- Earnings call transcript Q1 2023

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Olga Levinzon

Good morning and good afternoon, ladies and gentlemen. This is Olga Levinzon, Coty's Senior Vice President of Investor Relations. Thank you for joining us today for the prepared remarks portion of Coty's First Quarter Fiscal 2023 Earnings. Later this morning at approximately 8:15 a.m. Eastern, we will hold a separate live Q&A session on today's results, which you can access via our Investor Relations website.

for Mercier, are Coty's morning CEO; Nabi, this Laurent and CFO. me our Sue presentation Coty's Joining

Before statements. I the cause that hand Coty's the would materially contain like SEC, the differ statements. actual earnings call over remind forward-looking these company reports from that results to release you where and to many filed refer the could of Please comments the may to today forward-looking to Sue, with I factors lists

of discussion the Coty's results addition, section except it the In our Sue adjustments you. in noted, expectations over Coty's specified of Thank CEO, certain turn Nabi. non-GAAP financial reflect will release. where and measures now I to the as company's financial

Sue Nabi

including morning brands, reaffirm of of consecutive Ladies environment, and strategy us results has we resilience market best strategy once refer pleased from our care, teams, a growth strength allowed like-for-like external Coty turn and we again remains In the At beauty This competitive of key expectations. report the in reported delivered has again complex in both the results and gentlemen, the the growth Coty's QX our from operating that consumers time, and are and in-line of ninth model. body we beauty dynamic to of and midst a market, ahead being beauty We of mood-boosting and this skincare since our quarter luxury cosmetics, category what the innovative resilient, has dynamics among a as index, to above largely each Coty offer, remain resilient, the same growth Beauty player, underlying our benefited key in full that drive staple fragrances. and spot regions, the products unchanged a certainly has set. we are fragrances, affordable we to demand. in last sweet particularly directly particularly of At divisions. the the balanced force. bring market a of communications each category which category at as routines, sales well and across across delivered earnings. remains the categories and that a the consumers' the same our time, to remained of of as beauty where have to fragrance

As powerhouse. the even several our a to growing uncertainty, sheet, key the results become continue sales beauty steadily a target points balance our result, would to midst market, and ahead There of in profit today. are our I the highlight of positioning macro growing of Coty true from beauty to our sales, deleveraging a like ahead we that

the and expectations fueled of brand beauty again and delivered initiatives, growth First, key demand revenue ahead by ahead guidance. once of we strong

from point impact our our guidance QX XXX Our business X%, core Russia, a XX% Adjusting of despite revenues basis X% negative for to grew Russia ahead our of raised like-for-like. X% grew exit. business like-for-like like-for-like,

year-on-year. points growth, our basis Despite Second, another and gross gross inflationary we headwinds, strong reduction. expansion, quarter debt net adjusted increased margins margin strong the QX delivered profit of various XX

$X.X XXXX As to track adjusted well our QX leverage declined a exiting debt net leverage Xx drive net grew our income towards at us towards on X.Xx, to billion, result, exiting operating putting below XXXX. year-on-year, calendar Xx calendar XX% ended and and

strategic six make execute and continue we progress each growth pillars. to across Third, of our

today ESG come with milestones to more a In days. you the and in share fact, number we of have to coming

guidance. strong in our the fiscal QX our XXXX in delivery reinforces confidence Finally,

based growing of X% of XXXX developing business to the fiscal $XXX $XXX see to X% approximately EBITDA inline term medium with continue on Russia to overall and million million the We adjusted growth the sales current exit, an for adjusting FOREX rates. targets, core with like-for-like, our impact trajectory the

remain and we demand robust, meantime, remain and behind markets most weaken. will to backdrop across should growth in plans we monitoring In the vigilant the performance. our will profitability our and strategic and before to outlook. driving on deleveraging finish Starting balanced our in during key advancing react reinvesting our resilience our through trends have agenda, continue our the and to now capabilities, brands cover an necessary with environment external moments with a premiumizing our signals discipline, Then portfolio, the the place I demand While execute take I now our will and progress agenda. with quarter, takes revenue you Laurent sell-out revenue update financials. few our

of perspective, sell-in which From Prestige products. for number factors quarter to fragrances consumer sell-out truly the at demand strong and prestige between more continued our due for desire saw outperform, This revenue fueled business in demand, to by reflects continued diverging beauty play a consumer like-for-like growth. the we trends sell-out and a premium our

teens, in As digit low with our also the a solid result, Consumer sell-out while mid-to-high single Prestige grew Beauty remained growth. sell-out

from reversed the the of discuss difficult exit; below reported Prestige Beauty will revenues revenues well comparisons Russia sell-in XXX from like-for-like, Prestige Laurent level. were grew sell-out, XX% Russia strong this X% surpassing launch like-for-like, and at with and the by: our as in three, sell-out, was details; the industry-wide certain prior business impacted shortages in points impact where material XX% exit. like-for-like which more on growth the the However, grew pipefill. no these growth components, headwinds in year, revenue of trends two, one, the growth basis back Consumer fragrance

initiatives pipeline adidas' inline cosmetics mass Consumer our body and and and sustainable our Monange's silicone-free & Mind clinical by Skin in body to boosted in sales growth range Beauty Bozzano's of revenue broadly fragrances deodorant, and premium ahead brand business, new strong performance was range, the care sell-out, including Brazil. was in businesses While care a launch

