Q2 2024 Coty Inc Earnings Call - Q&A

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Operator: The Bulletproof Executive 2013 Hello, my name is Todd, and I'll be your conference operator today. At this time, I would like to welcome everyone to Coty's second quarter fiscal 2024 question and answer conference call. As a reminder, this conference call is being recorded today, February 8, 2024, at 18, sorry, 15 a.m. Eastern Time or 2.15 p.m. Central European Time. Please note that on February 7th at approximately 4.30pm Eastern Time or 10.30pm Central European Time, Coty issued a press release and prepared remarks webcast, which can be found on its Investor Relations website. On today's call is Sue Nobby.

Todd: Hello, My name is Todd and I'll be your conference operator today.

Todd: At this time I would like to welcome everyone to <unk> second quarter fiscal 2020 for question and answer conference call.

As a reminder, this conference call is being recorded today February eight 2024 at 18, sorry, 815, a M eastern or 215 P M Central European time.

Todd: Please note that on February seven at approximately 430 P. M. Eastern time, or 10, 30 P. M Central European time, Cody issued a press release and prepared remarks webcast, which can be found on its investor relations website.

Todd: On today's call are Sue Nabi, Chief Executive Officer, and Laura Mercier, Chief Financial Officer.

Operator: Executive Officer Anne-Laurent Mercier, Financial. I would like to remind you that many of the comments today may contain forward-looking statements. Please refer to Coty's earnings release and the reports filed with the SEC, or the company list factors that could cause actual results to differ materially from these forward-looking statements. In addition, except where noted, the discussion of Coty's financial results, Coty's expectations reflect certain adjustments as specified in the non-GAAP financial measure section of the company's press release.

Todd: I would like to remind you that many of the comments today may contain forward looking statements.

Todd: These refer to <unk> earnings release, and the reports filed with the SEC, where the company lists factors that could cause actual results to differ materially from these forward looking statements.

Todd: In addition, except where noted the discussion of <unk> financial results and Cody its expectations reflect certain adjustments as specified in the non-GAAP financial measurements section of the company's press release.

Operator: With that, we will now open the line for questions. If you would like to ask a question at this time, please press star 1 on your telephone keypad. You may remove yourself at any time by pressing start.

Speaker Change: With that we will now open the line for questions.

Speaker Change: If you would like to ask a question at this time. Please press star one on your telephone keypad you.

Speaker Change: You may remove yourself at any time by pressing star two.

Operator: Once again, that is a star and one to ask a question. This question will come from Rob Ottenstein. Go ahead.

Speaker Change: Once again that is star and one to ask a question.

Speaker Change: Our first question will come from Rob Hottenstein.

Robert Ottenstein: Evercore. Please go ahead.

Robert Ottenstein: Thank you very much and congratulations on another terrific quarter. So, Sue, your outperformance in Prestige Fragrances was really impressive. Two questions on that.

Robert Ottenstein: Thank you very much and congratulations on another terrific quarter.

Robert Ottenstein: So suit your your outperformance in prestige fragrances was really impressive.

Robert Ottenstein: Two questions on that how much of that outperformance is attributable to new brand launches.

Sue Nobby: How much of that outperformance is attributable to new brand launches? And then second, as Prestige Fragrance, as the Prestige Fragrance market normalizes, can you continue your outperformance, and if so, what gives you the confidence to be able to do that? Thank you. Yes, good morning, Rob.

Robert Ottenstein: And then second as prestige fragrance is the prestige fragrance market normalizes can you continue your outperformance and if so what what gives you the confidence to be able to do that thank you.

Yes. Good morning. Thank you very much for your kind words, indeed, it's a very good cost of specifically driven by the prestige fulfillment.

Sue Nobby: Thank you very much for your kind words. Indeed, it's been a very good quarter, specifically driven by the prestige performance. You know, the outperformance in this division has been achieved thanks to a very good, I have to say, balance of new launchers and strong performance of the base business, which is also supported by the halo from the launchers. If I take the example of Burberry Goddess or Burberry as a brand, all three lines are growing. The one that is, by definition, new, Burberry Goddess, the biggest launch ever at Coty, number one fragrance innovation around the world, while at the same time, Burberry Her, which is a few years old, or Burberry Hero, which is two and a half years old, are also growing.

Speaker Change: You know the outperformance in this division hasn't been achieved thanks to a very good I have to say balance of new launches and strong performance of the base business.

Speaker Change: Which is also supported by the Halo from the launches if I take the example doesn't tell Billy good days, although he is a brand all the three lines are growing the one that is by definition you don't believe your desk biggest launch ever at Gucci, the plunge President's innovation around the world while at the same time good to be here, which is a few years.

Speaker Change: Old ore delivery hero, which is two and a half years old are also growing so in fact this I would say outstanding performance. We are having behind our innovations is also benefiting other brands. Some other brands are that Oxford, you I'm thinking about Calvin Klein or does he does I'll also growing double digits without new innovation so in.

Sue Nobby: So, in fact, this, I would say, outstanding performance we're having behind our innovations is also benefiting other brands. Some other brands of the portfolio, I'm thinking about Calvin Klein or Davidoff, are also growing double digits without new innovation. So, in a way, it's really a good balance between innovation and base business, if I may call it that. And what gives us the confidence in this outperformance in this market that's going to normalize is still going to be mid to high single-digit growth, which is far above what was the case just a few years ago. But the confidence we're having comes from a lot of capabilities we have been able to build during the last three years, capabilities to be blockbusters, be it in terms of creating winning juices, creating winning mixes, finding the right balance between influencer marketing, classical media, sampling, etc. All this is know-how that's here to stay and here to develop.

