COTY - Earnings call transcript Q2 2022

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Operator

Good morning ladies and gentlemen. My name is Brittany and I will be your conference operator today. At this time, I would like to welcome everyone to Coty’s Second Quarter Fiscal 2022 Results Conference Call.

As a reminder, this conference call is being recorded today, February 8, 2022. 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

In where company’s financial non-GAAP measures discussion of the noted, of and financial results the addition, expectations specified reflect in except release. Coty’s certain the Coty’s adjustments, as section

Sue Nabi

it's to XXXX, that Ladies while we first medium Investor with half November delivering and our we term Day. our the the on fiscal gentlemen, are of simultaneously completion of strengthening achieve objectives clear short-term objectives, during the outlined foundations the

ourselves profit balance sheet. make and into these is six As enter and momentum. strategic you margin our duty objective ahead steadily a in on recall, confirmed simultaneously I beauty deleveraging of results a Coty months are expansion our and profit ambitions we market, gross growing of to has takeaways of ahead well drive with. that you the future fuel sustainably live sales, our powerhouse last the to growing The true which includes are turn as want cost with few cycle with the where reinvestments, revenue combined we There track initiatives growth strong growth virtuous which

exactly our launch played impacted last that and grew QX mid-teens, consistent as and the out. sale the quarter in with by sell-out trends in first our has is both on in We revenues fiscal QX timing half had expectations. sell-out First, of this [ph] revenue QX were driving flagged what and XXXX our pipe was focus

our growth as past we've by key achieved mass were consumer brands. in signs in we beauty Importantly, in months of supported six turnaround clear the cosmetics growth the fully saw strong

and increasingly another XXX had points exceptional of with basis quarter in year-on-year, performance to XXX time, business of to quarter. model margin same the our the At gross difficult close an first reach basis to times cash steadily allowed years. inflationary generation leverage strong profit the gross to five saw expectations. and deleveraging on we We coming Achieving growth focus of has higher growth backdrop have ahead strength our versus our we cash. many margin growth in Second, the drive on speaks disposal and at our against great of our this points this us the below levers

consumer particular across and to this quarter continue global market progress was for on we a the the first in business six time highlight execute of beauty, Third, share leaders. grew basis. our growth each years, where The make strategic five

finish I to first will ethanol, to on outlook. of of Additionally, using a trends higher production our takes majority few Laurent now our our our increased sustainable take with on seeing strategic moments strategic before and and portfolio our in This, in half leader second QX. Fourth, And drives fragrance cover then that strategic in a more to the upcycle fiscal in sets during the will half growth trend as the ahead we've I our across later call. by goal XXXX. I'm integrate of schedule completed into sustainability, steady of ethanol us share our against the our our on of sales in stage the this of mid-teens run with part sales you coupled financials progress of are update in revenue 'XX our share quarter-to-date the progress pillars accelerate the becoming we 'XX 'XX. focus the strong an first I honored growth each EPS. sellout through our a to recently on outlook, putting already turn, will sustainable of through our revenue payout quarter details

QX guidance. grew with XX% our line Our revenue in like-for-like,

Gardenia Flora QX Gucci pipe Hero. when key and our strong the launched initiatives, we sale Following Burberry Gorgeous

As choppy, our last the fuel was our prepare we the underlying discussed on were ROI out holiday the be sell-out the critical our period highest expected strong earnings QX. up and goal during consistent trends to sellout step was a call, expected. played in investment results QX the revenue for while as trend in acceleration opportunities to to and The

QX, Underpinning China. executing to in over on that saw sell-in sellout strong beauty 'XX brands, sell-in we between and full on first alignment even as growth the we driven in At mid our broad-based in of mid-teens. overall low And with past QX the and sellout key other level from to Rimmel, in and Sally Factor. par prestige us skincare we bring continued even these Prestige remain makeup, CoverGirl, achieved sellout same in Hansen Consumer growth the the the and is Beauty Gucci registered by players showing like-for-like to high first clear sales. months fragrances and by in Burberry our a mid-teens half X and growth across fueled improved trend par growth also under-indexed to resulting as half 'XX, results cosmetic is The fiscal key Jacobs. industry to Our low-quality Coty teens with in the the and of time, X-month of Max X% turnaround tremendous reduce as this sales Marc were Prestige XX% like-for-like success

have a in key and supported half sales noting like-for-like as Canada though Gucci and and QX, -- worth becoming by is well saw to regions US It's by China the fueled rose des over the growth grew markets The new increased XX% US, X by to all half the next local Americas like-for-like across region X% half in the travel local months, and in Asia travel all retail. continued Asia key region. in and to outperform. Chloé travel the XX% in with in like-for-like growth retail. XX% Pacific past in XX% we EMEA brand Moving We travel first are retail, XX% we and sales The Mexico. in materializing Atelier now strength QX, Pacific in first Pacific as the retail. first in engine Fleurs QX, growth as a that China Asia region

dynamics you the the our in and reminder, dynamics well. pipefill the a I financial to Laurent of take over through As impacted results. as QX phasing region hand to each QX quarterly will sales now our in call

Laurent Mercier

ahead very second pleased Thank you, profit our guidance. continued strong Sue. which with nicely am pace delivery our quarter results, in our with EBITDA of coming of I

margin. Starting we the This quarter circle to virtuous again gross demonstrates create. set out with

of above nearly quarter. basis points XXX last This from by year adjusted quarter gross fourth and XXX margin XX.X% our points of QX basis margin XX%. marks increased consecutive gross Our from last

improvements margin management, pricing the gross by E&O the productivity was margin and favorable and Our Beauty increased higher volume. businesses, in by absorption improvement and performance both supported on revenue Prestige sales which mix, driven and Consumer were

As we have focused in gross to this year the both previously very further years expansion detailed, continue and be on margin to we driving come.

