Q3 2023 Coty Inc Earnings Call
Oh.
Good morning.
And welcome everyone. My name is Chelsea and I'll be your conference operator today.
At this time I would like to welcome everyone to Coty third quarter of fiscal 2023 question and answer conference call.
As a reminder, this conference call is being recorded today may nine 2023.
Note that earlier this morning, Cody issued a press release and prepared remarks, bobcat, which can be found on its investor relations website.
On today's call are student Nabi, Chief Executive Officer, and Laura Ms Ye Chief Financial Officer.
I would like to remind you that many of the comments today may contain forward looking statements.
Please refer to <unk> earnings release, and our reports filed with the SEC, where the company lists factors that could cause actual results to differ materially from those forward looking statements.
In addition, except where noted the discussion of Coty financial result, and Cody its expectations reflect certain adjustments as specified in the non-GAAP financial measures section of the company's relief.
With that we will now open the floor for questions.
If you would like to ask a question. Please press star one on your telephone keypad.
If you find that your question has already been addressed you may remove yourself from the queue by pressing star Q.
Once again that is star one to ask a question.
And we'll pause for a moment to allow questions to queue.
Our first question will come from Steve powers with Deutsche Bank.
Your line is open.
Thank you and good morning, everybody.
I guess my first question.
Clarification on the commentary on first quarter 'twenty for pricing.
Both the press release and the prepared remarks should hopefully quickly.
Hi.
Coupled those placing comments.
With your efforts to transition the portfolio to a cleaner more sustainable products I guess I was looking for a little bit more detail is that to cover the cost of that transition or are there. Other factors at play as you consider that that round of pricing early next year.
Yeah, Steve. Thanks for your question. So first of all I mean, just to remind that indeed, we implemented price increase I mean over the last quarter. So that was the last one being <unk>.
Q3, which indeed, we absolutely need to mitigate Cogs inflation and as you've seen in Q3, which is a boon to.
And we expect Q4 to be two salesperson. So now indeed, yes.
Making a new price increase in Q1 24.
As we explain in simple terms I mean, we always make sure that we do each in a granular manner.
We are making sure that keeps the waves of CTO now you know, we the value creation and sustainability.
You know one of the biggest you know Uh huh.
Element that we're putting in place to create value.
Please what we are currently implementing is to bring in a majority of our thoughtful you towards Calvin euphoria.
I noticed for Kevin and Bill Clinton suite, so he's really focused on these value creation that.
We share between T V tears and consumers. So this is windstream, but of course yeah.
A lot of user Eddie mentioned value creation return, but innovation and high quality products, we are bringing towards two to the consumers and can be very specific and give you. Some concrete example on consumer beauty, so well, we all know developing a clean formulations.
Sure.
Now as we speak with you on guarantees are critically important.
The DNA of the brand and that will be more and more initiatives we schemes population.
Okay.
Okay, very good and actually the right while I have you talking too I'm sure you'll get questions from others, but on cash flow.
You know as you mentioned three Skus you usually seasonally.
Yep, yep weaker or negative because of the because.
Because of the seasonal elements, but.
<unk> was also not typically.
Super strong cash quarter for Coty, and I think.
So given where you are in the year and given your guidance.
It implies maybe a little bit more robust cash flow generation in the fourth quarter than at least we were expecting initially so can you just talk a talk us through the moving parts in and.
And your confidence in <unk> cash.
Cash generation to get you to the full year guide. Thank you very much.
Yeah, absolutely I mean, I I confirm you know with confidence that we didn't get either a year you know we use our cash flow above 400 million. So that's.
Absolutely sure.
Just to explain a little more in Q3, so you're right that Q3 is always you know seasonally weaker is the basic reason is that you need all the investment that we are doing in Q2, which piece of peak season.
He then we are cashing out in Q3, so that's always a there's a cash cycle. What is that we are we have a.
Was there anything that I really want to bring to your attention. He said to assume we are rebuilding inventory until Q3. So he's really conscious choice conscious decisions that we are making under again in control. You know we did he brings 100 million. So that we're reading a good position to secure Q1.