Speaker Change: The way, it's really a good balance between innovation and base business. If I may put it like this and what gives us the confidence in this outperformance.

Speaker Change: In this market that's going to normalize steel is going to be a mid to high single digit growth, which is a far above Oh, you know what was the case just a few years ago, but the confidence we're having gets from a lot of capabilities, we have been able to build during the last three years our capability.

Speaker Change: Capabilities to be the blockbusters be it in terms of creating winning juices, creating when you mix is finding the right balance between EQM sell marketing classical media sampling et cetera. All these ease of know how that is here to stay and here to develop its also a confidence that we're taking from our still white space.

Operator: It's also confidence that we are taking from our still white space opportunities, geographically speaking, but also white space opportunities in terms of categories. So all of these give us confidence that we will hopefully continue to outperform this very dynamic market. Thank you. Thank you. Our next question comes from Oliver Chin with TD Cowan. Please go ahead.

Speaker Change: Proximity geographically speaking, but also white space opportunities in terms of categories. So all of these give us confidence that we redid, our hopefully continue to outperform this very dynamic market.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from Oliver Chen with TD Cowen. Please go ahead.

Oliver Chin: Bye Sue and Lauren, you've made so much nice progress regarding, The Bulletproof Executive 2013, Targeted pricing going forward. Could you speak to what you mean there in terms of the opportunities as you surgically analyze that? Also, Sue, e-commerce impressively drove 40% of your like-for-like sales growth. What do you see ahead in terms of embracing that channel and the centers of excellence and community and TikTok innovation as well?

Oliver Chen: And Laura you've made so much nice progress regarding prices and you mentioned targeted pricing going forward could you speak to what you mean, there in terms of the opportunities as you surgically analyze that.

Oliver Chen: Also Sue E Commerce impressively drove 40% of your like for like sales growth. What do you see ahead in terms of embracing that channel in the centers of excellence in community and Tic Toc innovation as well.

Oliver Chen: Yeah.

Lauren R. Lieberman: Yeah. Thank you. Thank you for your question. So on the on pricing as you know I mean, we explained several times over the last quarters that we implement.

Sue Nobby: Thank you, Oliver, for your question. So on pricing, as you know, I mean, we explained several times over the last quarter that we implemented a price increase of mid, you know, mid single digits. And this is also what we did at the beginning of fiscal 24. So this price increase was very successful. It went very smoothly.

Lauren R. Lieberman: Our price increase mid you know mid single digits and this is also what to we need to.

Lauren R. Lieberman: The beginning of our fiscal our fiscal 'twenty four so is it Z These price.

The increase was a was very successful.

Lauren R. Lieberman: Went very smoothly and and you see that each one slate you know is that we still are growing volumes. So this was really very good execution.

Lauren R. Lieberman: And you see that it translates, you know, that we still are growing volumes. So this was really very good execution, very precise, very granular, and it needed to work very well. So now looking ahead, indeed, I indicated that we would continue very targeted price increases. So definitely, because all the work that we are doing in value creation, you know, it allows for specific products, specific markets, specific channels, still to pass some price increases. So this is something we will continue, but, of course, it will be more moderate and very, very targeted.

Lauren R. Lieberman: Very precise very granular.

Lauren R. Lieberman: And you need it worked very well so now looking ahead.

Lauren R. Lieberman: I indicated that we will continue very don't get to do a price increase so definitely because all the work that we are doing value creation.

Lauren R. Lieberman: It allows them on specific projects specific market specific channels still to put some price decrease those east we will continue but of course, it will be more moderate and very very targeted but definitely where we are going to focus even more no easy is more on the mix and.

Lauren R. Lieberman: But definitely, where we are going to focus even more now is more on the mix. And what we are calling, really, a stream that we are pushing, and we explained last time, is strategic revenue management, which is really to review the full values that we are creating for retailers and for consumers and definitely focus on increasing the price per unit. I will give you some examples.

Lauren R. Lieberman: What we are quoting your video streams that we're pushing and we explained this time user strategic revenue management, which is really two reviews of fools that use that we're creating for retailers and for consumerism and definitely focusing on increasing.

Lauren R. Lieberman: Price per unit I give you some examples.

Lauren R. Lieberman: The innovation that Sue was referring to, for example, Burberry Goddess. Burberry Goddess is the number one innovation on the market. It is an Eau de Parfum, and Eau de Parfum is, on average, 30% higher priced versus Eau de Toilette.

Lauren R. Lieberman: Innovations that Sue was referring to for example, built very good very good as is the number one innovation in the market. It is all about.

Lauren R. Lieberman: And all the puzzle is on average 30% higher price <unk> audio taught it. So you see this is concrete examples that know when we are launching new initiatives. We are working with in depth to make sure that he sees it.