back reasons. the first we not similar expansion However, please in half do the as in of to gross of for number level note the that year we of experience a a margin half did expect

volumes the seasonally, lower sales second given lower First, first the the margin is half half. compared period to as Prestige a gross

is as margin remains also of further impact to we expect Second, to the that the to now while before, finally, of points margin benefits over virtuous inflation expansion multi-year we repeat margin attack channel, supply place, in Coty cycle mix year. expect Despite gross navigate XXX regional plan in from don't year. the basis update our the benefits topics and category towards of we step give this, chain. brief created. back we up would have HX, key onetime lapping and And expect we driving environment. this shifts. in half to this gross indicated a will be I uncertain multi-pronged, inflation continues successfully Gross positive on like the

share environment. also coordination as we commercial freight is has fact, spot transportation in of under Meanwhile, advance. markets, supply difficult increased teams mitigation are In the our our material Walgreens secured bottlenecks. program. speaking impact through a well in cost since chain contract remains both supply Coty, reliant largely we operations not and exceptional proactively between am on while to our majority our components the our proud to pricing place efforts point, mitigating in and freight, on actions of the that capacity to lead outlook any teams spoke, material On reduction this and times with supply, and awarded unchanged inflation as On award, the potential I chain last XXXX strong

basis XXX with level Importantly, were delivering these in very and revenues gross that up margins resulted low QX solid in the also while XXs, line service actions guidance our in a points.

higher quarter, last half. expect continue to the during to second of highlighted inflation As the impacts we be

However, on our to confident year expansion delivering deliver we actions take higher allow also margin that to year. outlook, fiscal for we gross XXXX while remain the the sales continue us will

marketing in to Moving investments quarter. the our

During last is QX, which in we line to XX% plan sales, we up quarter. with stepped A&CP further of investment approximately our discussed the

on momentum increase as Sue which than was Consumer right be driven in was year-on-year. more Beauty. working and both The to undoubtedly level A&CP A&CP Our This Prestige the performance our the by increased described evidenced to sellout the decision strong strong by capitalize continued of in brands key earlier. media, doubled

as investments highest the ROI we needed. opportunities while Importantly, maintaining behind to reallocate also flexibility invested

continue invest our already Gucci behind to such as and Flora. successful, we Specifically, Hero are which Burberry innovations, key

white as Prestige grew six rate. market China, We where expand times opportunities space into also the to we such and continue makeup

of Consumer key turnaround our behind brands, a invested also business. resulting the true in We Beauty

second to A&CP the percentage a going intend XXs into we head this we with As high momentum half, fully level. keep

and continued to program, raise growth. another to execute cost-reduction fund marketing is lever allowing During QX, which us profit our we

costs year-over-year gross cost in being QX. in and drivers €XX fixed of savings lower quarter, our with We the achieved Specifically, over million fixed by margin costs. primary declined the X%

over For delivered on track which fully remain we million XXXX, to savings, in net of achieve first €XX have half. the we fiscal

explain cost-savings I program of Given front-loaded strong the we our the to in HX. achieved have dynamics savings year-to-date, very want

we in our half quarter, the first savings XXXX half. As were neutral in last fiscal as initiatives net discussed concentrated cost-savings second we expect of

However, mix actions. savings HX increased to fiscal will we inflationary beginning start impact the portfolio more initiatives offset in in in. same new time, number than expect so of the XXXX, pricing and XXXX, kick At the to

impacts we inflationary our the All-In we Importantly, beyond. our remain savings continue different target of monitor pricing and to we program, initiatives $XXX million mix on to fiscal fiscal ramp-up our XXXX even achieve savings areas track To XXXX P&L, with in Win on as implement and coupled of as

and to our Moving delivery HX. profit in QX

flat XX by percentage of increasing For is points increased strong particularly million A&CP reaching the $XXX light of margin, EBITDA which a and EBITDA sales. to quarter, with adjusted XX% in

rising delivered leverage. growth, strong, significant gross exceptionally half of million strong are continued financial profit we year-over-year in first fixed of XX% our our adjusted the expansion sales EBITDA demonstrates margin The was cost this we virtuous was cycle HX and XX%. and For XXXX, improvement margin quarter the robust trajectory of result This a to fiscal on. and in now $XXX delivery with improved a performance

our million, $XX a $X income tax XX%, tax a dividends. law, adjusted preferred our Now stemming of for was deferred and to EPS, of tax adjusted moving depreciation the from which to interest revaluation in $XX following million, expense expectation million, of rate Dutch of of change tax a below approximately due which EBITDA assets equating drivers; $XX included $XXX million, net to QX of million of

EPS the ended As tax adjusted a from benefits. which result, QX our certain $X.XX, includes at aforementioned diluted $X.XX

fiscal the totaled EPS half first the XXXX, diluted $X.XX. of adjusted For

While by million. market during rose EPS in the value share Wella adjusted not our $XXX included quarter,

of provide the and on context QX some our EPS. the remainder to of more ahead adjusted different to fiscal would XXXX, like Looking drivers I

for recent reflecting the to debt First, offset by expect refinancing. of we somewhat mid-$XXX net million in continue higher fiscal debt the a lower interest cost expense balance, XXXX, post

cost we Second, we the for some from HX by XX% tax tax fiscal hurt effective effective adjusted XXXX increase XXXX level, rate low approximately will that $X.XX discrete XXXX. an anticipate tax HX in as the percentage in EPS an in XX anticipate rate

degree tax high rate a is with projection there in of know uncertainty environment. the current effective we However,

following preferred ownership, preferred exit full the shares are dividend the KKR's on $XXX outstanding. million Third, only of of

$X roughly dividend Assuming further rate a for the forward. quarterly preferred conversion preferred expect run no of these we shares, going million

half Moving delivery first cash I pleased am QX the during to in very free the say free cash to and exceptional. flow was flow.

