainable of but and position as decisions

of million. quarters XXXX year put three of our last fiscal million $XXX ‘XX to year and savings Our cost on progress the $XXX of achieve over target us fiscal track target

With the preferred rate to low-teens KKR. million EPS. dilution and Turning from full million adjusted expense, for $XX effective to $XXX million, of a in tax and XXX shares convertible adjusted $XX close to stock non-cash now million compensation, depreciation diluted less factoring the quarter shares EBITDA interest of issued

$X.XX QX had So no Coty and ended EPS therefore, at for impact. adjusted diluted

EPS year-to-date and low roughly diluted tax of million in ended fiscal and the adjusted an EPS million expense at depreciation effective based million the Coty of adjusted for for the compensation, $X.XX. $XXX $XXX interest EBITDA, on As adjusted stock $XXX rate of teens,

accounting few our a dynamics EPS. impacting on minute a spend me Let

as equity our asset, a value call, in First, in carry fair we in on than XX% last income. its Wella earnings to our stake we have the recognizing changes as decision a the described rather taken P&L fair value

was to million. and improvement in there quarter, an led vaccinations to market general COVID valuation in increase $XX Wella’s by that This due the reopening an environment

the a these value of since over core our value speaks we this positive exclude adjusted a to and therefore, adjusted this to and net While decided Wella our is clearly EPS. from time, not business, see we to income have, activity expect changes is fair accretion,

to rules Second, based we the on accounting fair price. by stock end were value quarter dividend preferred value the required to

calculation adjusted EPS our EPS. the rules than QX diluted state $XX adjusted cash. value of Hence, accounting have result diluted million. same yield diluted be time, dividend At the we not EPS increased dividend far will the the the higher to cents the This mechanical thus $XX basic paid of zero. several As EPS, once of being the preferred QX the in by EPS cannot million that

we for to not Looking expect fair have quarter, adjustment dividend we therefore, to value. similar QX for pay the a convertible And to in cash. next do expect preferred

cash line at reflecting million. seasonal and of reversal at million, weakness in flow $XXX the the over capital now came $XXX free quarter, working approximately Looking Wella related minus typical which for with expectations

management our also tight CapEx We with of one-off costs. continued and

free positive have year cash flow fiscal we we expect on free cash generated end flow year million. year-to-date, to at delivery, Based continue $XXX with fiscal to for Looking ‘XX. the this

Turning now our capital structure. to

debt of resulted reversal Wella million, During debt some our economic our for completed billion, balance stake quarter, million deal outflow, of cash the working the the the of million $X.X in in $XX period exiting of And billion. factoring the and approximately combination to retained $X.X positive roughly million Wella ForEx capital KKW was organic increase $XXX of approximately $X.XX in financial approximately a net the QX $XXX net at end $XXX billion.

the QX million we due and from strong of successfully $XXX million, notes increased X% million. issuance $XXX in to We senior bond benefited completed XXXX. from in Additionally, $XXX very secured the demand offering

we It remains is key last our our net X%. balance in and XXXX debt and a made maturities lowering quite blended leverage cost of structure over that net capital attractive very in with levels. tremendous debt progress resetting clear and the year below XXXX have Our

opportunity be retained to monetization we and significant will While represent some in non-strategic assets our Wella leverage. likely reduce years, to will active at in a intensifying our coming opportunities monetize continue the and further point tactical stake

operational outlook. now back forward to for our Sue discussion me Let of it a turn and progress

Sue Nabi

you, Laurent. Thank

many of you ago and pillar growth several as and us joined entails. sales we to weeks through you what walked profit plan accelerate strategic our So each

the wearing significant market, It pressure. early beauty the are has excited in year, you products. past to to distancing, less consumption the I'm the making over come on shoots some the already the mask are global particularly As opportunities running cosmetics, consumer socialize update beauty progress been consumer quite ground have we our pandemic has executing clear and under plans, green hit and to we social of seeing. impacted Due we of have that