Q2 season. Okay. So this is really what we are monitoring and unusually three D. E. CFO now he's Ms improvement to Savi sleeve wounds that you are going to see so Q4 will be positive and we will land.
Full year 'twenty three.
Cash flow of 400.
To date as you know T. C 365, okay. So we are we keep preteens with cash generation on what you can control.
Okay.
Thank you.
Our next question will come from analysts do with Bank of America. Your line is open.
Hi, good morning, and thank you so much for the question I was wondering if you can comment on the launch of Lancaster in China, and how that compares to your expectations on skincare and China has seen a nice acceleration and fine fragrance penetration how are you engaging with consumers in this category. The first days on skincare.
Yeah.
Yes, good morning.
Thank you for the question Indeed, China has been very active for a quicker T. During this quarter that was specifically at the end of the cost out and of course during Q4.
We started that work skincare.
Strategic bets in China, a few weeks ago and I can tell you that we are very happy about the very very early results. We are seeing behind on their staff.
Skincare is about R&D formulation as you can see how consumers see affiliations and I can tell you is that the the ratings outstanding four nine out of five this is really unseen in this very competitive where consumers are very demanding so for a brand that was not doing anything in China, just a few months.
These ratings are I would say oh, great confidence.
We passed six thinks about how consumers in China are seeing already results could those who shop the line lean concepts.
Just a few weeks ago. This is number one and number two is that of course, we are creating the awareness of the lines in China and as you've seen it publicly during the presentation.
We were number one in terms of us, especially in China, which is again I would say and explore as he said in France and this is.
The middle of a very very noisy environment, everyone is trying to get through the noise of the Chinese market in terms of PC demand and we were number one during the launch period. Then we continue to see very qualitative comments on the line you heard that some consumers called the clean the category, which is our reference.
Of course, the great skin, which is great for us because that's a great summary of the high quality the exclusivity and of course the European origin.
Origin of the brands.
When you look at what's happening at the counters, we've seen you've seen the first tons you counter that opened in we went there you know a few weeks ago in China, you see that the conversion is as high if not that both some of that heat and Brian could you give us a great great great confidence. So now the job is to increase the traffic.
At the end of the day when you had the formulations. When you have the right word. This mode. When you have a very high conversion what takes ease that now you need to create this traffic across our counters on tmall et cetera to increase the size of the brand. So it's really starting exactly where we were dreaming is to start in the way, we would really need to stop.
When it comes to the fragrances.
This is a slide.
In China.
And you know I was I took advantage of my visit to China to visit some consumers at home you know.
Second by Yours, these entry prestige or premium fragrances, and I can tell you that that was a incredibly surprised to see the level of acceptance of consumers.
And in a way they were telling us that this category today is more or less seen as almost the skin care category.
High value category.
I mean, that's becoming performance Jesus everyone is obsessed with what they call lingering sense, which means long lasting sense and people are more and more moving from heritage and tradition, our brands February Sneesh very conceptual brands that sounds very unique story something that they can speak about the social media.
As who they are so in a way for a company like <unk> between our fragrances, where we're starting from a low base and we have a huge upside in front of us remember the penetration that 3% to be compared to 50% in Europe . So the there is a huge potential in the country.
We have the right brands to upgrade their next to this we have our ski cat you know adventure that stocking right now I think the upside can be very very strong could you.
Thank you.
Our next question comes from Rob <unk> with Evercore. Your line is open.
Thank you very much two questions one I wanted to follow up on on fragrances.
You know it looks like Youre getting an acceleration in the quarter in the fragrance category.
Is this driven by any specific brands or is it more broad based.
And then the second question is on the consumer beauty side, which continues to be very strong.
Uh huh.
You know what what is fueling that that continued momentum. Thank you.
Yes. Thanks.
Good morning, Yes, Indeed, we are seeing clearly an acceleration you know these tenets fragrance index that that had been referring to since a few quarters. Now is not only are you know continuing but it's accelerating fragrances.