key the inventory to work addition improvements we of cash program. across Olympics made profit receivables, the payables, strong all In delivery, [ph] and streams

to of our costs. have continue management very We CapEx strict and one-time

was flow QX first half million. $XXX while As free in a cash result, $XXX came flow at free million, for the cash

these the of streams to seasonal During commence, cash XXXX, fiscal mitigate with other will work second typical half remain of many the outflow. should place steps which in partially

of with by of generation financial our to QX. cash was billion, from This key as net after We real approximately as factors: well sale. on true-up two capital lesser $XXX business Moving free approximately decline price strong to ended the decline debt $X.XX the a million of $XXX which structure. finalization sale about a is QX driven of estate assets, related contingent extent, to receipt million of of Wella a from cash tax credit the and related primarily Wella business to consideration purchase the flow generated

leverage net we $X.XX our target, result, of am stake economic ended the came Factoring times. to which with at was proud leverage of of $X.XX with around year this we the a towards billion. billion, in I XX% a approximately end, Wella X.X to of debt As quarter in quarter times. at valued XXXX ended initial calendar five with calendar end ahead say

we our leverage of us organically, the to that am While distribution. work existing streams to I debt allow completed its order entering to times shareholder will say in has pleased four numerous I that have a believe refinancing fund QX, target Wella reach

on We XXXX. drops of following our the intend We $XXX time cash €XXX end target approximately in Coty. expect XXXX. four cash to full the unsecured the moves this to on distribution calendar step the us by million year clearly goal of us XXXX. plus bond utilize approximately par redeem proceeds result calendar our significant next our bond reach premium to in in call further ultimate a to helping This towards this XXXX balance million XX, that of sheet will excess by two times April is This times leverage of

back economic Brazil, market light the from financial current call provide In exploring. adverse for conditions have the volatility have Before the in Sue, application IPO, registration briefly we the I partial I being. on want time the decided IPO an hand Brazil to to been of withdraw process we and to update

IPO to continue a will Sue. to I in now Brazil We proceed monitor turn conditions possibility back call partial a the future to evaluating market in opportune window. with will new

Sue Nabi

Thank Laurent. you,

strong progress many across pillars six We in additional QX with works. strategic initiatives continue to make our tangible the in

with start pillar, stabilizing growing first Let's strategic and Beauty brands. Consumer our our

we something are slide year few would ago. with I turning the encapsulates this on have think charts around perfectly this business, the a speed lightning that which anticipated

which For global far is only for Beauty likely is which the color internal Consumer much momentum Beauty gaining market goes, first our roughly as but This time strong longer, in our five a on together of Consumer years, our has brands, Coty as the is underpinned data business cosmetics not by basis. business. but stabilized two-thirds account share in share,

mass grew cosmetics grew in global single mid-single category mass our XX% and cosmetics mass over in the low sell-out in the high digits the While to overall. digits, beauty

with and points close of share we have maintained body behind in globally the category nail mass digit risky three the As key December. cosmetics At innovations a share same care business mono XXX Brazil roughly supported sell-out November result, double new to [ph] the basis months, past by and momentum growth, gained in XX our of time, and color points over basis color.

in-store as communication execution excel. Drilling teams, path the our be deeper relevant into consumer expansion exceptional to sustain right momentum beauty While color are we products, and as may in the are strategy, beauty seeing consumer can mass with brands right cosmetics. results and bit the that confirm ever truly we the linear, not a these

gaining Rimmel, share and proud biggest are Beauty brand, turnaround began with Sally I that global biggest a Max While four brands, am Factor market to Hansen color basis. now on say our CoverGirl, CoverGirl, our Consumer all our cosmetics we

we CoverGirl know, makeup. in in doubling ambassadors skinified of new March clean with heritage assets, communication CoverGirl's you on new brand XXXX re-launched As and down and makeup

Now of CoverGirl weeks. launch, in roughly XX market months XX last has share the into the gained XX

activities and brand with the [ph] Rimmel, positioning the On a Boaboa new branded the summer over began we the communication. new at

execution Spain resonating Australia, by UK, winning communication clearly momentum led as markets and Poland. share with the and share in revamped are Rimmel is consumers globally, in Our now key

step, of makeup the next and a CoverGirl for Rimmel's clean line Rimmel Kind with & the vegan have As launch we Free. recent leveraged called playbook

over note Insta-Dri. in to in our continued key key January beginning franchises fuel brand and so fiscal of with Two markets years appearing the the benefits important QX. the support past fixtures that have line it's like the in and share revolutionary we was February, and On Sally already TV media However, in It only the successful began launches trend this through Miracle market to Rimmel supporting Gel the on now from to launch Hansen, will like momentum come innovative Takes couple

share a share in where Australia Sally result, As across Essie as it the Hansen and well has is Spain. recently UK as gaining gaining overtaken

already repositioning Finally, the revamped anticipate the Beauty less share of and communication execution, gains every do share not The business, Poland Priyanka while in globally, as playbooks month, reiterate, with Consumer we and a formulas seeing the led our with path to to turn Max execution, the market Spain, for what Foundation began fall year and ambassador. Max than clear and FaceFinity gains and Factor have into Factor's is around every coupled linear quite To in Chopra our Jonas returned by is we revamped the in-store brand strong a market developed right new Russia. have that success. UK., we every brand are

fragrance the favorable, highlight market trends strategy, Prestige quite of vary as for that pillar the by to business. to luxury fragrances region. backdrop Turning even remains accelerating our our here second It's important

versus up US by double-digits in is very in the momentum China. This global we Specifically, the year-on-year market QX, and supported strong and estimate is fragrance XXXX. Prestige both

extension growth market driven monitoring lapping often the truly five China high incredibly any seen given is the fragrance path yet second China, today from a in prior clear to the market the of start growth Chinese of many consumers fragrance closely number move viewed continuing signs China low to see which we not while figures the Importantly, fragrance We discovering and market In the year, being few of to come, in US years. the we as fashion. the the we momentum see penetration for as the have to by years next luxury an in the fragrance fragrance is are slowdown. category, market

resonating are category is while hand, in as other stabilizing growth two-year launching Similarly, still now that up the in only Prestige XXXX, markets in provide negative, leg this year-on-year robust, growth retail, the years. performing Europe attractive travel are innovation. remains the European On market-leading globally. more while there fragrances the for year-on-year, the in coming momentum in trends solidly will Against store the well of Gardenia Europe. Gucci Gorgeous and Coty fragrances for fragrance category versus also which is backdrop, Flora suggesting is exceptionally reopen, another is the

the December. spot fall and claimed with Perfect US Flora consecutive US was the the Chinese becoming number has XXXX. XXXX, Gucci on seven Marc Tmall Gardenia in one Gorgeous is fragrance number Flora resonated number the one calendar the fragrance with holding the second in where early launch in Coty truly While number all marks in fragrance female officially also the has in consumers, Canada in of Gucci the calendar Jacobs for one fragrance launch year launched only This XXXX.