The the overall stabilization brand continuing is even its as levels, working is pre-pandemic gets While beauty point certainly restrictions. the efforts This relative first underperformance Coty are Western first such under with been to underway. that and not believe true have the off. X CoverGirl, the as are we We share to towards years. in team modern repositioning take we with positive brand more to a to a consumers, March, despite distinctive stellar, where in are media you market. tight new yet say recording I growth progressing even to for brand am been early The gains back heritage brand which see repositioning pleased it. many market consumer market global paying hard on positioning, and markets Europe with has our to our full are really resonating of The can returned results being are narrow month assets as we CoverGirl's CoverGirl presents

category color as consumers second Importantly, demand. data more is it's shows XX America. Clean Recent points Beauty with CoverGirl brand cosmetics becoming US Clean Nissan even clean clear is beauty the what in Beauty the by outpacing that

CoverGirl continue to and Clean into innovation. are as inventor We the clean we leveraging Beauty lean positioning of

While started. this beauty are the the post-COVID, we video Simply XXth Niki of with new herself. full and shot foundation, utilizes number birthday just behind nostalgia the Ageless, not the Taylor shooting ad of to trust Taylor Ageless the ad America's encouraging, Activations results CoverGirl's least, power began early are the milestone franchise spokesperson, last getting air. only but year; anti-aging one Recall Niki brand in a recently with this promoting selfie Simply

specifically of other [ph] challenging how brands may we be are stereotypes. mass I Two the at also Today, shemale in is highlight brand While full a Rimmel across global These speed well-underway, wanted announced brands. both are brands. to Factor rapidly empowerment, first recently the who our CoverGirl spokespersons. Max new are strong process we moving that supporters repositioning women repositioning and our individual as beautiful and expression, of key

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drive continues which fragrance overall fiscal very the strategic compared fragrance pillar Moving The business even prestige luxury say fragrance our space, next on pleased of to in is makeup the United to ‘XX. prestige beauty growing US that category States our booming. to of is growth. prestige accelerating I'm and the to performance

the than recent exceptional months Importantly, propel been several X faster US, in icon focused the the Marc performance year-to-date fiscal luxury helped Perfect America. growing franchise Coty Burberry fragrances. has Marc the market spots in in the brands. and fragrance house Jacobs women's Coty share X growing brand gaining driven has helping boost be fifth was of market for overall The Jacobs spots fastest up March the Her in to up by

the recent not March. fragrances, in but also Gucci HUGO We see and from very continued outperformed US Gucci growth innovations. Gucci BOSS market least, Bloom led during the to strong Guilty by Last

China up in by the and in double-digits double-digits the growing sell-out market with China Pacific fragrance prestige sell-out fragrance driven double-digits Klein performance there impressive doubling double-digits in Thailand. the Asia and rest broader similarly the of was digits region Gucci has sell-out China and outpacing growth been APAC. Coty sell-out sell-out triple in growing strong and market. Calvin Burberry in Australia. Our China robust in The and up

in been our helped of bright various But have I this slide. across prestige While you into on the performance won't go with they the the see fragrances, markets and various brands winning are spots in US to certainly clearly details that markets in has franchises. all our lead can globe.

triple has that momentum to and pleased for triple where fiscal supported and Moving the EMEA, say Cosmetics. very region, the This in digits Gucci led and our digit year. prestige Kylie XX where US, launched the face delivering top In on prestige with is sell-out recently now makeup, Gucci sell-out in to the products. Touching both in growing quite trends seeing a bronzing particularly makeup lead by globe. China present. Burberry now products. continued by Gucci Asia I'm the in Burberry on are Sephora is In this are makeup powder performance across the is Pacific the brand been beauty And robust stores prestige Gucci brand growth strong maker makeup third brand,

last in and months former As for the demand cosmetic even weak. recent transition the as from manufacturing we discussed Cosmetics quarter, been by limited Kylie's purchase Kylie broadly manufacturing completion of contracts sales has remains supplier

social However, may spots seen track Kylie have of to and And the see at remains began this. fact, new you already on for this media the line Cosmetics in channels on launch summer. the hinting brand's Kylie

details very this and cosmetic which yet, and encouraging and shop updated have we on give In we platform, the portfolio, us trends our about in building sum, assortment in very out allow we seamlessly our the and include of to while we true we built today are confidence that just cosmetics. brands are early products. the expand will which the skincare While and an right Kylie consumers cannot makeup reveal seeing between website are stages Coty, approach profitable new of meaningfully to assortment a best-in-class initiative very the a product many prestige Kylie footprint Cosmetics excited collaboration Kylie will omni-channel and full prestige still are