Lauren R. Lieberman: So you see, this is a concrete example that now when we are launching new initiatives, we are working really in depth to make sure that this is at a higher value versus the base business. This is also the case in Consumer Beauty, a great innovation that we just launched with simply edgeless essence. And same, this is a high quality, very premium product with a price which is 30% higher versus the base business, and it is number one on Amazon. So you understand this is really this work on improving the price per unit because there is value quality in the product, optimizing also all the trade terms, and reducing promotions.

Lauren R. Lieberman: How you value that.

Lauren R. Lieberman: The base business.

Lauren R. Lieberman: Casey no in consumer beauty.

Lauren R. Lieberman: Great innovations that we we just launched on simply your age laser <unk> and statement. This these are you know high quality T very premium product.

Lauren R. Lieberman: We will price, which is a 50 person how youre going to use it so based business and it is a number one in Amazon. So so you understand that this is really these work on improving the price per unique because there is value quality teams a product optimizing or dispose of all the trade terms are reducing promotions.

Sue Nobby: So it is really this way that now we are really moving towards this strategic revenue management approach, mixed improvement, and we have already strong examples, and I can tell you definitely that the work and all the initiatives that are in place will really continue on this journey. So that is why it is one of the big drivers of our gross margin expansion in H2, definitely combined with inflation softening, and definitely in addition to carryover pricing from last year, and also all these strategic revenue management elements. So that is a very clear path that we have ahead of us. And on the second part of your question, this is Sue speaking.

Lauren R. Lieberman: So he's really easiest ways that now we are really moving towards these strategic revenue management approach mix improvement and we are already strong example, I can't tell you definitively do the work and all the initiatives that are in place. We really continue to these young so thats why youll see too.

Lauren R. Lieberman: You know, it's when there was a big driver of our gross margin expansion in excess to the definitely combined with inflations of knee and definitely in addition of carryover pricing from last year and also orders either strategic or the new management agreement. So so that's a very clear that we have ahead.

Lauren R. Lieberman: And then on the second part of your question. This is bill speaking so how are we embracing E com digital community management peak truck et cetera. Indeed, the elements of E. Com during the culture has been outstanding as you said it before a.

Sue Nobby: So how are we embracing e-com, digital community management, TikTok, etc.? Indeed, the performance of e-com during the quarter has been outstanding. As you said before, 40% of the growth in both divisions comes from e-com. This is really an unprecedented level of performance, I have to say.

Bill: 40% of the growth in both division comes from E Com.

Speaker Change: This is really a you know an unprecedented level of Uh huh.

Bill: So I have to say, it's 180 basis points extra penetration in this channel 20% of growth and it's quite I would say obvious to explain this thanks to the strategy that we have put in place and explain this several times now since a year and half.

Sue Nobby: It is 180 basis points, extra penetration in this channel, 20% of growth, and it is quite, I would say, obvious to explain this thanks to the strategy that we have put in place, and I have explained this several times now for a year and a half, of putting advocacy at the center of our social media strategy. I can give you the example that Laurent was mentioning, which is the Simply Ageless Essence Foundation, which is a very innovative product. It is a serum, a transparent serum, and you can see capsules of pigment in this serum, and they burst on the skin when you apply them.

Bill: You know putting advocacy at the center of our you know our social media strategy.

Bill: I can't give you. The example that law was mentioning which is simply ageless essence foundation, which is a very innovative product is the serum transparency at them and you can see capsules of pigment in the serum and they burst on the scheme. When you apply them. So this is typically the very kind of product that ticked up.

Sue Nobby: So this is typically the kind of product that TikTok and any social media are crazy about because it's very visual in the packaging. There is a transformation on your skin, something happens, and the result is that it's number one on Amazon already just after a few weeks, and it has been given to the hands of a mega-influencer that we were referring to during the presentation. We had 95 million views. Can you imagine?

Bill: Any social media is crazy about because it's very visual in the packaging. There is a transformation until youre skiing, something happens and the result is that it's number one on Amazon are ready just after a few weeks and it has been given to the handset Amiga influenza that we were referring to during the presentation.

Bill: We had 95 million views can you imagine one plus 95 million views 10 million dollar of E. M D, which is the total ENV of covergirl in the U S. A year ago for 12 months. So you can see that this transformation of our consumer beauty business from the business that towards relying.

Sue Nobby: One post, 95 million views, $10 million in EMV, which is the total EMV of CoverGirl in the US a year ago for 12 months. So you can see that this transformation of our consumer beauty business from a business that was relying on, I would say, a low level of innovation in terms of percentages, maybe not enough disruptive innovation, but with the right brand equity, into a business where we are going to double down the level of innovation, disruptive visual innovation, together hand-in-hand with strong advocacy marketing. This translates into this performance that you are seeing, which is obviously driven by Amazon. And to finish on this point, because I guess the question will come at a moment or another, our advocacy plan is really evolving very fast. You've seen the two studios we have opened in the US. You've seen how much we moved from a few hundred influencers with whom we were working just a year ago to 5,000 today. And the intention is to go double this, triple this, who knows?

Bill: On the I would say a low level of innovation in terms of percentages, maybe not enough disruptive innovation that with the right brand equities into a business, where we are going to double down the level of innovation disruptive These where innovation together hand in hand with the strong advocacy marketing this translates into.

Bill: This performance that you are seeing which is obviously driven by by.

Bill: And to finish on this point because I guess the question with come at the moment or another our advocacy plan is really evolving very fast.