Tmall, and become operational Gucci launched Coty male assure and which has of the in profiles and Hero, to launching scores all testing And on leader in XXXX. fragrances December. before early fragrance Burberry launches for also the within fragrances, fall, are number all the the line these pipeline amongst Coty's Prestige strategic Coty's and sense identifying very And in side, the seven will will rigorously similarly, a rate in I'm our fragrance of success also becoming claimed innovation this higher strong enhanced than the we are of team Tmall the capabilities industry's track strides new US launched fragrance player in of in above historically. success business fourth as with confident to on male Flora experts that to calendar making Burberry male last here. and Makeup, Part icons. and became spot be on years global reach is over markets. fragrances we the a in figure fragrance discipline second built right rate Hero key capabilities the clear in the X.X a industry-leading have speaks that It's On

led Our Prestige Makeup sales in XXXX approximately year-on-year, first of half Kylie and Gucci Makeup by Cosmetics. doubled the

Prestige in footprint stores counters, designs on video are this see can to Year. the with differentiated relevant Beauty Chinese with distinctive for New rapidly Red brands Tiger and locally Burberry slide and such our you in eye-catching showing As Makeup store China, our growing as packaging the the coincide we communication and

of As our than first X% this a momentum, XXXX. XX% Makeup of half to over first to half penetration less the sales approximately of continue target and fiscal total in our X% Prestige we the by XXXX, result from of grew sales in

way in Focusing opportunity half QX and stores makeup. Gucci in biggest e-commerce in doubled opening focus than traffic makeup Prestige locations flagship we business our on highest highly in Investor by sales. and discussed our Gucci cosmetics, first as is productive supplementing on sales at more And year-on-year. the growing XXXX, with our our in Both a robust Day, makeup prestige profitable this

months, strategy we makeup we seeing that is doors Gucci the in have Our comparable a US of lines long can but accounting for of business are the sales. photo of over with locations. doubled outside but in Gucci our store in working. are recent Beauty Gucci the number a you highly well example, And is of In this one sales Gucci this year-on-year evidenced China, by XX% doubling clear makeup brand as remains desired as see e-com the also

sales have Gucci makeup in Our triple our activations strong China driven to year-on-year.

fragrance exceed building Gucci sales. in brand, our In into of a fact, now sales we Gucci two-axis as China Gucci advance makeup strategy truly

out skincare our building business. So our turning to pillar, third

acceleration Day, strategic Coty. we see highlighted foundation as initiatives. of skincare XXXX for the meantime, we during are As skincare fiscal year for the our the laying In Investor we

Let me Lancaster. start with our strategic focus brand,

Lancaster our scientific into you skincare protection Hainan focused is and a first to China. and turn As in excelling brand on know, Mainland repair strategy

XXXX, actively and with VIP see that This here. in Lancaster's opening doubled of has same pop-ups range truly dermatologists, Hainan become hosted sell-out you with and strong brand Since events Lancaster support with the growth as opinion product to recent time, been with consumers the have Hainan seeing opening leaders counters efforts second exclusive We retailtainment, with while engaging We these leading fixtures monthly sales three one Lancaster doors brand view initial beautiful double-digit nearly celebrities in the we in there such the key right and China with period. have are sell-out. activation, translate as equity the Mainland December. Chinese also in and in China, At confirms Lancaster Sephora's the our resonate consumers. and May

the with ambitions of key milestone, skincare our launch the CoverGirlskincare. progressing also next are We

brand new CoverGirl first-ever Clean we you As CoverGirl's the we English CoverGirl Fresh rollout Spanish line at is skincare in to Ferrera national of unveiled sold. as Last with formally America newest announced wherever campaign dual-language both in the brand the coincide time Ferrera the skincare week, and launch line the November recall, with America the first the we as of ambassador. announced same

look the now. [Video video Let's take Presentation] a new campaign at

Sue Nabi

extensively and campaign exceptional our results communication I [ph] we CoverGirl want lineup, have to seen and emphasize tests. skincare that on protested the

the to you we for forward new on updating excited initial are initiative results earnings CoverGirl, call this and next look about the in May. at We

our fourth expertise. pillar, our and e-commerce direct-to-consumer to Turning strategic building

sales particularly growth on e-com we Focusing first strong the with half Consumer make results, including in Beauty. XX%, to our continue strong in e-com up progress

reached our penetration e-com result, a mid-XXs approximately half Prestige penetration including high the XX% teens, and Beauty. in first Consumer As for penetration in

strides encapsulates Chief the as many than Jean-Denis, Officer, our However, few just and November, our more you transformation from across multiple digital e-com, last so over we've much in months. areas Digital heard made

trial own Sally our Perfect of allowing consumers making Hansen hands moving an Hansen, Sally today, see image virtual a hundreds advanced As with purchase. shades we part before of to Corp, on for of their announced tool their live partnership

also to is beauty real building. across And We results. adviser have BAs engage markets, doubling client streaming driving with base through digital our brand storytelling training life on been down this key our and our

Hansen For example, strong a Sally program million million we the resulting in Amazon, X US, our impressions. fueled in stream the Guide successfully live CoverGirl to by to sales CRM recruited thousands contributed beautiful more less views in Amazon live were very double-digit single-digits image the with promotional elevates sales, whose and and December streamers, streams Tmall the and on of months Similarly, have Tmall but high-profile streams percentage of live This live Gift up results our by in reliant from previous part on in consumers also X.X our our a us participated quality list. makes not Holiday only and BAs, by of our in brands.