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Now building moving pillar to our portfolio. of skincare third a out

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our utilized activations support As innovative very once digital again online some to performance.

strong streams on doubled. helped live sales drive supported by which Sally growth Amazon activations promoted very CoverGirl [ph] digital following during live performance our influencers by sales to to TikTok double-digit at the recent and Hansen. We QX, key stream was our sponsored sell-out person This led The and include, of Ageless, a Simply micro accounts. Some events. hosted events events growth CoverGirl for

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on of to strategic our presence moving in Now fifth pillar strengthening China. our

brand performance quarter, during performance expectations exceeding by has Tmall remained highlighted the and in both retailers. XXXX. sold Burberry third and the March also sell-out being which newly magnificent the grew performance Beauty I internal strong over launch X As since out China stellar during Gucci Gucci Burberry quarter. XXX%, a Beauty with was Burberry saw earlier, supported Cushion multiple our as on launched luxury beauty Foundation, launched Gucci very the saw on quarter, top in during Beauty Tmall

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$X.X fiscal $XXX XXXX, $X.X EBITDA billion, expect adjusted approximately of total we of For sales to continue to billion million. up with

commenced. circle Importantly, reinvestment has the of our virtuous

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be better and will at supporting fewer these media Our behind bigger bets. brands

has cycle now started. the Importantly,

We we which shoots, Today, as of channels. number that we into growth ago, outlined steadily and cost we achieving fiscal margin towards just a ‘XX, to As were our clear even a further growth, are means reported expansion reductions. continue be shows profit and move expect in gross see low to profitability sales and we both, quarters trade-offs. quality to view path as sales we green reinvestments pleased great a we and quarter we reduce where not funded increased improvement through sales do both with. that fully This four compared we

milestones for for you. to will our share must we opportunities very and ahead, remains your focus much future I today. and act be all time urgency. to you to many of ahead the sense Thank strong work and say and a with cannot However, continue continue excited that achievements wait with I

happy We questions. are to take your now

Operator

of is first line open RBC. Instructions] Thank [Operator Modi question questions. you. the The floor for Nik comes from now Our of

Nik Modi

morning, you. everyone. thank Good Yes,

have questions. I been developments could two context have hoping maybe terms been of given restrictions Sue, guess, in vaccinations, Europe just is I things the of lot give you on and just us I what's fluid lockdowns. was Asia. some and a - of So there I how April since and in nature with especially in COVID happening

there I would one has broad picture shelf losses. any the color and been space Coty, in the space. around mean, question So is the US really of be And especially – then things helpful? mass, shelf that bigger has plagued the

now, some are looks investments of of it space? in with discussions like your some right how looking so you. terms of And on you're health that retailers your Thank and momentum the given seeing curious

Sue Nabi

Thank Nik. you morning, Good your question. for Hello.

how on was context know, some region improvement April started the under And see stores to March. the lockdown started back UK was been, as early such that that you countries you give to So, European in the has that the to open some say one. strictest in can we I

So in starting as see hopefully we’ll may I see from and same weeks of happening there we great things France we in the and say. signs Germany the hopefully, Italy, kind some to are coming in

that doing, we vision the during lockdowns to space shelf in thanks in see better, that are fall. year another and earnings this which act. since the to proud mass, that that have growing been growing stronger X on first to today, America element it the last great it's strongly in turnaround very plans are share. that is these is And QX, be shown of Clean years, to because referring may CoverGirl the happy been Please We would success to this hopefully, our Beauty news we've year, we the very with with is area area the in Fresh key say, in investing case in believe and to we more was are X, around of had been I'm news that or remember that game the this green CoverGirl last be this somewhere space for market you again, and share you largely makeup I leading confidence in very the When success And for partners This great first is are positive US the I in So the comes the its shoots brand shelf building have of started which has reactions story. it Clean retailers in now Coty going and share is area. to stable, how of and going the that from retailers. since time that another call, say, was presenting. the these likely significantly the an will for you the even betting, clearly by this market that many you fiscal that's I've and time QX what the first strategic the years of remember, was CoverGirl doing clearly during most to America. impacted Europe is CoverGirl retailers, region in into And share -

category XX that of points category You may ahead is have trending cosmetics the America. heard this in

right So partner our the to to when CoverGirl one, between with needs its needs you win-win retailers. bets earlier the and is invest. that it I've again, comes invest to us this clearly been and And is sharing where Coty situation where money a

Nik Modi

on. it pass I’ll you, Thank Great.