Geographically, consumer EMEA region like-for-like continued fragrances. grew prestige XX% particularly Latin momentum grew Retail that momentum by overall and regions. a supply with very Travel growth across significant while revenues most Americas broadly like-for-like, like-for-like sales like-for-like America, our pleased double-digit X% to as demand U.S. markets. we constraints, Brazil strong counterbalanced saw in fueled sell-out. the all in As in was strength say I'm and result, by in the revenue inline was our the in total Revenues growth grew

Asia I in intermittent Travel Pacific Asia through you financial XX% with now to over the and returned results. will lockdowns. momentum excluding growth to China despite while Retail, grew take hand revenues strong like-for-like, Laurent China the to call our

Laurent Mercier

Sue. you, Thank

as by have very virtuous also volatile of many have with out made in engagement environment achieve. many set the am attractive heightened quarter. motion, particularly the backdrop, had and interest further the the highly I As interactions The globally. public progress to for pleased of results awareness being a being rates you you to sustainable results, and during am now rate and is and Despite is solid in of regarding progress to show the across of majority Coty gross recognized, increasingly this with environment future increasingly institutions deleveraging. Coty's there know, we during became KPIs QX external financial is an cycle complex, significant long-only I we uncertainty FOREX share fully and delivering account The as continued community, including we we key margin, our investment. a the profit, ownership, dynamic encouraged and investment

driven year. quarter. in as Prestige price from the adjusted gross improvements as Gross our quarter gross performance was by Consumer XX.X% both margin improvement XX primarily in in basis of margin QX trade well margin increased in the performance and Let’s strong with last start points spend. Beauty,

to limited mix was expansion this going on alluded based in see quarter Sue benefit level QX. XXX dynamics both the we than of The we which offset in growth care, forward, inflation, earlier. drivers While similar points our to as one revenues, more were the building approximately divisions in mix body the positive experienced from of the COGS blocks contribution outsized heightened of gross what and positive which margin the basis

Euro FOREX Given had top-line. and more discuss material Pound, want sales, natural the rates The has on both business briefly currencies in our with to negative the impact of in impact model. our X% volatility FOREX these the significant the a at hedge reported I and recently, a in deterioration particularly

sourcing exposure our our some margin. the our in manufacturing in majority Europe, place However, the This UK. takes on natural of hedge gross business, FOREX and the creates some in including limiting

multi-pronged, positive on we remain in gross forward, well-positioned continue shifts from execute Going and margin mix we to plan, benefit multi-year attack our to the will business.

we Now through let’s how touch challenging and supply environment. are on inflationary and navigating backdrop, the global this

supply Sue constraints components. a earlier, in by in to have global coupled industry-wide and for and fragrance ongoing fully chain, discussed As bottles, glass not demand robust alluded shortages supply with key was fragrances, our pumps. lesser chain components driving the caps key is like to supply peers extent, of Several the complexities anticipated which

fragrance for XXs set for experiencing dynamics. feedback our ramping retailers seasonally received fragrance similar up volumes below As from QX, demand levels a the slipped result, that lead-times seasonally depleted constraints supply for chain. constraints in across shows supply the which to exacerbated our a impacting safety issue sign raw slowing, market is ultimately to the elevated which no coming and chain, have is Beauty, are with remained Prestige. this with and service traces in low peer global general own has quarter. the QX, stronger And material our by back in expecting the in suggests The further XX% but supply we which The we our similar stock fragrance Consumer of suppliers, the

late as and also this economy support environment, reinforces single-digit delivered of ahead despite preparing we good constraints, building are gross to lines mid pricing expansion shifting is component single-digit margin inventory in take and Ultimately, only to past of guidance the where we our company, these available behind stress problem that pricing available. quarter. power imbalance the a this executed for scarcity, this winter, As in an stock in is mid when have It quarter. ourselves look a round revenues to QX is supply/demand following of additional current we crucial we the strong important and pricing

manufacturing of We’re energy supply our concerns investor in also about Europe base and there. cognizant

be the Here, inflation, the and business benefits, estimate low energy due usage dual of inputs. we continuity initiatives, continue our time, see margin manufacturing of and limited we have risk inflation energy-related our our XXXX, developed savings. protect mix COGS gross At same plants, to sourcing pricing, X% business to an remains we And own unchanged in finally, in by offset to plans of revenues to outlook disruption. on FY as approximately

in Let the of Optimization and to as include: material of sourcing an All-in-to-Win we cost projects of charges, based spend to QX A&CP. of total in through update savings excess and projects as me on variability savings The gross continue planning year, our a forecasting million. in non-value-added analysis, the by to up on that over program. QX, components. up of XXXX we ramp streamline And margin driven expect FY over In stream value $XX QX continue the initiatives. we expect now our course million, to obsolescence $XXX clear trade we significantly provide & fixed combination delivered and more contribute we and in improve processes. continue Improvement and ramping

Now marketing moving our recap to investments. a of

down represented is year. During which XX% QX, slightly sales, A&CP from over last investments of