to on Moving China.

on make fifth this We strong to pillar. continue strategic progress

beauty strong country we double-digit in very strong even QX, the a slowing parts led as of maintained QX, Following COVID sales in the resurgence growth broadly. of sales to

the was where XX growing fastest in In sellout top the fact, amongst second business companies in China. a was Prestige beauty the this row Coty quarter

over the grew of Prestige the is times four sell-out market, Prestige beauty XX%, overall QX the growth which Our than rate Prestige times calendar market. while six sell-out XXXX, in faster our was

December. to I'm revenues reached proud after number Our XX three that quarter on Tmall the the XX And Tmall, in Gucci the brand only times in launching on grew spot year-on-year. say over months Tmall

our year. that the our fiscal outlook and XX% brands, China and to me people by of XXXX. strong we to confidence sales revenues our have total to That me All reach ambition in win capabilities right gives China this brings now of to for drive the

We January reached levels high to mid- like-for-like and detailed QX to XX%. accelerated how plus in sales have growth our from QX teens sales how

a to that spectacular growth the with we and becoming expect constrained same our perspective, negative of second X% of Laurent ForEx in now XXXX confidence serious as All is second mid-teens. the profit in accelerate half performance year-on-year benefits prior X% At the half in and we inflation. QX, the this a margin should revenue growth while the discussed, first the quarters to in usually overall, in the coming the second XXXX. more step-up an while will seasonally time, gives by XXXX, sales of margins the of a half us had are to in our half gross lower and first one-time headwind sales in estimated impact the growth gross half year From be fiscal like-for-like compared

a as As the prior XXXX result, compared half year. would gross margin in we expect to fairly second expansion the limited

you couple basis the with a margin in expect compared to XXXX of XXs this gross margins as XXXX, when fantastic continue to half gross fiscal fiscal adjusted in in XXX XXXX. However, uplift we of the first the significant for expansion points

P&L. down Moving the

growth We in continue minimum fiscal our of the environment a growth, XXXX sales again of cost no Following XXXX we In low second in EBITDA as low also we effective rate, the mid-teens currency A&CP the the in deterioration million assuming reinvestment lead the fueling our expect or normalize of to global confirm of to see discrete end significant levels at tax initiatives. total, constant in And adjusted while a rate mentioned to tax half XXs. we situation $XXX XXs. monitor we would some COVID upper the high expect QX, active macro adjusted at environment. to now XXXX like-for-like fiscal the Laurent guidance tax range headwinds as at fiscal to comfortably on to XXXX

which hurt to fiscal XXXX $XX expect half XXXX. year, fiscal benefited fiscal. are Here, in total magnitude And including that of by for discrete with relatively would the to or net while X.X% approximately a we first or drive percent, EPS, $X.XX. benefits of benefit into half takes a on EBITDA a followed increasing in we the account $X.XX a $X.XX hurt mid-single-digit ForEx the strong in back delivery second by this on of QX tax in This EPS date $X.XX expected $X.XX, the for the a our note adjusted a impact guidance currently EBITDA roughly ForEx half, similar half, total our in should foreign limited first million we dollar approximately

our continue times data we setting first on step of great confirm the fiscal of and profit Prestige across results delivered and for in to upon We this a cash moving we strongly a goal of now, last Consumer further ahead strength sales with expected broad-based reaching grew $XXX and total entered delivery Lastly, ahead calendar are success objective. we the sell-out we around expect gross To strong speed four full We half of with margin, year, the Beauty. with target. the the end distribution, towards stage for with year. to delivered this XXXX million strong XXXX building conclude first leverage expectations, and half

your for powerhouse. stronger exciting ahead. in even We short, continue each an confidence of pattern our delivery on second the become you maintaining And initiatives progress us beauty progress across as Thank a pillars progress strategic more with strong many true is today. to our make are we In ambitions our time made half. giving of we to consistent

your questions. We are take to now happy

Operator

And our question Raymond Instructions] Tong Olivia we with first [Operator take I'm -- Tang from James. Olivia sorry, will

now Your line is open.

Olivia Tong

to and just profit quarter of ahead expectations deeper came nicely our this expectations EBITDA, with half both meaningfully of gross for I dig the remainder morning. wanted good the into and in your your obviously Obviously, first better. year. Thanks, Great. expectations

other mean I that whether you realize you want much how have keep flex how the second expected little that. in level the second how to unchanged you is into potentially clarify just not continue the think rates fiscal guide. Appreciate half, in so tempered do is Thanks you of upper at open I'm So the support leave in half? EBITDA half, view margin you higher – to EBITDA, end XX% expect magnitude what can just than the came the at curious first but on that upside, you same extent you choose ended. And to I it. expectations so choose gross much. half, -- at expansion your to could things and levels better more you invest you brand to investors I talk and that to on expect assume then gross flexibility the margin read if in you about the as QX, about obviously, But happened? mentioned, what expect case you if a You second in bit at now the still in

Laurent Mercier

Thank Olivia. you,

start on than will indeed I I and part expected. first with better mean the on -- in QX, – why So came indeed, what

give will I definitely, drivers. Number one So key you a -- few the is growth.