Sue Nabi

Nik. you, Thank

Operator

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

Steph Wissink

Good you. everyone. Thank morning,

Our media. question the working on is

So, be seeing little you're working in the QX seeing would could into any thinking are which about not bit that of already talk there media how some already? you. about into if that momentum? you momentum QX which Thank planned you're leaning on and And brands then a channels, is brands,

Sue Nabi

to the during one in in than say very are we Good media Thank when media, that the value the to work absolute in be that so is you've morning. XXXX. working going quarter of you, higher the we Steph. quarter had happy heard Again, fourth it fourth to comes dollars,

step So significant half and progress you first versus this again, is clearly seen what QX. a the during the versus have up a significant

back will may of if be the scene, clearly, say. the where front we'll I area So at QX an be

brands, In behind be investing we'll CoverGirl. clearly, terms of

there. fuel announcements the heard around from behind seeing heavily Gucci, You've behind also recently really these Max we've investing expansion, in seeing Tmall course, around of and the also Rimmel, specifically made that are these benefiting, are brands. in but We'll brands, mortar Europe be for that Factor and we we brick re-openings momentum be Burberry, we'll to investing the China,

more is side of Kylie specifically going and we to course, in skincare, start to behind philosophy - put one brands that, Skin Clearly, there in APAC during which in we there So in but Lancaster America, QX. invest on China. money are will behind America, are also more

Coty. would the So these next, say, around are the areas story where see we I

Steph Wissink

working to of A&P or [ph]. are so, total the on percentage quantify you willing And sales on media

Sue Nabi

of do dollar? of What how absolute quantifying in percentage, terms mean, you is - the it Do percentage you mean going to sales? by much is not in to going be

Steph Wissink

Yes.

range to you higher we of absolute range about ‘XX, think or kind percentage the are willing us Just give dollars than level? some QX but

Sue Nabi

these And this we be a around to this of that more much are of because AnCP know, for the again, going this. do And I much absolute broader disclose don't What is a to the sure, strong what we going we'll And I But you have stronger. media said of what think number of quarter what how of dollars, you for brand/product of voice we to absolute do competition going imagine each the every honestly terms be, will behind to during you is quarter therefore, we number prepared we XXXX, sense were brands, Stephanie, going much fourth invested elements investing dollars do. fourth of a are to focused. franchises. are As don't in gives behind of to know and will be be the share today.

Steph Wissink

helpful. Very Sue. you, Thank

Sue Nabi

Thank you, Stephanie.

Operator

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

Faiza Alwy

good Hi, morning. Yes.

sequentially I shoots, then XXXX so to any same around and you and initiatives I - said if then I if is, so he first the And put the when being being second gross many think his perspective my or are cautious just is So margin fiscal can sales in green hoping comments. many guess, temporary. quarter, change on maybe, there's little half at was you structural guide have. your guide, could perspective. I you're that I and if you I a just your the XQ decelerating? want around So Laurent cautious? two rate sequentially bit guidance And expand compare of well, comment is question, exciting that talked from roughly one you're But is ‘XX on it me, whether half just wonder that look about because just And XQ questions to Sue,

would more that color just around helpful? So you. be Thank

Sue Nabi

Faiza. you morning, Thank question. your Hi, for thanks. Good

bit more a fiscal 'XX perspective. guidance So put again, to in little

impact we comparing As course, the are, company not cautious to unique But had is Fiscal high that very we as was working same heard focusing you've this fiscal of you with part are years. at surrounding an say, smaller brands. over of of you number digit know, if last X - 'XX, know, that quality all because on it's I single what's the company this 'XX strongly as may with us I with. - we on And and being the again, had low of a you are today. compare lowering it again, again, if sales, normal a think

bit in To of for intend give I'll the creating are coming fiscal the the you news color this gross because therefore, is and we margin, not it's a on let So, great may, I the little which years. more Coty us. is me, to we for in the a one, to a build that if new indeed way, not comment baseline Laurent new on 'XX Coty meaningful

Laurent Mercier

Yes.

your for question. Thanks Faiza. hello, So

So the for and model margin brand. to going because our important invest way is are in the really this indeed, gross we very QX the improvement in fuel is generate

drivers. say to we it So, on we a means but can that as that I little healthy explained, structural So are elaborate XX% new say, coming a improvement? base How gross margin so I big this looking we more indeed the structural, is now forward. can

mix So number the management. definitely one is

but So we without The are strategy skin disclosing e-commerce we implementing last numbers, time that discussed accretive. precise new is care, prestige.