Importantly, Simply successful innovations Burberry including a our stable Ageless constant currency investments Beauty. well Parfum and relatively as bundle Flora Boss Hugo our targeted of most Gucci Prestige Rimmel We media and as was the working percentage mascara in Consumer new CoverGirl year-on-year EDP, media and behind grew our Hero in sales. Gorgeous as innovation Jasmine, Bottled at Thrillseeker recent

whitespace investment and We our areas makeup Prestige also of behind skincare. continued

this expect investments ramp-up a our XXXX, critical in full Now, the underway, A&CP to our sales. with high-XX% during sell-out meaningful continue in period. the be level spending fiscal A&CP of to And QX we expect for we

quarter. to the Now for moving delivery profit our

$XXX point basis Our million, income driving QX margin adjusted a our XX%. operating XX% operating improvement XXX grew to to a adjusted in robust

of Improvement. Importantly, XX% both XXX points EBITDA, basis over we operating growth to divisions On adjusted $XXX delivered million. delivered margin

or our points adjusted result, XXX year. XX.X%, basis a was last versus As up EBITDA margin

fixed Our in was driven in quarter gross as the profit decline leverage, growth, A&CP. margin improvement our the revenue slight solid cost by expansion, as well

income interest an effective net includes the depreciation representing count XXX of tax following Adjusted adjusted QX Now $XX XX.X%; million, which of of million, in moving $XXX million, share $XX tax of adjusted of $XX our rate EBITDA and of diluted EPS, million, million. drivers. to

to swap an locking included of adjusted $X.XX, effectively from Recall, negative is As the versus we mark-to-market a will several the last year. in was non-cash, $X.XX $X.XX and included income on be net an into flowing forward. $X.XX continue bank equity line. to into this that mechanical transaction to highlight swap factor net million calendar below mark-to-market for a It income of result, EPS EPS These share share price EPS this $X.XX program previously other return the total a our QX return diluted EPS impact calculations into and targeted a impacts entered EPS with adjusted our calculation, buyback has during XXXX. moving adjusted attractive in of in swap. important $XXX income total improvement counterparties, Beginning QX, our

FY and our QX additional details related current certain to ahead drivers let XXXX, expectations provide Looking me to for adjusted EPS. of our some

to to million. be First, in mid depreciation expect $XXX we continue the

have net in continue the to the Second, is the the to of most be place in remainder. interest we for million, fact on the hedging fixed expect mid year $XXX our that also and we reflecting majority of debt

anti-dilution, based consistent changes around the to XXXX now tax high shares Third, effective $XXX regulations; QX we for adjusted we $XXX in FY assuming share on in on count, continue million. rate at tax to with expect accounting finally diluted fiscal GAAP no an and provisions the significant expect XX%, XXXX million

our to efforts we in our quarter, stock generated results to the the shortages global The $XX flow quarterly well components in payments, as of as in working of increase certain We part we flow. build with as million timing mitigate CapEx reflected our free as consistent and capital earlier. free inventory the cash Moving of cash expectations. discussed the certain component

repeat For XXXX the would on we the as a XXXX. due we which to FY benefits than won’t strong to free to and lower FY though capital cash continue we little FY helped XXXX flow in full call, indicated expect last working flow expect cash one-time the be generation, year,

Our to cash agenda. to debt reduce and intent flow advance steadily our our our is use free strong to deleveraging continue

capital just roughly structure. net by Moving of to debt under with $XXX from QX, our We free QX improvement ended cash of driven billion, $X.X million our an flow.

by the our we QX remain X.X our to Wella’s Wella from the high-growth of take result, and unchanged we in times, is rate of environment remaining $X.X and of with debt with supporting stake In bring of as fully a the free Approximately end XXXX. end debt leverage we haircare stake, four this. notes, in in brand. and fixed like economic net two for value book on-track the cash to calendar interest is place, minute Factoring Wella variable down I debt our in times down debt, to end to uncertain, sensitivity mid the our our approximately hedging seasonally of quarter And XX% of at seemingly was times for also a acquisition fiscal ended have reflecting of the at quarter, quarter, such the our expectation $XXX. the of to expense the As rate leverage XXXX that fixed, billion. towards address QX. third quarter would X.X XX% rising, $Xbillion, our interest below our strongest a the flow increased approximately Coty’s

expectation despite our back will debt rate Looking interest to strategic our decline support coming the paydown to years, in our our the on strong in I environment. XXXX, rising the progress it continued beyond for now Sue expense hand and steadily deleveraging review fiscal to quarter. progress interest

Sue Nabi

Laurent. you Thank

As in Beauty we continued further you we quarter, pillar, after Consumer have strategic progress our our QX our growing update first with six business. stabilizing quarter strategic to and pillars. on Starting made

mass In the market digits single line successful cosmetics to Beauty of year-on-year, our mid-to-high mass key gains the our our beauty. market, consecutive historical Over many us and in continue tenth overall total, the Against beauty Consumer both single of with allowed with this the marks trends. backdrop, in for brands in broadly share the grew global growing this low color has to business, Coty’s past the digits. outperform of sell-out month market quarter, in repositioning

We’ve Our as market goal Rimmel. is in Factor start market to Max particularly we even globally continue lapping to some and improvements. drive momentum, share these share strong of momentum seen in

impressively, biggest campaign here UK data, ad X mascara In for mascara see in become market, fact the launch number its for brand. – can ever has even the mascara TikTok-driven market – Thrillseeker the of more the on based the Rimmel, recent Rimmel and quickly launch latest whose the you

includes our the uniting began In have brand, now a deliberately focus fashion Coty’s representing the sustainability as Active our Brazilian leading has Beauty leading While bodycare Consumer our calendar adidas packed vegan trend, for brands recyclable, with X adidas. we called skinified brand part on bodycare formulas, skinification the our portfolio, Monange our premium for relaunch range athletics our forward Consumer have relaunch also on bodycare innovation. cosmetics refillable, and with Mind. a begun our and This of in brought Beauty XXX% Also, keeping in true premium that new brand’s range & bottles agenda. sequenced are Top and and leap clean sustainability, brands, focus of recycled, Skin launched we market-leading