Bill: You've seen the two studios we have opened in the U S. You've seen how much we moved from hundreds of Influencers with whom we were working just a year ago to 5000 today and the intention is to go double these triple this who knows so at the end of the day. This is just the starting point and for me. This is next to.

Sue Nobby: So, at the end of the day, this is just a starting point. And for me, this is, next to fragrances, the biggest white space opportunity for our color cosmetics brands in the US, but also around the world. Very exciting. Thank you. Best regards. I got to get... 6.

Bill: Fragrances. This is the biggest white space opportunity for our color cosmetics brands in the U S. But also around the world.

Speaker Change: Very exciting. Thank you best regards I gotta get some of that Central Asia HSR looks awesome. Thank you, yes, yes, you love it I'm sure. Thank.

Operator: Thank you. Our next question comes from Filippo Folorni with. Please go ahead. Everyone, good morning.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from Filippo <unk> with Citi. Please go ahead.

Filippo: Good morning.

Filippo Folorni: I want to talk about margins for the second half. You're expecting stronger gross margin expansion as the cost of inflation moderates. Maybe, Laurent, you can give us some help also below the gross margin line. What reinvestment are you assuming in the second half and whether you still expect 10 to 30 basis points of EBITDA margin expansion in the second half? Thank you. Yeah, thank you. Thank you, Filippo.

Filippo: Wanted to ask on margins for the second half are you expecting stronger gross margin expansion that cost inflation moderates and maybe Laura can you can give us. Some help also below the gross margin line. What reimbursement are you assuming in the second half and whether you still expect 10 to 30 basis point.

Lauren R. Lieberman: EBITDA margin expansion in the second half thank you.

Lauren R. Lieberman: Yes, Thank you and thank you for the post saw.

Laurent Mercier: So, first of all, indeed, I am really reaffirming that we confirm, indeed, our guidance, the EBITDA margin growing 10 to 30 basis points. So this is really confirming that, you know, the right dynamic after growing 40 basis points that we did in Q2. So, indeed, in H2, the model is that, indeed, we are going to benefit from a gross margin expansion, a significant gross margin expansion, which is really a combination of COGS inflation softening.

Lauren R. Lieberman: First of all you need I mean, you are reaffirming that we confirmed indeed our guidance he.

Lauren R. Lieberman: EBITDA margin growing at 10 to 50 basis point, so as he sees video confirming that our you know the right dynamic after growing 40 basis point is that we did do we did in Q2, so indeed on an H two.

Lauren R. Lieberman: So that is that indeed, we are going to benefit from a gross margin expansion and significant gross margin expansion, which is really a combination of the cogs inflation softening Oh. This is a decent nuclear beginning men, but each of them saw.

Laurent Mercier: This is definitely a big element, but it's also helped by the carryover of price increases that we did last year and we did at the beginning of this fiscal year. So it's also all the work we are doing on mix. And last but not least, of course, is all the work we are doing on productivity as part of our all-in-to-win. So this is definitely all these drivers in motion.

Lauren R. Lieberman: And by the carryover of price increase that we did last year and we did beginning of this fiscal year. So each of them. So all the work we are doing on mix and that's been teasing of course is all the work we are doing on productivity.

Lauren R. Lieberman: First of all I need to win so as you see definitely all these drivers are in motion, we keep investing definitely on all you know as our strategic initiatives and all of the drivers consumer beauty and.

Laurent Mercier: We keep investing definitely in all, you know, the strategic initiatives and all the drivers, consumer beauty, and prestige. So this is definitely, and I confirm again that we will land our ANCP level in the high 20s. So the model is fully on track. Now, to be more specific on H2, what we are also including in our model is that we are factoring in that now we see Forex turning slightly negative in H2, OK, versus positive in H1, but on a full year, it should be pretty neutral. But there is a phasing effect due to Forex. And another element that you need also to take into account is that we have a headwind effect from the Lacoste exit, which is impacting mostly H2.

Lauren R. Lieberman: In prestige so D C diff Nikki and I confirmed again that we will end our agency PD will ease in the high Twenty's. So the modality is fully on track now to be more specific on the H two what we are including in our model is that we are factoring that no we see forex.

Lauren R. Lieberman: El Nino 19, they get TV next to Bill gave their Susa, who is ETV niche one but on a full year it should be pretty neutral, but there is a phasing of it.

Lauren R. Lieberman: Safe to do two for right now and those are a demand that you need also to take into account that.

Lauren R. Lieberman: We have edwin effect from the lack costs to exit.

Lauren R. Lieberman: Is impacting them mostly <unk>.

Laurent Mercier: So if you take all these elements into consideration, you see that we continue to have a very nice EBITDA margin improvement in both semesters and definitely for the full year, you know, confirming these 10 to 30 basis points. Thank you. Our next question will come from Olivia Tong with Raymond James. Please go ahead.

Lauren R. Lieberman: So if you take all these elements into consideration you see that we continue to have a very nice EBITDA margin improvement on both semester and definitely on the full year unit confirming these 10 to 50 basis points.

Lauren R. Lieberman: Okay.

Lauren R. Lieberman: Thank you. Our next question will come from Olivia Tong with Raymond James. Please go ahead.

Olivia Tong: Great, thanks. Good morning. I want to ask you about the innovation pipeline and prestige for even?? The Bulletproof Executive 2013, Fantastic performance of late, but that clearly means more difficult comps are coming. So just thinking through the number of blockbuster launches, how should we think about the focus areas over the next 12 months versus the last 12.