Division the growth of the division was 16% fragrances around 20%. So it's a very very strong growth that we're seeing in.
This category.
He is continuing to recover on the Savviest Atlas. So clearly it has to do with one hand with Saudi step of improvement, but also on the oil, but I wouldnt say consumer demand that's accelerating.
This growth is very broad based between the different brands now you know all the brands are doing their job.
Fantastic.
We're seeing a strong double digit growth B E.
<unk>, that's becoming a best seller lines in Asia of course, Gucci fragrances.
So this is clearly something that he does have some confidence that we have.
The right portfolio to answer the defense consumer psychographics are either in terms of pricing, but also in terms of what they're willing to back in terms of what brands are universal equity.
On consumer beauty, it's clear.
Really also a division where we are continuing to see very strong momentum.
Cosmetics brands are all growing double digits really you know these Max factor.
To name the biggest brands and this clearly is a great demonstration of the work we've been doing you remember I always said that we were fixing with watsco had enhanced since two years now two years in the house and now we are starting to show to everyone what.
The ability of this company to create really a breakthrough innovation, so you'll be less I'm kind of out there. He was one of them number one lip color launch in the U S and this ties a cosmetic launching the USB spring PTO terabyte cutoff that we just announced that a few days ago. I think this is going to be a massive success in this very strong.
Hunger.
You know every hour.
From which is mosquitoes.
More or less the same thing behind women in U K with <unk> seeker, and Max factor, that's having a 30% three zero growth, excluding Russia, which is really unprecedented flooding and so I can tell you that cosmetics are doing fantastically well.
So I'm gonna fragrances, I don't know if you're aware of this.
Brands like Blue New banana.
Prestige Division EBITDA, you know is as big as Hugo boss, So, it's a really really big part of.
And this one is also growing double digits. So the fragrance index is also at scale.
No what consumer beauty business so to confirm.
In the way of what was embedded in your question growth coming from both divisions first of all the brands in both divisions and the fragrance index is only accelerating.
Thank you.
Our next question comes from Filippo <unk> with Citi. Your line is open.
Hey, good morning, everyone follow up on China, you mentioned in the prepared remarks that April sales, including Hainan increase year over year and also on a two year basis.
Does that mean that your inventory levels are now in a normal position and now you're growing in line with consumption or do you assume some.
Carryover impact from normalizing inventory in fiscal Q4, and then longer term just any kind of target you can give us.
In terms of the Lancaster launch, where do you think that brand can get to within the China skincare category. Thank you.
Yeah.
Yes, good morning people.
So indeed, you're absolutely right. So a poorly is that we are seeing some acceleration in April . So how you are vis vis last year on higher versus two years ago and to be very clear. This is really a Q1.
Well again, you touched on in some cases or in <unk>.
The level of inventory with a retailer where he's very hazy.
And this is definitely a growth needs redone by you all initiatives that Suez just mentioned so you definitely see a skincare.
Yeah, I don't guess tail all the plans we are putting in place I.
Each seeking premium amortization, you know high end fragrance.
I'd say duration, so glad to do this now.
Example, we ever saw great initiatives on.
And of course me deaconess prestige cosmetic with.
Launches we made them.
There is foundation and <unk>, which he foundation, which are a very very good start so D. C U.
You are seeing is that we are building the foundations.
Oh, the new model early in China, and the strains for car T. And you know that we are starting from a low base. So again there is no no retailer inventory and so on you know going again. So this is really purely incremental because this is also the case on consumer beauty.
So fantastic and great initiatives on Ddos, which are really you're starting now and accelerating. So this is again, where the buildings are foundation and sequential acceleration for China.
So people. Good morning. This is sue speaking so in lung cancer.
There isn't any targets in fact, you know this is a business where you need to create.
I'm, Chris asked me, India, we've got enough stores and of course on the online store the recipe for success and again the recipe for success is about consumer ratings, social buzz and conversion. So when we will see that we have the right level of consumer goods and the right level of conversion.