So really Day, remember we how we the Investor during explained it's definitely -- are you and flywheel. when igniting

with And keep And margin the fixed the discipline growth. we do growth at is really with starting same fuel on strong how expansion. gross time, we that's the costs. definitely So

engines, these are margin. the -- definitely mean, So two gross I

what's I gross as so margin driving So expansion. this explained, it's

also So all we mix explained and it's QX. in

skincare. we the continue, China, with Prestige, Makeup, So all drivers e-commerce, Prestige mix

to So really Beauty, that they Consumer and gross which to also building are also kicking I super mix. on margin. is that accretive accretive want is within we important, of not only I all comment, category category, are what we it's off the mix, the in Beauty, are terms in it's Consumer is mention innovation want for very

all combination combined gross revenue So last and already initiatives pricing these management, it's of expanding started we really margin, year. with

We continue. To even productivity part third inflation. it on of course, the And to all initiatives. contain we Win of on amplify as We All-In also working, keep initiatives is

key actually element is mean, are we margin we fixed really key we A&CP, XX% last fueling fixed minus gross continue, revenue of I shared, cost net as the I And So started QX. our A&CP. of and of then a equation, level X% costs the year component, at as in

growth. these of it's fixed on gross elements, costs, A&CP, So really media then all and discipline combination fueling generating this margin,

also high the continue, points, will gross -- now course, same margin element gross volume. inflation there definitely of indeed, HX. indeed which seasonality the that net base. lower there is Basically, is moving we really you engine. a is from two gross is of key Number in a seasonality amplification. than to HX lower also about pricing even the as is one-time creating HX know, have so So on standpoint, is all And year, which we just basis a help And revenue margin, XXX had the at time, that's margin. HX, the a on last is a is HX. But

at on margin So level is say, gross a as expansion as not we total expansion which significant. of really the same course, HX, will be we tremendous will experienced margin But be gross in result. HX

important -- to So moving understand, are to and that's where the this we HX. in really model of HX, QX

on confirm time. And is $XXX mean, question, a minimum. million we Now last can the which continue shared we your our flywheel. EBITDA we this guidance, we second certainly at I guidance, what confirm

we some So margin, fixed there Through growth. tangible definitely Prestige where on share market discipline cost on both gross of success, it's fueling lot share discipline Beauty. and on concrete gains, are examples the are seeing a and expense Consumer very

the the continue and model KPIs, pragmatic on allocate always in and we very fueling approach, So we compromise always don't a the way this again, investment, with return support, money. we on

So the we are eye keeping. I strong a management And mean, inflation pricing, that's through disciplined of and keeping revenue really course, and media. rigor that on managing

Operator

Jefferies. take And will with our we next from Steph Wissink question

now line Your open. is

Steph Wissink

of for maybe you then, or conversations some you to give and question, Are contextual, the still of And the you opportunities Sue, you about one I you. that just they're to Laurent, back in you percentage percent sales are the on So morning, But the but A&CP. acceleration and category. shelf you as sales feel a events? the space of changing Thank you in talk those overall half. conversations for you pull question changing you evolving. efficiency have so retail a as little targets? out can Good sales, dollars Olivia's a us a your evolving talked to is your your just for response new coming for really everyone. how bit accelerated see like your finding more outperform promotional context is and bit Are finding growth can more you. you with about can the A&CP, curious that In are performance? back Thank partners in little but how I'm you relation this

Sue Nabi

morning, Hi, Steph. Good everyone.

Sue this speaking now. So is

exactly of gains the regaining Kind the rest again the in as since from lot the the among great of step it latest both on lot makes them Clean to opportunities what build Europe working of hand-in-hand brands. Beauty brands that way is would I this. year CoverGirl accelerating, idea say, are that a this gives would So moisturizer. interesting Gucci heritage cap is And is we are last environment, to of hand-in-hand that to in online say partner another category If with we bring When the they exactly Last category hand-in-hand it makes stores. illustration a strong and a Consumer Clean see to it we mass younger Consumer owning consumers couture the a in of retailers. precisely thing. launch not the me online, Gucci have we Gucci now take this what's in to -- their in say, creating least, is will very, we That's launch share which the creating a I category, been of and comes the yes, crystallizes on another Beauty, weeks of doing partners say really a they that discussions unique brands. visibility categories may are new XX why with our in doing doing And the very way and a opportunity this and to have decided question. vision helping us same very specifically not our here time, & have we're their the true in direction retailers for with now We're even US of has which such see and of again again new that skincare with that's Rimmel, with retail weeks going on our are and change where stronger category. that that retailers. I see or results us Beauty. the makeup. Beauty a on now, we and think portfolio suddenly into are in also this Amazon, insist it's is or CoverGirl incredible We having at we mascara to which vision Again, brand because with Coty the market terms the traction the Clean innovation. but I of launch to as retailers XX in since the Free, are retailers if seeing makeup, just ingenious categories They another given they build this retailers same I like say more that and one example missing side the

rebirth this and say, with retailers lot image. gaining have that opportunity. artistry in strong European-centric would This countries, on clearly, has this, world of would this So mass are very, business a brand the are that opening stores. feel a also lot us a now Factor, opportunities. makeup prestige is The world willing very that's their market at seeing destination in to very a only, take I of around conclude I to brand, look a and And its say, very, a successful, brand, heart, the of lot lot the is around lot example, countries to Max of the of it a gives share a relaunch of

part, So for I'll Laurent let Laurent, the jump second for in.

Laurent Mercier

Steph. Hello,

of level strong on our sellout. gross is peak Beauty we initiatives this very again, fixes, have, we XX% able equation, XX%, A&CP season. really explained a initiatives. So were that first and Prestige really Consumer What A&CP, important fuel is so at what's margin this and drove Sue QX the to was is remind And in to with really with

are starting we [Technical January with Difficulty] why that's with So very QX

Operator

standby. Please

[Technical We difficulties. technical Difficulty] are experiencing

Operator

live. are we And

Sue Nabi

Yes.

Laurent Mercier

Hello.

back. are We

Sue Nabi

When was it cut?

Operator

You the starting were your to question. answer -- your just

Laurent Mercier

Okay.

will do again. again. fine. it will I do That's it Sorry. I

on question So your yes, A&CP. on Steph,

drive be level strong very the reorder we we and sellout QX in could QX, and at So starting increase. first, the as in of and That's a again, why strong significant a of we we'll will sales the at why shape, And into that's are explained, very in reason good this XX%. high guidance. key with our now QX a high to starting A&CP, of A&CP share growth and that in thanks January we very was so QX. amplify And translates Sue indeed, QX. in this And level end

So low XXXX. on mid-teens fiscal to year

is obsession. So daily our ROI really

we the with initiatives. are reviewing So all Sue,

We the are testing copies.