Olivia Tong: Great. Thanks, good morning.

Olivia Tong: To ask you about.

Olivia Tong: The innovation pipeline on prestige fragrances.

Olivia Tong: Early unveiling of some of the plans for the next 12 months.

Olivia Tong: Fantastic.

Olivia Tong: Our funnel of late.

Olivia Tong: That clearly levels more typical concert Carlo so just thinking through.

Olivia Tong: The number of blockbuster launches how should we think about our focus areas over the next 12 months versus the last well okay.

Speaker Change: Yes, hi, good morning. Good evening. Thank you for your question. So in fact, the reality is that if you look back at what we did in 2022, which was a year with a big pipeline of innovations you've seen the results. We got in 2023, and this with constrained and supply and they were very very good. So in fact, the big difference between.

Sue Nobby: Thank you for your question. So, in fact, the reality is that if you look back at what we did in 2022, which was a year with a big pipeline of innovations, you see the results we got in 2023. And this with constraints on supply, and they were very, very good. So, in fact, the big difference between the Coty of years ago and the Coty of today is that we are able to grow innovations across several years instead of launching a new product and looking for something new, and then adding this new thing to the portfolio, and having a plus and a minus story. So, we are growing all innovations at the same time where we are bringing innovations from the past, I mean, at the same time where we are bringing new innovations.

Speaker Change: I could see us years ago, and the Coty of today is that we are able to grow innovations across several years instead of launching and are looking for something new and then adding this new things to the to the to the portfolio and having a plus and minus story. So we are growing all innovations at the same time.

Speaker Change: While we are bringing innovation from the past I mean at the same time way, we are bringing new innovation. So when it comes to upcoming innovations. We will continue of course to put on the market.

Sue Nobby: So, when it comes to upcoming innovations, we will continue, of course, to put them on the market when we are ready and what we believe is going to be successful on the market. This is also a discipline we have put in place in the company for three years and a half, which is to launch if and only if we are ready, we have the right mix, and we are 100% sure about the success we're going to put on the market. Remember Goddess? I started to talk about Goddess before we launched it; we started to say, everyone, this is going to be big, and it's confirmed. Because we now have all the expertise and capabilities and understanding that allow us to say this is ready to become a big innovation, or it's not ready, we should take a bit more time. So, of course, I'm not going to reveal what's going to arrive. I guess that our competitors are going to read the transcripts, so it's not a good idea.

Speaker Change: And we are ready and what we believe is going to be successful in the markets. This is also a discipline we have put in place in the company since the three years and a half which is to launch if and only if we are ready we have the right mix. We are 100% sure about the success, we're going to put in the market remember goodness I started to talk about good news.

Speaker Change: Before we launch it we started to say everyone. This is going to be big and it's confirmed and this is because we have now all the expertise and capabilities in understanding that allow us to say this is ready to become a big innovation always not ready we should take a bit more time. So of course I'm not going to reveal what is going to.

Speaker Change: Right I guess that our competitors are going to read the transcript. So it's not a good idea.

Speaker Change: Fair enough.

Sue Nobby: And then my next question is just around China and tribal retail. Obviously, your results have been very good; continue building out your businesses there. So can you just talk through some incrementality and the plans there? How much of your product lineup that you intend to introduce there is already deployed and whether any of the recent macro challenges have impacted your ability to meet The Longer Term Goals, www.youtube.com.uk You know, you've started the skin care expansion in China, Lancaster, Orvita, fantastic brands, you know, obviously, the launch in Shanghai with Orvita, if you could just Thanks so much.

Speaker Change: And then my next question is just around China and travel retail obviously results have been very strongly here. Thank you.

Speaker Change: So go ahead.

Speaker Change: Chemical mentality and the plans there.

Speaker Change: How much of your product line up with your own content.

Speaker Change: There is already deployed and whether any of the recent macro challenges have impacted your ability to.

Speaker Change: The longer chemicals, you have for the market.

Speaker Change: China travel retail and then just lastly.

Speaker Change: Starting with skincare.

Speaker Change: Lancaster, our beta and fantastic brands.

Speaker Change: Obviously.

Speaker Change: Launching Shanghai, but arvida, maybe just talk through your plans there a little bit more that would be fantastic. Thanks. So much.

Sue Nobby: Yes, yes, Olivia, thank you for the question. So, let me start with Travel Retail. You know, we finished Fiscal 23 with 30% growth in Travel Retail, and the first half of Fiscal 24 is adding an extra 20% growth in this channel. This is really a channel where we have consistently gained market share for now a few years in a row. And this is thanks, of course, to the power of our innovations. Remember, Burberry Goddess started as an exclusive in Travel Retail last summer, which really is helping us to, you know, put on the market innovations that are tested in a way among consumers in this channel that we believe are amongst the most experienced. The second thing is that we are moving from a business that used to be, just three years ago, an entry prestige, solely fragrance-focused business into a triple-axis business today with fragrances, makeup, skincare, and inside fragrances. We are now playing in the three tiers on the market, entry prestige, premium brands, but also niche and high-end fragrances with our outstanding performance behind a brand like Chloé Atelier des F And we don't see in our figures any kind of slowdown in the pace of travel by consumers around the world. So this is one for Travel Retail. Now, second, in China.