I in make gross we initiatives, that even are accretive sure And depth are the new within activities So really working accretive. are to innovations, mass, margin. say that will these in they

So detailed going sure margin model. with we that to with are it's accretive model, we and that work to invest gross we brand are work a make so the the the creating market, are fueling [ph] and initiatives in that each all

calling this management. number is one. two revenue what So, we Number are is,

is, trade how terms we to the review here about need promotion. to So in is what optimize is

to in more depth, to again be strategy. really more related the detail it's pricing So

really strategy very sometimes promotion element is optimize So being equation. big to nail in this our - which down to on returns, a

and So it's the here returns. forecast back these again, are you optimizing that to seeing

obsolescence of and efficiency supply market, which not a XXX and on being last more are chain, And detailed these precise very of and remain work, really but so brand, procurement and with the are will and a standpoint least will is, elements, on excess Again, degree better structural So accelerate. accuracy from forecast supply course, course, even teams. with chain reducing

really are a gross these are [ph] really again, pushing XX% pillars we three new So to base this build the looking margin as and forward.

Faiza Alwy

appreciated. Really Thank All right. Great. you both.

Sue Nabi

You’re welcome.

Operator

Our line next Andre Tessera the from of question of comes JPMorgan.

Andre Tessera

puts for in you I you're the see, space And and Coty overall want comment to the up Good the obviously, also US. morning. if but I understand, just you would as new takes of of like thinking do as coming back in seeing distribution a elaborate shelf lot bit a follow you comment little inventory closures, the understand puts Europe, can you're you. going on being a of there. And in embedding of also, conservatism But forward. takes terms if more like can in what lot the built and bit your of market? I seeing there a that of into everything are reopening there's opening, guidance, UK, some and Thank to you buildup

Sue Nabi

you. Good So, thank Andrea. morning,

new and that's are and going shared hand are each with retailer innovations direction show retailers bringing portfolio of been work the and the Europe. plans the So doing our the we of and space what shelf in be secure is what And to what current you. everything portfolio. the And in are ago, we green shoots it the every that again, with to for new and space on to us comment the is with to also we're have US everything in how Europe, that a months their brands, images I've securing are sharing in the to some what brand shelf added value really are clearly clearly, hand again, US and said - brand,

expanding? certainly that area are very, Where brands super are prestige are comes we build come. the here one in understand broadly is Coty to to the we I very Asia. the an And say. expanding the going helpful inside feedback, that has math, on to side, I may the your it's it distribution clearly question, stable. clearly is for is how what innovation this If if When and positive clearly distribution, future in an So in the see especially to this teams

online in it our Gucci. heard to You've and be brick the distribution, for or increase plans mortar

to course, skincare of intend increase strongly Lancaster distribution Of you've brand much Asia. our in heard the we

an the in business vigilant retailers pretty Lux the US going have keep seeing inventory, And example. clearly of [ph] have your struggling today. the of distribution you been part question say, was fragrances, the is The last see the that's very for fourth would inventory strong to in is to are is about this gains. part, we in I entering And been give up fact, to So lean that retail demand controlling quarter. which again, what with trade

of, So would It's this. worried stock not is like at about a we between all and consistency sell-outs I building. say, There not that kind building sell-ins. a - are

Andre Tessera

US. That's you skincare one side, Skin point one since Asia, a last, potential. of in lot just Lancaster, area it's little that I know KKW of on a you because the think I that’s mentioned Can a the see good about you more and pretty and but in And bit terms comment encouraging. Kylie also