QX, which deodorant, in the great non-silicone patent-pending market. During Monange launched the seeing is success first-to-market, already

key second with line. bodycare clinical deodorant a the launch Brazilian long-lasting, also momentum brand, fueling of was Bozzano, Our

As media brand over activation, in a strong grew bodycare our QX of XX%. and sales result these launches supporting like-for-like overall

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our X%. Russia on roughly impact natural of of X% the embedded for to expect with in-line more rates, like-for-like growth X% X% Based business, continue medium-term As to our algorithm to on the XXXX Forex such, based exit, headwinds for current model. exit adjusting The impact impact a Russia negatively QX of by in X%, the growth. and we to core expected in sales the moderate our with sales to on outlook profit, sales hedging is we net impact previous first our expect half of of QX

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years strengthened Purpose, the which strong, and and Coty Values, externally pricing and our remaining are and our remain positioning Our culture, have And control, worsen. the continued coming about to developed fearlessness great term remain ever-evolving disciplined in support inline internally as confidence all categories center plans and same forward-thinking in success time, excited a recently premiumize vigilant is forward QX with in mindset. Coty and should our demand divisions, to both store Vision, we conditions and fiscal monitoring the to resilience to both this with the business with outlook for the Coty in our results, cost start a in with and launched backdrop, to implementation, what’s on continued this macro progress. in year we At XXXX you our our further for short long our continued reinforces by We in efforts our algorithm. portfolio our be This term. reinforced new the on medium markets look updating

to you. Thank take now questions. ready your are We

Operator

My Gretchen, Coty's gentlemen. morning, conference Quarter like Fiscal time, Conference Call. At is welcome everyone XXXX this name to I I be ladies would will and First operator and Good Question-and-Answer today. your to

Coty refer like webcast, call a and would today, comments being call lists be As Investor the a with and these is where note Executive results XXXX. the that which actual Financial to differ statements. prepared the you earlier recorded from cause reports Nabi, Laurent X, Officer; the this statements. found Chief today SEC Relations forward-looking company website. release many remarks this and are morning, of forward-looking press can Chief to its to to could today's may that Mercier, Officer. reminder, on has I factors Please contain materially remind Coty's issued that Please conference release earnings On Sue November filed

except addition, noted, specified now questions. in expectations of financial certain for will Coty's results open release. non-GAAP section discussion we Coty's reflect the as With that the measures financial company's In the and adjustments of where

Operator

first Helgans question take we'll Ashley our And Instructions] from [Operator Jefferies. from

Ashley Helgans

questions and good morning thanks our the taking Hi, on and congrats for quarter.

to recovery and nice for expectations was of in Can your China talk for drivers it the Thanks. the some you the return fiscal year? start, see to the balance of region to So growth. about just

Sue Nabi

morning, good speaking. is This Yes, Ashley. Sue

news positive, way is country region slightly is this which world China us, in of yes, revenue. and if net a for X% a So, this the our even good is of only

we and do the probably and that in few So protected from a if been small a a see quarter of against is upside quarters, are we've all improving Coty the base, seeing in that since are lot same starting potential coming months these that country. this time, at we not lockdowns a continuing in seeing now way, I may. But

of globally niche I'd company, all Klein, brands penetration. And our Gucci, growth that's doing Hugo this future fabulously would Boss, only course, and, everyone course, about brand that imagine. say, to for these that are is you of if the I well X% On Gucci Calvin we can category, by the number start as makeup love both engines recent Burberry, fantastic are brands the with the and again, most country the Burberry makeup, And for brand, this not we of And imagine. say, and care, makeup, the potential last of started least, there had series And with you before skin as beauty, are lockdowns. I brands, future business far for the near remind at in Chloe, the would Lancaster. company market lockdowns. a Sephora, one is again, is fragrance but business, Chinese you the huge Of which that can the with starting this impacted think XX% first huge, the

a most for its by Chinese is This great year-on-year, it the multiplied the five one. see demanding demonstration you which so during consumers. towards sales As the the Lancaster in of desirability Hainan, brand is presentation,

And the would is Sephora skin Sephora say, that at the care half China. foray the a huge done brand specifically into niche start number is until recently and this Day to as ago month this care us with niche which Investors great after I we've the one in a one first, gives confidence market China. brand at as skin big, exclusive in brand Lancaster, Second, a

So situation terms these this the in environments. of would I quite a in how is doing difficult very okay we way in way all China despite describe are the

Ashley Helgans

We're if and in curious about throw down if your a seen if some you've go and overall into expectations any consumer to division, the one could in do these for Thanks some of within I more. trade trends just division, starting consumer Great. We're recession. hear beauty we categories.

Sue Nabi

Yes, see that's down No a we kind all. hear or any the trade slow down, don't and lot, good by a question we that of way. down honestly, trade at

our If see and in index. to us, we we prestige is sometimes because we fantastically for a the season. see running division, Because ordering way doing QX the you market well, our love are after it QX way, innovations ordering are including booming. the what also in call fragrance during retailers is from supply the in are advance This

still take this are thanks this, therefore, making A can and proposes business, work are premiumized expensive. divisions, love brand the also. you consumers people cool the plus from And see to that products So qualities. in the it And the products both shopping that of different shopping lot saying more like-for-like consumer teams of talk are heritage don't And purchase doing are on great smart I'd quality fantastically is is business in is to also beauty, way of about top be and we there the you've brands, brand other that second brand in what a beauty both a XX% part, figures, at explains this. as this element seen this that premiumized large that But Coty is doing we in our the one great, or the to the see cool into cool the what you the behind from these see divisions. the also beauty. well. across of desirable trust call the luxury done sure it consumer same have parts and is brands that smart on brands, These two results that this