Arvida: Yes, I'll give you I. Thank you for the question. So let me start with travel retail you know we finished fiscal 'twenty three with 30% of growth in travel retail and the first half of fiscal 'twenty four is adding an extra 20% growth in this channel. This is really a channel where we are consistently gaining market share since now a few years.

Arvida: In a row and this is thanks of course to the of course, the power of our innovations remember bad very good desktop its first as an as an exclusive in travel retail last summer, which really is helping us to put on the market innovations that are tested in a way among consumers in this channel.

Arvida: We believe are amongst the most expect second thing is that we are moving from the business that they used to be just three years ago and entry prestige suddenly a fragrance focused business into a triple access business today with fragrances makeup skincare and.

Arvida: Insights fragrances, we are now playing in the three tiers of the market entry prestige premium brands, but also niche in high end fragrances with our outstanding performance behind the brand like.

Arvida: Could we actually do feel so these China is clearly a channel where we intend to continue because it is very <unk> in our equation as you know it and we don't see in our figures any kind of slowdown in the pace of travel up consumers around the world. So this is one for travel retail no second in China, So in China.

Sue Nobby: So in China, we also had a very good performance specifically driven by prestige, which is the immense majority of our net revenue. We just got the beauty research figures about the sellouts during, you know, the quarter ending in December, and Coty is 30.30 points above the market. So we are doing very well.

Arvida: Had also a very good performance, specifically driven by prestige, which is the immense majority of our net revenue.

Arvida: Just got the beauty research figures about the sell outs during the quarter ending in December and cookies at 33 zero points above the market. So we are doing very well. This is driven mainly by our fragrances B E. B. So you know the other collections that we have in the lines that I think we deserve it.

Sue Nobby: This is driven mainly by our fragrances, be it Burberry, be it, you know, the other collections that we have in the lines, the Atelier des Fleurs, et cetera. So this is clearly an area where we have the first white space is fragrances, and even the small size of the company in that country, which gives me a segue to skincare. You rightly said that we opened the first Maison Orveda in Shanghai. It's really a very different strategy we are, you know, doing behind these brands. We don't want to get in the game of, you know, over-promotionality, becoming the favorite brand of Daigoo's.

Arvida: So this is clearly an area, where we have the first white space is fragrances on given the small size of the company in that country, which leaves me a segue to skincare you rightly said that we opened the first is on <unk>.

Arvida: Shanghai.

Arvida: It's it's really a very different strategy. We are you know doing behind these brands, we don't want to get in the game of you know, although promotions IDT, becoming the favorite brand of day goes this is not where we want to take our highest end brands and you can understand why so that's the reason why we are.

Sue Nobby: This is not where we want to take our highest-end brands, and you can understand why. So that's the reason why we are experimenting new ways of doing things, mastering 100% of the brand image and equity, mastering how to sell directly to consumers in the environment of a Maison. That's everything, but just the point of sale. The Maison is really a place where you will be able, if you visit Shanghai, of course, to experiment with the products, have facials, but also to discover how to eat, discover how to take care of your skin, but also, maybe, to discover pieces of art.

Arvida: Experimenting new ways to mastering, 100% of the brand image and equity mastering how to sell directly to consumers in the environment of Mizuho.

Arvida: Everything, but just a point of sale. The meso is really a place where you will be able to visit Shanghai of course to experiment the products to have say shows but also to discover how to eat to discover how to take care of your scheme, but also to maybe discover pieces of us. So we are really learning this part of the market.

Arvida: We believe is the next continued for the beauty industry in general there was a study done by Mckinsey recently, which said that the luxury market is $350 billion. The beauty is just taking a small fraction of these what we call a real luxury and ultra luxury is clearly the next fund.

Sue Nobby: So we are really learning this part of the market that we believe is the next frontier for the beauty industry in general. There was, you know, a study done by McKinsey recently that said that the luxury market is $350 billion, but beauty is just taking a small fraction of this. You know, what we call real luxury and ultra-luxury is clearly the next frontier for a company like ours, on top of everything we are doing very well today. So this is for Oveda.

Arvida: Tier for a company like ours on top of everything we are doing very well to date. So this is for albeit at the start of the brand over there is very very good we have the right consumers are reaching out the high networks and high networks individuals and in a way. This gives me the occasion to say that this brand got a what we consider as well.

Arvida: Oscar of the beauty industry, which is the predicts it also Marie Claire and I'm not sure now it was awarded last week and this is really.

Sue Nobby: The start of the brand over there is very, very good. We have the right consumers reaching out, the high networks and the ultra-high networks individuals. And in a way, this gives me the occasion to say that this brand got what we consider as the Oscar of the beauty industry, which is the Prix d'Excellence Marie Claire Internationale. It was awarded last week, and this is really a fantastic achievement for the brand.

Arvida: <unk> achievements for the brand, that's allowing the brand everywhere else in the U S. At Socs, but also in the niche boutiques, where it's present in Europe to multiply its productivity by two by three by four by five sometimes at both of these and become sometimes our biggest seller then same as brands with debit access. So it's really something that is <unk>.