As disciplined to have trackers. you tools know, we very

that make sure at we initiative strong If on level making and not simply very a some are dollar analysis sure strong expected, is is so we investing, any ROI. that the rework any we are built that then very, we stop So ROI. tests or are there

last year. We So this see we is started results. work a the

We this continue and Beauty…. HX, and the ROI disciplined Consumer why and will elements, will amplify so that's even combined both Prestige remain both all these driving A&CP, of I And in which Prestige this and XXs mean, in in Beauty. Consumer discipline in with on HX high a strong are level sellout

Operator

from our Andrea And JPMorgan. Teixeira with we take will question next

open. now is line Your

Andrea Teixeira

was your are guidance, you Sue, Hi, the XX%. you stack good And that morning. line. if like-for-like like-for-like but in of sell-out can deceleration And I But unpack dynamics and straight not light to was guided two-year you take that, appreciate your of also sell-in January obviously, QX. in hoping not raised away I a it, Thank merits the you.

the implies year. guide mid-teens fiscal new full your So for

and -- facing QX. in you're tougher much So comps a

and gives And launches you for call, what all evidence I this So a you confidence? of know new that. have given lot throughout of

order in reaccelerate two-year So the terms Thank to in -- months but sell-out the if in of stack sell-in your you you. of can five please unpack fiscal. last those dynamics and make

Sue Nabi

morning, Andrea. Good

results We reason growth, told very, has beginning say, quarter QX. is was results, of Prestige you're when Jan this come and that QX results. What -- in where story I have tight, the you be our we the sellout about our we quarter very in you've very quarter the there mass Sally market And back Factor acceleration this, of spoke It on been because CoverGirl market to continuing And first a exactly quarter. something seen it market, gaining you robust next very a quarter sales occasion, share. would there, fact, So second and Max sell-in quite was versus XX% an on the acceleration second being metrics. strong of significant the why, the gain during a Rimmel got and gives clear. QX to And share reported of the That's also, sell-out in with we quarter. been also again, and of say, Hansen very, of we the would sell-out. course, outstanding, I is now all to new, in right. the me that three the momentum we've quickly yes, see has strong.

we seeing this precisely year very with are that have So -- on sales we in what we when mid-teens that be acceleration this, have translated to because And Consumer plus say, the that into this Jan. I Beauty, half the XX% you comes of it of is would optimism in are in you with shared we the confident during during fiscal clearly -- press earnings that shared line outlook you will the second release. with

from, business a at -- very two comes since let's doing Prestige confidence the fragrances the are area. is booming or very Prestige high say, pace. So again, quarters growing maybe Coty three our this worldwide. on well since, is

there have do on Prestige We the side, and on we new engine one on to accelerate other Kylie makeup. side, Gucci the brands Burberry right of this Cosmetics the And cosmetics between have segment.

no Factor. the behind grow the with Rimmel better least, us skincare, it's key in much both QX, advertising for Last to be that plus skincare us and this with mass in a rising are globally, in we day, confidence there or QX. the Hansen in just makeup new that's brands not launches direction, We Sally are Lancaster in a to have going to starting of better on go. same starting -- again, not oriented Max story it reason CoverGirl, are want At Prestige giving to but CoverGirl when divisions end is next where

or of world, going days maybe ago them rest Advertising a -- the in success to few and ago, be QX. the biggest Clean Free, which Rimmel a the this of I'm -- wrong. and of playbook applied CoverGirl started One is to Kind Beauty not we QX of if week Consumer Fresh launch is the & in is the

us few the know the CoverGirl has just we say. of to strong, that strong is side, a the started have also ago. at just benefit The relaunched going the Prestige. advertising fashion skincare moment, have on US Boss. strong also you And the side. the in I This putting, Boss, which is to initiatives younger we globally have a And Hugo brand behind We Boss are Scent, on beauty days clearly franchise on On push

We have initiatives a lot on of Gucci fragrances.

Cosmetics initiatives a We have lot also of fragrances. Burberry we initiatives. on launching And have new Kylie

of kind starting new momentum. arising QX beginning momentum in QX. we initiatives accelerating Thanks are this fiscal, overall, and So and to we this a have of

Operator

And question with from Ottenstein we our take next Rob Evercore. will

now line Your open. is

Rob Ottenstein

kind the consumer you these initial you. could for a getting, of that just it's get well, Thank given Beauty your your Great. trying little pressures. I'd US brands. bit the how their Clearly, to like little you're positioned much. trying I brand of secondly, the state of sorts reactions. early, really very And how and consumer if sense just more appetite Omicron, see but the of inflationary talk given big consumer with the reactions to new more but for space maybe you you CoverGirl Thank to initial Consumer the you're you're doing skincare, be. very inflation, shelf in that what how granularity then get about consumer know a on and of food is on focus could

Sue Nabi

your Robert. for question. morning, you Good Thank

same And people more they when the next less is favoring of online shopping we new color. where beauty, see Clean qualities CoverGirl one when side but is say, clean that to for based, Cosmetics, matte. that we of growth So great they cosmetics buying share would say, back or when back is color, people is color, Prestige seen, which staining than quite our means Ageless globally across to for And trend for are more. it to any skincare. wearing Mascara, some on They focused successful, Lash kits which quite skinny the mainly or kind US, used people lips very US they skin is long Simply yes, clean We've less which consumption, I well And big say. really on with seeing, most CoverGirl, comes that what in more the everyone, non-transfer, ever strong, lip which another different it advertising, are way the liquid of could news on consumer to people got But beauty, is lip brands, Clean beauty, consume seeing of to are see and are in I Kylie side of matte, call makeup skinny a one seeing or business for our has many to that are you which do Outlast have something Simply is and sales, back wear tints specifically not are market Ageless, this long-lasting or have They to is consumers We which reconsumption doing wear lip I the and mortar what Makeup liner the call choose fresh is side non-transfer same on area, and into call call buying in just non-transfer on CoverGirl lip franchise are and have I are which side almost what but we ways products, more for to more shopping makeup. of what example, not to it I ways without color -- also with that's to are America. but say, clearly back Lip products, of is the really I with the is some our growth more in having therefore, other more option. brick performance looking for this the Blast long-lasting, engine the clearly with regions part clean the Kit, also explaining on been this healthy,

these and have the So we clearly, category consumption signs strongly high. seen to fragrance are seeing at makeup what ever is us, is business US in is I or to again. back This this we very an say, any to categories. And slowdown, else. of On thanks for anywhere Prestige, haven't specifically of growth,

around fifth story. the the is skin fragrance in starting in in In China, And And you pick market this to consumption last category low the China today of know fact, world. Europe. it's in there, outpaced up is of the category the and market and level the The of makeup quarter, so category. growth