Operator

Lizzul Our America. question Anna comes Bank next from of from

Anna Lizzul

the so morning good much Hi, thank you and for question.

some On Target shelf-space the domestically are key your of beauty mass Walmart drug gaining competitors and at such the and side, retailers as stores.

current are about gain and brand? bit happy with any as gain you CoverGirl, there share, And Revlon? your Thanks. stabilize also, of shelf-space brands opportunity to distribution a the of can shelf-space brands from Just continuing the you as talk market and is such to as such you're struggling

Sue Nabi

Good Anna. Hi, morning. Yes.

the the resets a next, for say, question. space slot, when is division, for consumer would to say spring Again, you thank chat shelf your which expect our I XXXX, maintain business beauty stable globally. would I comes to for So consumer beauty for the it we that

but is exclusive there. line sustainable number Sally powders. France. vegan also and Sally leader therefore, behind We selling Free, you And to and by giving new the many makeup in well know, pockets and recently. incremental Hansen. several has Remember, driven last very, on recently outstanding at like one success as reentering mascara Kind including of the Also And very to Rimmel, markets successfully the & of in country expect And undisputed that's countries we time Bourjois, and more UK, a which the same business. Bourjois behind the brand many, very the not least, over gains are now the competitive mascaras have shelf-space is where very in doing Hansen UK, Superdrug Bourjois seen space nail markets, repositioned many particularly

We and also in tracked CoverGirl of for non-tracked incremental channels. gains mix a expect

overall So that you when this say, I it the shelf-space picture I is, would movements. future to with comes can share the

Anna Lizzul

Thanks very much.

Operator

comes from Nik Modi question Our RBC next Capital. from

Nik Modi

Yes, hi. Good morning everyone.

Sue Nabi

Nik. morning, Good

Nik Modi

that derivation the of housekeeping at and kind picture Two the does just of number a can And as self forward is your consumption, with from is like more just change to it this questions. how move just I'm I'm I the you looks mean – do towards what we – actually on kind understand of then big of is of going? that how see. that you curious question, happening least to momentum what's picture supply can provide item. with glass. keep One one; the category actually shifting thoughts fragrance you agree is your more if the trying certainly gifting love away Sue, strategy what's I and kind from bigger shortages? statement,

Sue Nabi

ourselves these at with you glass, Coty. share And that Yes, we daily is so me see asking On a indeed are very quite this two Nik, we thank let you are factual. important the it way basis. much, questions on

they reduced European-based. mainly and are the of about not and glass lot quality number doing really it's fact, a In suppliers

tension is this index, by what tension the So exacerbated And is are fact. fact fragrance explains, in we fact, in the seeing this in that today.

last booming innovations number and of at overall innovations for This picture, big So expectations from XXXX. booming small far said, I success above category – behind worldwide our very by Coty suppliers, the would and Coty year. our say, the best from simply is,

is from to us is this consumption, what to tension comes and So fragrance it the say, When our true, can around for glass. which is general. shifting as sets, is explains away our absolutely gifting self great this gift than and for you this, I would are this way business imagine more consumption much self in dilutive fragrances dilutive because business a of in

So is that's sign category a increasing. a great, penetration of whose I would say,

something So many, Z to gifting, into and also we clearly would seven, moving parfum. demonstration eight used launching fragrances world. the larger we are classical today, are the growth the of the in say play a I is young the I automatically totally niche more something at is given the less more for eau the that Prestige right. of moving beauty not another is strongly, consumption years heighten And And level do year-over-year. call self-consumption. buying of have catched into and were because lot famous brand social around fragrance I’m remainder and index, items. right believe a this if the of media. demonstration from is second, fact do the are to Gen this quality size I’m And be totally at They would clearly going what fragrances, we people quality. parfum buying say, which which shift that the category show in call of suppliers many niche heritage me, think buying But de many, of what us, industry, to parfum expensive what of this if [ph] seeing including brands for are media hopefully the year used of is way more, I to to for Eau are terms to this is in And is wear any in de de has I have the the we up some I’m the areas of niche And eau corrected a them or the you eau going many this to are today we there seeing and course, I I’m most people that to relate from de it’s from wellbeing maybe and are I say, and probably from been or showing best am other other can that the behind years starting this of very the toilette category shift fragrance And strongly and index. I clearly to structural And was where index years. is consumer, social a brands. honestly years, category that to am not since anymore into sizes,

Operator

JPMorgan. comes question Andrea next Our from Teixeira from

Unidentified Analyst

mid quarter like and behalf single-digit of pricing This with was late and like the is about planned you. of the summer calendar single-digit you round Savanna across XXXX declining from fiscal pricing speaking three, low portfolio low of beginning another single year Thank will I in Andrea. are wondering current in guidance? for the like be price on increases volumes assuming

Laurent Mercier

Absolutely.

mean, offset inflation. margin this price to growing and So pricing this than implement And something I we more that to points. seen anticipated, is be important as you’ve absolutely course, a built basis a by mitigate able, tangible of to And needed increase. we was, that ago, XX gross indeed, are remind it’s to results built to we exactly office year we

and did we – low we digit indeed, recently, So continue. mid-single

manner. increase, in we that we great on are brands putting definitely, our And And opportunity it and very are the having we on when we’re also brands taking at very a volume decline. not also We are we innovations. do this our any support are the great seeing momentum of price doing a and that – granular