So can you comment on the…

Sue Nabi

is It's the brand future. and been one clearly in Skin key great brands build with Kylie the a figures, has the to that we are of continuing near in clearly America. our brand doing

sell going to and for from benefit to beauty on allow unique first time world mid I general going have, probably world beginning but a going the us the to shop beauty we'll which summer, of the say, lip website, or call for of from the able SPF. important to I creating super to we around foundation, the the This be skincare you heard, cross-selling. would Kylie, moisturizer makeup, fans in is we brand, remover, one color, for able platform new are first the summer, the and of have it's to really an of to are would may same, to same first a also will a As have super, and time, makeup in online, what is the a on in be moreover say, be platform where and

in her the happening in said America excited of ready that's this will working course, already to to upcoming for with that's Kim as as heard trend is it line, it. going super strong is all So 'XX moment. when scenes and When on forefront new And you room very to. in to you've she'll be beauty clearly we and progress skin to of it personally comes skin arena, every at She's, care Kim the give at happening Skin. line Kylie for us And KKW it. be the announced the have diligently are behind we forward more in launch the several share details looking fiscal are as times, the working her. we care clearly the she's

Andre Tessera

Thank Okay. you.

Operator

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

Wendy Nicholson

Hi.

money spending forward, terms and can of thing, going sense thinking more is AnCP you But in what's First on mix terrific. us give the digital your a traditional? between

Sue Nabi

Yes.

so is and most that, So, hello I really journey mean, the we we digital Wendy. where Indeed, continue we the are investing continue.

already media QX. remain our of and majority in in So a was it's QX the the already in it's case case HX, will spending. It

Wendy Nicholson

Got it.

Sue Nabi

- to go sorry, And ahead. please complement Wendy

Wendy Nicholson

No, Nicki think seen traditional if like to some someone for isn't I as opposed mean, media, wonder some I we've wondering ads particularly of would CoverGirl, of TV because digital? that so well I known. wondering, just I'm with would brands, Taylor. I Priyanka medium the like TV that great the was for Chopra. She's mass

Sue Nabi

to about Absolutely, say Wendy. And that’s what I view. was in the

you've are investing fact, is great the market And we news you digital the these that QX the in area the majority on is driven progress in seen deep mandatory. right, are TV. TV way by brands of money. CoverGirl truly clearly on of But we've said, last have our on the is distribution great by a as we such and this quarter during quarter, is that, the are CoverGirl of also very the America totally the share clearly return back middle clear TV, In was - which it

for two. time, are digital that the but return a example, Clearly same especially, TV So driving, I be the of is we of a to at are supporting driving going sales excitement, making it's really say with at doubling the campaign Niki the fact for would Ageless which sure Amazon, Taylor. Simply our mix awareness, the the we

of to has country. every campaign reach this imagine, in America you As the part

Wendy Nicholson

brand platform that sold And if Factor, well? such for a on is has plans sounds talked you focused spend on the just two brands. or to basis? Lancaster on he about And you in wondering Europe? there same that global early then China? if that Factor great. long spend on expand Priyanka as a follow more just a any doesn't in have little can, know China. bit, That but or Lancaster, distribute success doesn't – distribute up Is Max celebrity, a US if the it I I'm I Can you're I specifically a in outside thing struggled clarify if is it's behind of play brand Perfect. very and but sense global a a make you that to then know time, growth Max

Sue Nabi

again the you for Wendy Thank questions.

China, in brand say We're long care comes build that's it daily SPF be this of start. can brand skincare, care be which several to on. you already position around imagine - to would to first a be basis country that’s a is great a us to care. European can certification brand on baseline gives together an the for today the Silver daily that But to a remember, that it we Hainan, world is, the I a for It are is The this shared leader part so baseline is European focus seeing going in build, exciting us like And China, number journey recently in the of could times do when A one a China an extrapolation. as top brand as China. a strong which sun putting of an of sun the doesn't The that is is brand is our this as but sun the the Europe. routine, first where in we’ve as level Lancaster kind a going skincare I in about think, skincare question [indiscernible] mean Lancaster, XX the that having it in on really we position powerhouse brand idea a in a sales to journey in and Cradle supporting UV protection. not Cradle certificated, to innovator first reinvent it

one from the really regions. And skincare two in stories China. it's So different huge brand, is

from of So need in this, benefit I trend. would equity. brand the continuing course, And sun say, would would we say, brand we Europe, I build care, to to its big are around

China. future, one no the what course, We'll see Of happens knows. in

not of the reverse investments kind moment. but that's are markets. in but the around brand of we to Chopra It's It's Priyanka that's the popular the highly innovation, not question Middle on brand Max the Factor, a European the call, too. we the premium highly almost as at what take brand is To the announcement really in Factor same just there plan which European is the concentrating question, a Max popular markets, your that's East. Sometimes China, and answer

rest before So Europe the back we and in do of I to America. to world homework think have in going the some

Wendy Nicholson

Got it. Thank you so much.