Sue Nobby: That's allowing the brand everywhere else, in the U.S. at SAX, but also in the niche boutiques where it's present in Europe, to multiply its productivity by two, by three, by four, by five, sometimes above this, and become sometimes a bigger seller than famous brands with double access. So it's really something that's happening there, but we want to master the time of the expansion of this brand. Now, coming to the second brand that we launched in April in China, it's Lancaster. And this one is also doing very well.

Arvida: Turning there, but we want to master the time of the expansion of the brand now coming to the second brand that we don't show the in equity in China. It's a lock step and this one is doing also very well and we are now adding a second leg to the brand new we did skincare and now we are adding the syngas to the skincare I'm not that it was not.

Arvida: There, but we were focusing our investments behind skincare.

Arvida: And we are realizing that by supporting both we are increasing the productivity in a tremendous way. So everything is on track, but and this is very important we have really taken advantage of the momentum we're seeing behind our fragrance business to take the right amount of time not to do any kind of mistake and transform our breath.

Sue Nobby: And we are now adding a second leg to the brand. We did skincare, and now we are adding the sun care part to the skincare, not that it was not there, but we were focusing our investment behind skincare. And we are realizing that by supporting both, we are increasing productivity in a tremendous way. So everything is on track, but, and this is very important, we are really taking advantage of the momentum we are seeing behind our fragrance business to take the right amount of time, not to make any kind of mistake, and transform our brands into Daigou fellows. Thank you. Thank you. Our next question will come from Charles Schotty on Kepler.

Arvida: <unk> into February.

Arvida: <unk>.

Arvida: Yeah.

Arvida: Okay.

Speaker Change: Thank you. Thank you our next.

Speaker Change: Thank you. Our next question will come from Charles <unk> with Kepler. Please go ahead.

Speaker Change: Hi.

Charles: Good afternoon or are all the <unk> and I have two questions. Please the first one on the B.

Charles: Premier on the fragrance market.

Charles: That is outgrowing the prestige segment.

Charles: It seems that could trade branch doubling down on just said just category could you share with us or the <unk>.

Charles: The initiatives you have in place.

Charles: And then to tackle this a in my view you do wholesale bacci ahead and allow for clearly after the deferral and as Nemo could EBIT.

Operator: Please go ahead. Hi. Good afternoon or good morning.

Bill Schmitz: I have two questions. The first one is on the ultra-premium fragrance market, which is outgrowing the prestige segment. It seems that luxury brands are doubling down on this category. Could you share with us all the initiatives you have in place at the moment to tackle this, in my view, huge growth opportunity ahead? I'm aware of Chloé Atelier-Defoe and Philippe Moncouty, but are there any other initiatives in place to tackle this issue?

Charles: Dan here or there you can check it in place to tackle this.

Speaker Change: And second question.

Speaker Change: On E Commerce in that you are on Julian your very strong growth.

Speaker Change: In the online channel.

Charles: What's the growth broad based between your DTC platform and also specialty retail us online business and could you remind us how e-commerce growth is impacting your growth in EBIT margin. Thank you.

Sue Nobby: And second question, on e-commerce. It seems that you are enjoying very strong growth in the online channel. What is the broad basis for growth between your DTC platform and also specialty retailers' online business? And could you remind us how e-commerce growth is impacting your growth and EBIT margin? Okay, so let me start with the first question, which is about the ultra-premium fragrance market, which is outgrowing, indeed, the prestige fragrance underlying market. So there, you're right to mention Clouet-Habit de Fer, which we've been mentioning for several quarters as a best-selling line, specifically in Asia and in travel retail.

Speaker Change: Okay. So let me start with the first question, which is around the cutting and fragrance market, which is outgrowing. These the prestige fragrance.

Speaker Change: Underlying market. So there you're right to mention Korea to be deferral, which we've been mentioning now since our satellite cocktails as a best selling line specifically in Asia and in travel retail I can mentioned the collections behind each of our brands. The bus collection is doing fantastically well.

Speaker Change: In the Middle East in Asia in many travel retail locations they'll be really signatures is doing very very well in the different areas around the world and you're right to mention you know the.

Speaker Change: The Cookie and cinema MTT Mancha Tea Party line, that's about to open its first store in the coming weeks. This is something that's really I would say the pride that the company.

Charles: Once you'll have the product in your hands I'm sure you'd be certainly surprised by everything you read in the experiment from the packaging from the box the longevity of the sand.

Sue Nobby: I can mention the collections behind each of our brands. You know, the Bosch collection is doing fantastically well in the Middle East, in Asia, in many travel retail locations. Burberry Signatures is doing very, very well in different areas around the world.

Charles: At the same time originality of defense, but also easy to wear science and everything we're doing behind this brand is the best of the know how of the company sustainability is at the maximum we can do with the refillable bottles are high cable, but whatever is the right name. So this area is going to become the new playground.

Sue Nobby: And you're right to mention, you know, the Coty Infiniment, Infiniment Coty Paris line that's about to open its first store in the coming weeks. This is something that's really, I would say, the pride of the company. Once you have a product in your hands, I'm sure you'll be totally surprised by everything you experience from the packaging, the box, the longevity of the scent, at the same time, the originality of the scent, but also easy-to-wear scents.

Charles: The company if I may call. It like this and you were right to mention that anything's upcoming what I can reveal is what is public today is the Madden new license that we've announced it yesterday.