So confidence where say, strong in the having there that tailwinds are, is categories that giving us many the again, a things positioned are on way, are would right, behind. key company I

X.X important the in dermatologists, X. et skincare, look on and item news cetera. We've it great to I say online initial So And have a the doing that is X.X been results skincare specifically, positive at when have you are very comes the if and TikTok our where TikTok brand using to to shelf space, very between we ratings, which Amazon. ratings very, CoverGirl started is

X what's considered So X.X our to very well. which need one Under strong America that's is you the the as ratings. very, consumers, to being usually sometimes at star product, is X.X is rating specifically Ferrera. what water But advertised X.X, from doing fake by cream. not is look on weightless exactly That's

very having an both today makeup even we space on terms only from launch Clean attractiveness skincare well, we're also are towards CoverGirl, not in also. because the additional space, for Fresh going benefit to halo very, skincare. way So of effect stronger idea confident the to of skincare But this us is in that makeup give and is not

ad, the end could read of is at it at at seen, the you the starting advertising if are that makeup the which CoverGirl We you space. in have end precise aisle, shop of the

clear very is that's this I opportunity, consumers. for So But for great a guess, us.

Steph, in I question of beginning are lead one going brands category around the first this the is the As this US and categories a the with hand-in-hand and skincare of rest key in to the hopefully, answered to clearly our that use story. we CoverGirl world clean from retailers, retailers at our create very will other the

Operator

And we Barclays. our Lauren from Lieberman take will next with question

Your line is now open.

Lauren Lieberman

and back half. your for Good here, little more why in questions. slated I there nature. I know color more productivity some savings think you understand, on I productivity company's which thanks. programs curious two you cost but Hey, year, isn't I fully on were more a But targets the had Laurent, just I reach are bit from morning. One is was, gave detail still rolling I great. bit mean, able to earlier typically, a the in about was

change how curious the any I some process But was replaced the his since seat the Investor offer additional on you've any secondly, could of brand. to be for that thought then public if there you CEO and delays to activity time there's for of with management looking Andrew Day, might And Thanks. was just that opportunity I So great clearly offer behind company. with was leaving line point. been on anything lead a just color a to the Kardashian

Sue Nabi

Laurent first and second which okay. part, around take the the savings, with can maybe you're part, is start So if I'll

Laurent Mercier

take it. morning, will Sure. Sure. I Lauren. Good

we have savings, of of fiscal kick initiatives, on in initiatives basically, so will beginning indeed, key a so most XXXX. of it's really that So new really pipe HX. delivered which we in And the

the And material give program, analysis, concrete you built translate some team top a stronger which so program. full some value a with in very very, have now of we is will have savings concrete this automation, that fiscal procurement fully fragrance. the really even you we combined examples, bring factory XXXX, Other mean we On review lower also in place. see I savings we of into have from manufacturing, close elements for XXXX this you benefit about which savings will a as also made will XXXX. decision depreciation. is in to plan also benefit will -- the And were the here now So to on chain, we specific in fiscal mind a with will is in supply programmed and talking know, this, also a on to additional

really very strong the we HX in So strong then initiatives. have and

we XXXX. we for XXXX So fiscal planned $XX $XXX fiscal net savings by million and of on the are announced terms that's million why confirming

Sue Nabi

Laurent's of first on – So complement this to and question. answer quickly the on part

continuing We be second to half, to during are which used second offset going half. do inflation productivity the with are gains to hand-in-hand the pricing for

fiscal. it's opposed. of half this really so And not the to going offset to used inflation be for that it's It's second

to around changes. answer your So question management

it's So great first, Andrew. a for opportunity

And is I giving for So this, the to the opportunity great level company. take us have of a the This to understand everyone it. of leaders clearly to can Coty, it's highest next generation say. opportunity the

former the the huge country have continue and at in are when going Coty around and teams Kim myself have to the skincare of assets behind say in world the take I accelerating, have upcoming the earlier. General that least, the in is since opposite to it's years. CEO General and the around exactly she's we and is fact, of and leader, at end and things, since Canada. so taking country You this the Canadian business the you of launch York not of running delay years, myself Anna the outstanding clearly world. big, Erickson of venture account last, Coty, relationship. say a can for the but having Kardashian to of thing Anna other year. Kardashians And know into think, X.X in Kylie is very the years fact, is Anna, another our we of on Ventures, big may And She Same role with and has Debbie and world New number focus Vanessa with that with of very, is committed separated Coty we becoming that's I is, and become von been part the the management Anna something Bayern that It's Manager for women by Joint around Canada. strong woman, that Coty the something care the today, potential US has Coty the one the today Manager. run biggest the fully she's that today which happen an joint And fiscal a relationship

Sue Nabi

much. very you thank So

there side, if concluding moment. any maybe remarks, right on are the Laurent, your that's So

the I improvements of sixth really, all at Coty me, super, that of super, proud. across metrics. that this think, is something super quarter say super proud I'm This For I really, makes have teams to

half excited we you XXXX. to as fiscal you area soon. very very to to to are Bye-bye. prepare your talk the and which I Thank We skincare very, more second hope it, even be the start is to into excited for of called and the are much questions, year,

Laurent Mercier

Thank you. Bye-bye.

Coty (COTY) 8 Feb 222022 Q2 Earnings call transcript