And part really growing we result Beauty the tangible these is growing. volumes volumes, that doing. are our in it’s and So Consumer fragrance are that are equations of all

Unidentified Analyst

you. Thank

Operator

Your from next James. Raymond Olivia question Tong comes from

Olivia Tong

an you. gift bit Thanks. important is have quality ability holiday, obviously terms to the what fragrance continue. you stand shortage in morning. and could to you. period what you it Good little a your Wanted talk during extent of hitting what past where and to Thank about sets think supply relative to glass the the impact And

Laurent Mercier

Olivia. Definitely. Hi

to confirm we guidance, our X%. So, X%

to Russia. for there change on X% our HX, of guidance year. X% We either you confirm no So, excluding Russia, see growth, that X%, X% full is excluding the to

At following tensions this facing same very as time, you the QX, closely a that strong. and we is we So The demand are – monitoring very published. we all the just are is strong of, extent, Fragrance that tension number components. on yes, to as seeing, seeing but also tension our tension is all peers are some on we [ph]. one also are and caps we on the

are components, we tension monitoring are So, tightly. HX this But this despite our on year. guidance we confirming

Olivia Tong

into color this Got of of give lowest the the it. seen to is quarter? on you just SG&A, think prior best terms impact what Thank I even you the SG&A COVID. results in then And years, shortage broadly, the several Can glass this we’ve mean, in you. the had any performance,

guys? obviously you particularly this a comps a So, the for bit can fair of you as you, arguably what’s year that of a SG&A comp The opportunity front in just talk about challenging the what’s driving get improvement bit quarter, against more easier progresses.

talk SG&A just So front Thank so that you you if about little bit would in much. a you, fantastic. the opportunity could of be

Sue Nabi

if how give The not have sellout than potential didn’t And on mass roughly say, the can quarter I first in better This we’re it’s in to part, Yes, Prestige would good in is the fragrance just low But which much the but low idea is for not X% the may of compared XXs, which you so the we’re how I not the impact would the same of, prestige good good, take On of an worse face is the results our which XX%, morning quarter strong this shortages level business performance quite the Again, to the been kind in Olivia, teens. is peer others. going at excluding are than of what of if is others, our set, I us. Prestige, Russia. the I’m in our our under the was around limitations. gives like-for-like, around say, was we QX. we moment. the but the seeing level you of service division

Laurent Mercier

specific So are SG&A, consider, your question is second willing we there is Olivia, Forex. element one on which to on

P&L on significant As Coty a times, course, also of goods, have we say about in very I that highlighted and we top natural side, during sitting are few line, have Forex have, we headwind share in on the X% hedging because to which a of a But it’s my I presentation and X%. we cost Europe.

because it’s in have in on the factories We Europe. have SG&A but A&CP we case Europe, and teams also

be SG&A. to specific on So more

HQ in have Amsterdam. We

a sizable UK. We team a also and have team also in in Paris we have

So there mechanical effect Having currency, is dollar. in is of numbers lowering which a said SG&A reporting that.

We we on reduction. This of to our win of agenda. are SG&A keep – completely working, is course, part all-in

So, work. we this keep

We our within continue. we to and have continue and especially have manage definitely, initiatives, And some Coty amplify how function additional support on nimble to organization equation. we to

Operator

Powers Our from question from Deutsche comes next Bank. Steve

Steve Powers

Yes. Hey, you. morning. good Thank

disposable sounds guidance, you I intact. that, assumed they allowances for remain slowing your embedded If wondering like back have conditions or current foresee Just of if within conditions slowing full you. arise? allowances at on alternatively, reaffirmation even levers you any in it for you’ve Thank potential have consumer demand should or retailers I’m the modest more year potentially or those demand to pull what inventory. less guess

Laurent Mercier

Hi, Steve.

obviously indeed, confirm our roadmap EBITDA towards XXXX. confirm guidance $XXX to our guidance million we million, leverage by $XXX X% and times supplying the of four to we year full end and ratio X% So calendar

as confirmation are, you So and mentioned, shared and see indeed, the numbers. we Sue

is seeing any the the the out slowdown even QX shared, demand in not just are and I We mean, stronger. sell even and as demand in we

Prestige. on So is and Consumer definitely this Beauty good – momentum is there

time, not are I give mitigate definitely, the and giving manage are some that really that munitions confidence also dynamic. to have monitoring, any are this have us all in plans we that the all the been and actions to us we about we to – We seeing slowdown win full and the equation. we order same At momentum monitoring this place am

specific – we in context the retailers some and seeing we on And is to not a on. also are we definitely your we really what I supply really push of see about fulfill this mean, so to to are even tension, way seeing, seeing are are So What is QX selling. question more, destocking. any and This seeing really currently. chain monitor. okay, and destocking we need for we in

Steve Powers

continues if from whether getting has makeup, at as take been sure, both doing is And cetera. Prestige renewal guess invest investors point license, that willingness is impacts number in then on additionally anything keep that I at question et how a openly license Okay. years years ultimately to that work in That’s acknowledged to if a the discretion very especially theirs, your about there’s franchise helpful. And Karen because down has could, and of your offer pretty ask this [ph] that in-house potentially continually or central to left you if ambitions, I’m I that your have relationship, Karen’s and I I’m it’s you time, the spanning remaining. business road. wondering even while talk Gucci the current Karen, at can have just if they’re I of to over that to back on

revert that With may the to day owner. one brand the original portfolio back risk

Thank how thinking you’re you. Just about that?