And the best teams graduate teams. This is when we really decided to extend the distribution you know and at the end of the day.
He still just saying we have three brands noncash they're in China or is that going to be also it's starting in China and the U S. In each other retail and seasons, you'll see which is the biggest skincare brand. We have today a good team that's starting to ease a reinvention a month ago here again, and you've seen the fantastic advertising behind the legacy.
Joseph Wisdom. These three brands will allow us to go into the $500 million in the coming years in terms of targets for our skincare business.
Okay.
Thank you.
Our next question will come from occurring in both Meyer with Piper Sandler your.
Hey, good morning, all and thanks for taking the questions and congrats on the quarter.
So just kind of touched on it but the margin guidance for the year and some of the puts and takes behind that.
You talked about you know slight gross margin expansion, but I'll say that.
Right.
EBIT guidance for the year can you just talk about where maybe some of that pressure is coming really I know you mentioned FX and maybe some higher A&P.
Spend but can you just talk about you know what we should expect for Q4, there and then as we head into fiscal 'twenty four.
How are you kind of thinking about the puts and takes at the margin trajectory there. Thank you.
Yeah.
Yeah, absolutely. So we are we are confirming our full year guidance and it would be done through 90 965 to 965.
To answer your point, I mean D season, despite but $50 million.
The headwinds so as he sees the guidance that we gave you the beginning of the year. Despite these headwinds we are reading in a position to confirm and at the same time, which is absolutely key is also to reinvest in our strategic initiatives and we mentioned a few especially in China.
T O R equation is that he's putting control group, we see it means that our EBITDA margin will grow 50 basis points at the end of the year and even though a small gene will go when I'm. Good 50 basis point, so you're really understands that we are monitoring your equation.
In a creative manner.
Is it can you clear the.
We allocated the resort season hearings overdose victims, so delivering of course with Covid profit objectives.
One important element to this is that as you do so we are increasing our EPS guidance by <unk>. So Lisa we just swap cookie, we havent guidance. He has no two lenses a year at 52 to 53 cents, which is you know close to 80% EPS increase versus last year.
If we exclude the swap.
So the guidance is 58 to 259 cents, we chose a bud to no more than 50% EPS increase versus last year. So you see them.
Significant improvement in <unk>.
In our in our EPS.
His guidance so no definitely looking you're looking forward for fiscal 'twenty four.
To give you more detail in the next coming quarters, I mean, we confirm unions and meet to them. A good reason that we shared a few months ago and that we reconfirmed you in cagny.
He's really two out of the nature.
Net revenue growth.
And of the 6% to 8%.
EBITDA growth in the range of 9% to 11%.
EPS EPS growth of $23 26 in the mid twenties.
Thank you.
Our next question comes from Ashley Hogan with Jefferies. Your line is open.
Hi, This is Sidney on for Ashley first question was just any by category trends, you can kind of call out in China and travel retail.
And then just with the strength in the mass category, you know any any potential signs of trade down that you're seeing at all.
Thank you.
So thank you for your question so any sign of trade down. The answer is no. Clearly know we are not seeing any sign of trade down nowhere we are.
In fact, seeing even there because he's the continuous couldn't musician BT consumer beauty with what we called <unk>, which is in this beauty that is at the premium that's that's pretty cool in that study.
On session, John where current journey, starting to party states signed a knee, which is really the annuity piece to the reinvention of these brand and by the way the reinvention of our consumer beauty customer Codell cosmetic brands.
When it comes to cacique categories. We are continuing to see you know the fragrance index at play there is a globalization of the fragrance index you know it started in the U S. And then we've seen Europe , and China, which really is the best I would say, our new Solaris thing for the industry as you can imagine.
This category is pretty amazing and becoming the dominant category with many consumers around the world Skincare continues to be the Queen category. You know are growing you know what are the.
Kind of.
Good growth not crazy not loan growth, which has always been the case with skincare since I'm doing beauty, which is almost 30 years now and this category.