Sue Nabi

welcome. You’re

Operator

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

Lauren Lieberman

Great. Thanks, good morning.

Sue Nabi

Good morning.

Lauren Lieberman

sort ‘XX. about Day, XX% we've and to talked from going the about been of wanted math that about expect But ask rate XX% you out further areas That you get of talking the about the into like I growth grow that period, towards you Investor to sales you're the about achievable. just those of areas talking backing kicking those a implies term, fiscal would by in sales in. large XX% something on compounded in which numbers certainly near businesses, seem as

you Thanks. of that's talk the maintain about So wanted have an of degree growth sense about kind level the confidence two, a one, why on if right you just it? way to in that get on basis? of the thinking further would particularly of And to, period, can anything organic out I just

Sue Nabi

morning, your Thank Lauren. for Good you questions.

we we grow expect in grow the continue to growth today. are yes, small, to and So, how fact, - to given

Think true long - fact, of today, in have starting a again, that term, potential the big about infinite. we the is I size would Gucci this it's us, of sales at the front we in So and of potential makeup level what and today. have say, long given

infinite. And, of think I adding clearly top of at today China. potential with imagine this. on doing skincare, What the Lancaster Coty skincare we course, is are in

will to was you the XXX% the walk part - meant. question? again, growth I well, of to the talk. potential second And it sure of investments is course, these to When question, make a there. focus that this is growth going it organic, are So the we on but limited understand If there what comes about will be are our big did not which those areas this, the to we is

Lauren Lieberman

Yes.

Sue Nabi

I acquisitions, we what what questions Coty. have cetera. say potential I'm usually do That's et asked We in Yes. need about when

the nice April, the I for think company years. for I've been in next plan was the what when presenting

of to remember acquisition. Cosmetics from care level build clearly this, the track any when For plan pyramids sharing to skin super you Kylie going prestige we on super we've the makeup portfolio, same entry most the to side. That's summer. the comes for on Burberry our been we of cosmetics is that re-launched on And that portfolio, or you the side, see need care the and without was with me, skin important the could to level the especially the be say, premium thing can comprehensive it side kind And a portfolio part re-launch. be it price intend I price makeup with Gucci, this would

posts, She's on social strong what's a happen in in doing to all teaser, going very probably seen deleting something summer. this announcing way her great, happening You've been during what's media. past Kylie a

the growth we've several to think have that shared what we now. need we So times you we that achieve with

Lauren Lieberman

Okay. Thank you very much.

Sue Nabi

welcome. You’re

Operator

next the of question comes Evercore. Our Ottenstein from of Rob line

Rob Ottenstein

sense quality bit couple to get One, on a you questions of were little amount Great. sort XX/XX. that the seasonality two, Number because bit term remarked quarter Thank impact sales in your is? at one. a their That's because you one much. kind it, can the channels you of sales of the strong that a results. color were of of what competitors more headwind China, just of from depressed get of of low just number that little in of all as quantify increased A cut very

something in So value how a I involved talked that you that if wanted of $XX and you're about was well? as to asset? Any turnaround and And get the increasing impacted finally, in that discussion, the you sense fair about Wella then would slides that there color the outcome Can discuss million. you Thank extent the affect you? you. in all at what to and that the ultimate

Sue Nabi

to the China. want question. to Rob, I'll a I'll to thank you if you pass try on answer for few about it Maybe complement questions. one your very Laurent. much Laurent over

Laurent Mercier

I some over Robert. impact quality - Hi, Yes. and two indeed, years. the Sue mean, already low mean, digit single I sales It's on elements. is gave high

this any seasonality us. for in increased roughly we your China impact this question, in amount said, stage, which or the seasonality is as have. is On So second still China, we small at is

a So China don't see from impact that. opportunity, great is and any we had

Wella. question on third Your

more As included is market the $XX are this the value. to on. context fair in million reopening I and the fair salons an is on And economic, value market that due what the so macroeconomic impact impact explained, external is

the the is there that I this whole the stage, at understand you team, So really performance data. of And new model. as about working no organic mean is element

performance so [ph] market And the no organic value. in fair this there indication from is clear