Laurent Mercier

you, question. this Steve, thank heard more a course this all, today. we we first is for of what see that it Beauty and very Again, Yes, again, have attractive is of even category,

exit. for others license the specifically do We initial there is I’m would has space. Gucci, mechanism themselves, Given term and makes as we that that for nothing if sense heard to by what’s carrying index. not with do and work on us, hold fragrance have early an no happening What the also confirmed it long And around the wrong. some

Jasmine you Gardenia I Gorgeous us tell Flora got behind the company. The growth is that Gorgeous widespread in the not the company, and certainly across relationship say about not upside drivers that boutique would the this the year are joining Gucci coming of we pack have quarter division year the the share and week new years. for even fantastic into seeing unprecedented, skincare. last other without the beautiful, Last the is Singapore and different clearly only new can a that presentation of as growth the the you’ve That’s tell a the we thing you coming I to but want between tell made with the seen I during Marco the it our this company today. Prestige potential you behind Gucci – And I have work in and genes to brands least, can in we and are one. opening success one Singapore. of are the I the is It’s doing. we brand you results Bizzari, of last thanks of was is talking I biggest every and That’s to fantastic. middle we with in together

Operator

question from next Rob Ottenstein from Evercore. Our comes

Rob Ottenstein

more your bit Max Given, on very also Rimmel, what and initiatives you Thank And little do And increasingly covered I maybe if retail, there? consumer down absolutely – in Europe? of you’re strained of in you about But on seeing any touch that right bear then Great. apologies we your a much. travel everything you’re hear Factor more brands. say really travel, weakness. not I retail, this touch on kind if you can into travel see morning. everywhere seeing you can Can more you

December in Thanks. outside increased impact traveling that? little of quarter your talk how about And on the and the a maybe see So terms they Hainan of bit business.

Laurent Mercier

your you Thank again. not Rob. confirmed for any morning, in that we question good including EMEA. Yes, I seeing are weakness

But is of I on very doing You’ve growing seen course this And my EMEA fragrance fantastically part, is that’s also is later digits. well. Europe the double on of back in answer. that retail well. doing travel part it Part come

that you’ve the in it for many and fragrances, strategy thanks be lot an towards percent legs France ago. is Recently, is is mainly moving UK When in used which fragrance to the new And share looking including last we taking you’re comes again, going, today. to well, are And something spending is is which today our thanks mascara and travel to it you launch Free, for created fantastically about audience success of this. added And about XX% about the this XX% well. the [ph] brand of to the Beauty with brands market, and index, are or to millennials to to well embodiment And of opening beauty, says around that many, the & this is the exactly Factor, base have Max is few And which Rimmel, new is consistently that plus years. brands result many, the more business. create in in this the way second dynamism XXXX, a on first the Europe, many become done Max even in levels was what the to our commercial, two Gen Z of I entry Our TikTok in is that which and sold strongly business the France. lead consumers are to the and mascara these but to clean [indiscernible] is TV which to part booming Rimmel we It dynamism, the market part since market late repositioned younger very brand Rimmel once minutes the biggest been is if the have big And market is very plan gaining below first test out thanks that we’ve the and share to sophisticated, brand, course Consumer this brand sensations of XX% presented developed and prestige all revenues Thrillseeker the two fantastically towards that’s the net is well can which country less travel a Even generation brands, also way TikToker of to and it from say. part a about XX business the of as representing of between its all mind that And of I still TikTok the was our to and that business latest the retail. least, seen doing Max are power our remember of globally. world, is is time. ultra-premium/luxury to in a On up. you that of massive premium, this where Thrill we a spoke point parts has Rimmel, right Kind growth. this see fragrance by innovation. Rimmel, not products biggest how a is with doing that a TikTokers mascara Factor in-house this because capture learning the quickly of Factor job, is we how stand exactly has are of in last products that is but more Seeker we

place very, The this central comes first in is Asian opening Prestige would Lancaster. That’s are brand, say which one well to retail travel when again, thanks this, the it elsewhere. everywhere is but I makeup, Kylie skincare booming to I very now also Hainan, doing in That’s Cosmetics. but think we also region,

a And the stocks behind in our we products. running after moment, fragrance we weakness really are the rebuilding way, at this do So see happening. not

Operator

from Carey Your from next comes Wells Chris Fargo. question

Chris Carey

that just some And morning. year? and mean and the gross expansion good margin thinking as modest of by you what expand full and far we you in the for headwinds? puts on be should takes about Hi, Can QX as just tailwinds on

Laurent Mercier

all, as have basis XX implemented. of we expansion. QX Chris, we point Hi the in the results with I testament to I definitely actions a that margin this And proud very delivered all first are mean, we mean, of gross is

little and you’re is me headwinds. give the tailwinds a So let this more what calling you color, and

headwind shared is points about So in definitely, last quarter. two with It’s the we revenue. net inflation. line what It’s

there but are and quite in some negative all So all, in is positive this line.

we how offset inflation. we So and than mitigate more this

rate factory, we work and announced a for goods a and factory ago, than the of cost cost And more is now this gross helping cost implemented, to on fragrance. is This in reduction. reduction, this year absorption helping of the continue is way Prestige utilization example clear is margin. A the closure definitely Germany. We increase fixed of

powerful so to is components, We really to reduce way a analysis, it’s And to also to reduce also costs this market efficiency. working are platforming of improve and on value simplify our products.