It is the biggest category worldwide and this is where we wanted to play now and last but not piece, we see color cosmetics back in consumer beauty quite strongly specifically in the U S.
So around the world.
The different subcategories.
Second category is going be to seek with Gen Z as a back to reach 60, CFO So something that's new.
The classical foundation in Muscat category, So no signs of trade down or the categories are growing quickly musician and fragrance index is exited ratings. So that's I wouldn't say the summary in terms of that's what we are seeing globally in terms of I think at least in nutrition.
Yeah.
Thank you.
Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open.
Hi, good morning.
Yes.
Hum.
So.
Right.
Just just to two quick questions. Please.
Just number one can you just talk about the consumer beauty profitability yet.
How you see that trending going forward and how fiscal Q3.
It came in relative to your expectations.
And then the second question is and I think there has been.
A couple of questions kind of around this topic, but yeah. There was a comment in the press release around.
You know more investments.
And to your skin care and that there the revenue benefits from that investment what it would take some time to play out is that in line with your prior expectations or are the is the skin care opportunity just taking a bit longer to develop it sounds like you still have the same goals over time, but.
Perhaps the phasing is changing so just any any clarity there. So so thanks for those on.
Humor beauty margins and.
The pace of skincare investment versus a first revenue overtime.
Well sure I'll. Thank you alright, thank and praise Paul for the question.
The profitability I mean consumer beauty I mean, this is a very profitable business or maybe your question is more but Q3 Q3 is either way you lose a quarter, where we have significant investment for consumer beauty. This is really a quarter, where we have big launches. So we are investing in and again, it's 40 years.
Included in our equation and in our quarterly equation, but bear in mind that all the initiatives.
We are putting in place on consumer beauty.
Very accretive gross margin accretive.
<unk> shared with you a few initial teaser and quickly that you should see as we are making we are launching currently on Covid I mean.
Very coffee table initiative, and definitely is a flywheel and consumer beauty. He said he's absolutely emotional Sue explained that he didn't you in those first two three years, we have to do the work with what was in place and no D. C piece. There is some strong acceleration in top line, but also in profitability.
And there is a very stronger very strong or are you from all the initiatives that we are putting in place. So we don't see it in margin we know we'd expand should expand in fiscal 'twenty three and beyond exactly based on what I shared with you that last statement, which sounds a little more picky call. It either so that's.
In Q3, we had to face some of the onetime Forex impact.
It's very profitable.
On your question I can stop and sweeten cannot be done on the on the east.
We made very clear that indeed.
Our balanced portfolio skincare, he's he's a reuse strategy compare it to either so we all we are investing and we seize indeed will include <unk> <unk> and <unk>.
I'll say, we so what we just kicked off season with lung cancer.
What we are doing current tier so in UA squeezes.
But I can tell you from a video finance and marketing and commercial teams. We are very precise kpis that we are tracking so that we're reading a position to major Hawaii pursuit to put you in a correct measure of the east needed, but definitely I mean.
Is there a definitive step by step we are building a profitable business.
Mine is on the gross margin on skincare, He's also very accretive.
You can do that can complement what he said Oh. The reality is that it's too early to tell you.
We are growing faster or less fast than what we had even though in months. We've just started a month and half ago and <unk> been sharing with you. Our excellent on time. This isn't really the P 60 million can do whatever you want if you don't have the right combinations as consumers find your brand interesting and eastern with conversion at the counter.
There you have the issues, it's not absolutely the case, so remember we've been very clear from the beginning that the strategic emphasis is on driving balanced growth engine that could see you know about.
Which includes the imperative to debit else can get business in the coming years. So again, we are we continue to be very confident in this strategy because we have the technological know how because we have the patents and because we are putting in place are continuing to put in place the organizational capabilities of course this.
Requires upfront investments you know.
Clearly the name of the game, we're making now and the Great news is that right.
Key to be in.
Physician, where the rest of the portfolio is growing very strongly.