Rob Ottenstein

you at least me, sales, You or you the single said on low - cut out digits cut quality for high years. over out X

So, thinking to something X%? like be X% should this we in quarter

Laurent Mercier

to last last say, again, beyond have really this you it's would including what average quarter, consider the this for years. quarter. the digits I over more No This precision high two for is quarter. single

Rob Ottenstein

insights Okay. said of in to can the us And any you do have what's that then you given actually just happening what on Wella, terms business? give at you

Laurent Mercier

impact taking it’s I so the back share is to is of no and there quickly, value you. [ph] you the the this the of fair will the again at is are too to reopening, again, that market elements this to early think, the definitely, team segment business No, very healthcare can working model, we give Salon with is growth. more performance -- stage. But organic course, Again, and, that more Wella. of benefit elements

Rob Ottenstein

Thank you.

Sue Nabi

you, Thank Rob.

Operator

question. we for have time And more

of line Our final question will come Astrachan from the of Mark Stifel.

Mark Astrachan

earlier. Faiza’s And just broader everyone. hello, question, on maybe thanks. a building Yes, guess, I

XQ. about peers, spend your should at we do - are implied the sales versus fiscal how for or the benchmark core or peers? increasing you at still think whether And so but Obviously, growth, how year-on-year we below it’s look of accelerating talked year, better, guidance June two same kind progression about trends sequentially in quarter. thing So growth you

if you you you. within et growth. start think sort some to peer changes And the it's get early, you versus Do So that Thank in And you how on categories going could then, rate of do mass, the a can talk given holding are back market you specifically broad too business? that's all prestige think the the soon obviously, cetera? of accountable group? comments, to relative global should

Sue Nabi

Good morning, Mark.

may is key in when us of say, this terms I part us should peers? you on should you at year-on-year company, a versus again, that be about would you start benchmark the I a ‘XX fiscal say mix that fact. we us of reshuffling do new should benchmark in a think how peers basis for just - it So, today. And us, again, looking in if are versus because, factor

to the I compare to if you ability best give So can, the this versus way, is peers.

with et Of the regions, exposure course, same of we in not are terms cetera.

of needs don't So footprint the be parts it's than we part the really rather that's the all in same different the because business the world, progress of the that to today at have assessed today. done

So again, inflection be I think fiscal should that for a us. growth ‘XX

should well? clearly look of was So understand second the because the I question, sorry, that's didn't I'm you at your part the way very this. What year and

Mark Astrachan

Yes.

broader think was segment as it in the how about a you - more basis context Just on do it of well.

So specific prestige to versus the mass. broader question, but

should of talking how that about you're ‘XX? all would improvement think fiscal So there in it? come we about that the Is

Sue Nabi

Again, the what we Day for Coty. the what winning think shared Investors is during strategy was I've clearly

mass even stabilizing business. We're is that's important green key our of of to before and just company. growing element shoots really stabilizing an part starting the First, brand, the over see story, there, a the

is of course, thing, in in fragrance but the houses. China, stronger a rest allow us. in accretive, top in more, the building fragrances, which and of female soon And world us are go also concentrating as business, Second the on lockdowns way focused creating Prestige APAC prestige to will America. accelerating fragrances, artisanal highly as selling which behind

leading course, a quarter, and businesses, on mass Of times, been things brands prestige part doubling in growing of the growing you not several e-com, been at both areas and very, both we many, But you'll do have assess divisions. areas. it story, again hopefully is XX% new care These shared Thanks across will divisions, was e-com not such of brands least, the be both has are with strongly. makeup Burberry, in on the to I company building but Coty Gucci showing Tmall progress And innovations, very new And but skin the which again, prestige least, and Last, have questions. portfolio at may sales, brands. if which I've also as on many the right during DTC. the be last, game things, the Amazon, our China. the but able own and to say, these not

Sue Nabi

able again share questions very, green first with you your very you we've to that for and been Thank happy results this and shoots.

Laurent Mercier

all. you, Thank

Operator

gentlemen, conclude does this you. the and conference. Thank Ladies

Coty (COTY) 10 May 212021 Q3 Earnings call transcript