is is mix. which So is the element, a this on There cost really side. big, big

what continue. all valid accretive. mix all This initiatives This beauty. initiatives, and we the off the is We All Prestige. we doing work new years focused two kicked is is for consumer the within margin gross are This is on we the always ago valid that launching. are and also

implementing a increase implemented some number pricing. we We beginning equivalent a We these also just mid-single-digit of XXXX. XXXX. price And are increase new mid-single to three, is a low beginning initiatives key gross summer is during Sometimes calendar digit September. absolutely did which price are And single-digit Prestige. even margin calendar

able So you elements, all these see expansion to thanks modest margin that within are elements, all these to gross XXXX. we confirm fiscal

Operator

Our from next Barclays. question comes from Lauren Lieberman

Lauren Lieberman

in I the gains thoughts market mentioned was update that stronger Great. launch, on progressing performance care get XXXth how even can performance really or an some you’ll for for think month share But there, of we a hoping migrate on bit I the little that, in look additional that’s morning. how kind Thanks. to Good press skin CoverGirl. release of know I you’d to XXXX.

other some Thanks. focus So a lot of the the of brands. prepared remarks on to

Sue Nabi

years the undisputed results, very brand you’ve the have it facing CoverGirl, the since give the the would is, But done line you, seen invest course, fantastically is sustainable, done we’ve And the the on brand supply which Blast until the it share, we to then and started for make share interesting see reposition overall overall the was for CoverGirl and to been line to Blast beauty reinforce the same recently, net maker it this listing line, brand selling at – to – around say, Thank somewhere difficulties way as of On big, a end the went Good CoverGirl are XXXX you strong halo And to we just has so the this constraints into back it way, to we clean, we’ve comes Coty morning, brand, picture on were to we – We got of with delivering Blast, say, this around has Lash XXXX. Lash people. we’re summer with recently. In September equity, healthy been the younger behind big, and revenue stock and meantime, brand market your when Lauren. work years. called well, market sorry. the American and it. behind doing question constraint comes recently brand in recently, which until I Lash is to about into And when it’s at when CoverGirl, which that out, brand, fantastic big et leading Exhibitionist not the the invested this continued to we Remember, I was talk to years we cetera. having effect is what the used CoverGirl the mascara, by have. as September let’s

are doing overall, we these little a still behind we that what let’s few that now here constraints, the us. So now have there. But we and ones solve are supply say is

is specific. what learn, done. we we the And learn, understood And really which it’s test, fine-tuning to implement. very, are very behind media CoverGirl, there, needs We test, mix be

the next TikTok power somewhere the by the hopefully we Seeker, now, Lash Blast a playing around media But leveraging reason, back behind playbook happen quarter. bit would are come I QX the little Blast into line. will Thrill of of say, starting So and Lash of already

When picture CoverGirl. and share news demand, among can big with among you the good comes all is of news I such makeup versus consumers overall, fundamentals the ago. the to Hispanic The the it job. is, care, in done has has the The dramatically care increased skin that’s aisle. we skin the Zs, So penetration part that as two the Gen penetration that around the as big year care years just skin its launched stopped a ago it

learn, us where learned progress three definition, this and by of of in lot we probably fine-tune again, we the to a for a and of was and on again that test, et we to business intend implement cetera, here quarter So quarter continue four. things part it place CoverGirl could

dynamics it the CoverGirl to on health is the brand and of the is brand and when everything So track comes intact.

Operator

Casella last from our from JPMorgan. And question comes Carla

Carla Casella

had the Hi, on I debt structure. question a

you debt to And not You’ve the in rate so I address got maturing your markets you anything. XXXX great. lengthen that how the debt need of But sense not maturities know far you imminent lot do need XXXX, any or for and it’s a are advance would feel, to in structure?

Laurent Mercier

of to things to made last all, you and XXXX the first maturity two Carla the is over right as rightly say, debt So the years extend is XXXX. we

this, free pay XXXX. we our cash $XXX a have, have go. $X And many our we a delivering on a years that flow at until deleveraging continue agenda confirmation minimum stake Wella earlier top of we on So to with which And is debt. will at billion is perfectly And you clear know, the is track, to the as million minimum. value, down

are these all a with our place. good in we mean I are elements, elements, with XXXX, in deleveraging maturity debt agenda So XXXX full confidence we all very these in

Sue Nabi

Yes, I'm please sorry, go. Carla,

Carla Casella

follow-up. I’ve just business one

sales You’re the cosmetics, and What doing percentage those Burberry are called Prestige and you of in so out Kylie. today? Gucci well

Sue Nabi

This business low part single the in of the is digits.

small our a the And so still good, but small of of business. business, growing it’s its portion portion

Carla Casella

Okay, great. Thank you.

Sue Nabi

Laurent. you, Thank Carla. you, Thank

with if remarks, thank session some would So everyone. you, you this to me. like close Q&A closing I allow

consistency element you, again, which have since us shown important that about how we now, much a is are we for a very of and one is quarters first The row all in for course. nine

times of is talking calendar start a – three the about company. change The the end is step going the hear next one ESG. to we us third that second This Coty for thing a big the will that’s is closing start you element by leverage year. will as as towards of And a remark

questioned a lot we’ve you around because by recently element. of seen lot been a You’ve this

the been the is in just sustainability which is this that news, is what great company, company quartile ESG has of Sustainalytics and by seen beginning around personal the company the products top topic. but doing You’ve rated of this

believe do for much is moment your enter that base. you and the again, and right to this very attention. Coty’s best I investor again the So Thank

Operator

you, Thank concludes today’s conference. and This ladies gentlemen.

now You may disconnect.

Coty (COTY) 8 Nov 222023 Q1 Earnings call transcript