Lewis both to deliver on our profit commitments and at the same time, so he and he's not either shoot our skin care portfolio with all the activities that have been sharing with you right now.
Yeah.
Yeah.
Thank you.
Our next question will come from Lauren Lieberman with Barclays. Your line is open.
Great. Thanks, good morning.
I just thought I'd kind of flip this around.
So many things are going well.
So I thought maybe it'd be interesting to hear what are the things soon neurons that youre worried about as you look ahead. It seems like everything is on the right track lots of positive update today. So what are the things that are kind of tap on your list.
Warrior watch points. Thanks.
Yes, good morning.
This question is really you know since the last three years <unk> Xie Xie ongoing question and this is all the decisions.
As a strategy, we detailed release exactly too.
Two to grow as a companion to protect the company.
The name of the game is balanced thoughtful you. So easy is really what makes a difference and know what we are seeing in motion. So its' balance in terms of the.
These things in balance portfolio. He is makes a difference in sort of source of data in terms of geographies.
Very balanced portfolio across closed the worms visa is.
As you saw America doing doing very strong and it's a case of North America that took so sell somebody a rig count. So huge so you see you see reserves and balance the growth of our all of our equation.
Europe very strong and we are seeing currently you saw a good momentum in Europe , I mean, it's a fragrance in big that Suez, referring too even though in motion in the.
In Europe retail grew more than 50%.
And last but not piece as we discussed extensively before.
China for US is only on opportunities. So this is definitely the work that to me. The leadership teams that we are doing constantly lusty meant to to answer your point is a swing in terms of price partition.
Reading.
From a re affordable.
Foldable products.
So we can match the needs of.
You know part of the consumers and then we are going to open up and we are also reaching a very high end consumer so.
Or disease.
<unk> definitely given giving us.
Not only the protection, but also the drivers are we going to profitable growth. So this is <unk>, what we are looking at adapting and stuff.
Okay.
Thank you.
Our next question comes from Olivia Tong with Raymond James Your line is open.
Great. Thanks, good morning.
My first question is around the price increases that you're contemplating our next quarter or two quarters. Just if you could give us more color in terms of.
Categories geographies that you're contemplating is it areas you had already planned and it's just taken a little bit longer or areas are areas that are that are new.
And then on the fragrance service levels are getting back to the high Eighty's can you talk about where it was heading into COVID-19 in and.
At this rate of improvement how long do you think it will take you to get back to where you weren't before.
And should.
Should we think of this shortage has impacting all the fragrance brands more or less equally on a percentage of sales are you know that that could have potentially been left on the table are there.
Any innovation change do you have to make as a result of the shortage just trying to think about the recovery as fragrance service levels get back to a more normalized thanks so much.
Yeah. Good morning, Olivia, it's one price increase.
We share them and indeed, we are contemplating to lead the new price increase in Q1 24.
The methodology remains the same and we expect several times, we are dedicating pricing your fees, which was put in place more than two years ago.
We do he's always very granular.
So we do eat.
Bill channel product.
Category fell musket and we need to of course combined with the data that we get you know from CMS.
We are making sure that what he's done he's really machine.
Exactly what the consumer needs and as I shared before he's also we combine these with the value creation sustainability E. DCT big angle on value creation. So this is a case indeed on prestige little so on consumer beauty. So.
This in mind. This is very granular work and every time, we are making sure that in terms of the portfolio price increase that we are doing.
Consistent and we are not.
Meeting some gaps between projects.
A closer Greg So it is very something and I have to tell you know we have very good expertise in solar.
Price increases went very smoothly and again very good collaboration caliber.
Collaboration with our retailers so on.
Semi stable.
Additionally, we are seeing some very good improvements. So I didn't know I mean, we are lending to three.
In the high eighties.
That is very important so easy needs as soon as there is still some tension and this is a case for the whole industry. So that's why we remain very focused.
So it shows that we also are building inventory end of Q3.
The key reason.
The challenge on semi stable in fact is because the demand remains very high and so he's very so it means that supply chain keeps adapting I mean it was.
So really very strong default and a decision made at the DCP, we stay very focused and so as this was the case in this is a case on glass bottle are indeed.
But also our caps.
But all very very good improvement, we all know.
Very good in a very good position, but of course in some channels that we are and we are managing very very carefully.
Okay.
Yeah.
Thank you.
Our last question comes from Andrea Teixeira with Jpmorgan. Your line is open.
Thank you. Good morning. So my question. If you can comment on the prestige side of the business coming in stronger.
Than expected then of course, you you did mention a couple of things doing them.
Your prepared remarks in your answers but.
We've seen that strong demand.
Fragrances launching is for about three years now and your implied fourth quarter, albeit it's still very strong as about 11% for the total company. So I was wondering if you would just embedding some conservatism or is there anything in the third quarter that came in and I understand he came in all.
The reopening in China.
The thing you can contribute to say, perhaps I know, there's some pull forward there.
And by adding some deceleration.
And then just a clarification on a couple of questions regarding our margins. So as you think about the pricing that you are coming in for the freshwater and why do you set yourself too in terms of the growth.
In your Investor day.
Where you highlight at 9% to 11% EBITDA growth.
Is that something you were saying basically we need things as grocery is coming in better than anticipated. We are not going to chase margin. At this point, obviously, you still had some improvement underlying but it's probably at this point below what could be an issue. We're not only investing is that the way we're thinking.
And in terms of priorities you had priority of course is the priority will be daalder topline in dollar margins as opposed to percentage margins is that fair.
Yeah good morning.
This is two I'm going to take the first part of the question may be around the Osaka for myself Cristina.
We see this in Q4.
Q3 benefited both from a restocking and of course from the who thinks we stuck in Oh, Oh capex elements with our innovations do.
Do you think about what the brand like built really a between a doubling her and delivery hero fragrances.
We are we've jumped from the 30 position to a top 10 position something like this in the U S market. So you can see that we are performing in the market. Thanks to our innovation.
Talking hubs and by nature. So the growth of the market is lifting all of US at the same time and this growth is huge 60% in the U S 40% globally and it's just the beginning and we believe this fragrance index that is at play globally.
Four we believe that there will not be any millennials spectrum, we're starting to see that this was really a one time benefit in Q2 and Q3 of them. So now when it comes to the beat that horse maybe the only you can take this one when it comes to reinvesting the prioritization of stuff, saying that they will not be an extension.
We'll keep you <unk> just before I mean <unk>.
What is important is we need it and so what we are doing is this new piece, we can do this.
In our strategic initiatives.
One indeed, we refilled to Lisa <unk>.
<unk> saw a lot of those are the initiatives. So we are investing in these strategic initiatives.
Did he very the proceeds.
EBITDA and EPS. So this is really the way.
We are monitoring our equation on a daily basis.
Yeah.
Okay.
Yeah.
Thank you.
This concludes the question and answer portion of today's call and I would like to turn the call back over to Stuart for any additional or closing remarks.
Thank you very much. So thank you everyone for your questions. We are very proud as you can imagine. These are 11, Scott gave us results that are in line or ahead of expectations and we see these cell growth accelerating those decisions, which is really a as you can imagine a very strong source of price for the asset.
Both divisions are double digit growth and this is fantastic because we have two legs and we need the two legs to compete in the very competitive world of today.
Clearly understood that we are reinvesting behind our skincare PR.
Obsession and all hasn't been saying this several times during the call today is about creating separate Brooklyn June two divisions separate brands separate categories in several regions and this is clearly starting to show results.
But not pleased that while we are reinvesting we are continuing to confirm our profit no forecast and of course, the guidance last but not least a happy to say that the deleveraging of the company is fully on track targeting three times at the end of calendar 2003, and two times at the end of calendar <unk>.
25, thank you very much.
Okay.
Thank you ladies and gentlemen.
First question after the call. We appreciate your participation and you may disconnect at any time.
Okay.
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