Charles: This is a very premium fashion brand, it's very young its colorful it's avant-garde it's one of the coolest brand today in Asia, and Europe and as you can imagine this is going to be part of our agenda to really bring on the market very very creative juices, the heavy high positioning but why that is.

Sue Nobby: And everything we are doing behind this brand is the best of the know-how of the company. Sustainability is at the maximum. We can do it with refillable bottles, recyclable bottles, whatever is the right name.

Charles: Same time being part of this fragrance market. So that's what I can say about what that can reveal stay tuned hopefully you will see things coming soon in this area too when it comes to E. Com you right. You mentioned the very strong growth that have been commencing early yeah. This is broad based across retail that's government pure players that come in.

Sue Nobby: So this area is going to become the new playground of the company, if I may call it that. And you were right to mention, are there any things upcoming? What I can reveal is what is public today is the new Marni license that we announced yesterday. This is a very premium fashion brand. It's very young, it's colorful, it's avant-garde.

Charles: In a way out.

Charles: DTC part, which is the DTC behind our brands, we have DTC behind our skincare brand side do you think about she goes as she is one of the biggest DTC platform. We have at Gucci and this one is doing very well in the same way. The brand has been growing during three cross sales is driven by DTC same thing behind all of the Dol, where the DTC is growing.

Sue Nobby: It's one of the coolest brands today in Asia and in Europe, and as you can imagine, this is going to be part of our agenda to really bring to the market very, very creative juices, very high positioning, but while at the same time being part of this fragrance market. So that's what I can say about what I can reveal. Stay tuned.

Charles: Here again triple digit growth if I'm, if I'm not wrong. So you can clearly see that this stock is also growing but indeed, the big part of this.

Charles: In terms of net revenue is coming from the E retailers. When it comes to the profitability may be low hanging you can say a few words about this yeah, absolutely and and indeed on on the numbers of your question was the contribution to growth. So indeed that so you know these are high and a 20% growth on E. Commerce in fact contributes to 40%.

Sue Nobby: Hopefully, you'll see things coming soon in this area too. When it comes to e-comm, you're right to mention the very strong growth that I've been commenting on earlier. This is broad-based across retail.com and pureplayer.com in a way.

Charles: Also Q2 growth so it means that the E com penetration in our numbers is growing by 100.

Sue Nobby: DTC part, which is the DTC behind our brands. We have DTC behind our skincare brands. You think about it, it's one of the biggest DTC platforms we have at Coty, and this one is doing very well. The same way the brand has been growing during three quarters is driven by DTC. Same thing behind Orveda, where the DTC is growing here.

Charles: Basis points. So you see very very healthy and it's very hard to see from a profitability standpoint, because indeed the E. Comm on all our all players all China orders. It is strongly are margin accretive so is that indeed part of our.

Charles: Gross margin in a modern and very positive for the equation.

Laurent Mercier: Triple digit growth, if I'm not wrong. So you can clearly see that this part is also growing, but indeed, a big part of this, you know, in terms of net revenue, is coming from e-retailers. When it comes to profitability, maybe Laurent, you can say a few words about that. Yeah, absolutely.

Speaker Change: Thank you very much friction fallout tunes kachina the coming weeks.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from Anna <unk> with Bank of America. Please go ahead.

Anna: Hi, Thanks for the question. This is Jonathan Q4 odd for France.

Anna: I'm just wondering two questions.

Anna: First you mentioned in your prepared remarks, a more tempered consumer environment in China and that Youre, making tweaking to accommodate these changes just wondering if you could give us any any details about the tweaks given that economic change in China and then second.

Laurent Mercier: And indeed on the numbers, your question was about contribution to growth. So indeed that, you know, these high 20% growth on e-commerce in fact contributes to 40% of the Q2 growth. So it means that our income penetration in our numbers is growing by 180 basis points.

Anna: If you could go into any detail about.

Anna: Yes.

Anna: The digital marketing and social media activation, what kind of ROI you are seeing for this marketing spend so far.

Laurent Mercier: So you see, it's very, very healthy, and it's very healthy from a profitability standpoint because, indeed, the income from all players, all channels, is strongly margin accretive. So that's indeed part of our growth margin model and very positive for the equation. Thank you very much. Looking forward to seeing you soon.

Anna: And how the.

Anna: The engagement differs by demographic. Thank you.

Speaker Change: Yeah. Thank you good morning, gentlemen, thank you for your question. So indeed, when it comes to China.

Speaker Change: And it is that we are that's my intuition and again no studies around this but everything we see we here. We read says that we are in the middle of two areas. There wasn't the era, where promotional IDT Daegu as all this kind of way of buying really created big buyers in this market and people were waiting.

Anna Lazul: Thank you. Thank you. Our next question comes from Anna Lazul with Bank of America. Please go ahead. Hi, thanks for the question. This is Jonathan Keeper on behalf of Anna.

Speaker Change: And for these occasions for all these sat was where people could buy anything that's very desirable at prices that do not work usually with desirability. So this is something that lasted what it lasted and now we are in the kind of.

Jonathan Keeper: Um, I've got two questions. First, you mentioned in your prepared remarks a more tempered consumer environment in China and that you're tweaking to accommodate these changes. Just wondering if you could give us any details about that, given the economic changes in China. And then second, if you could go into any detail about...

Speaker Change: Era, where it's I would say normalizing, our where we are seeing the brands respecting more and more of their own brand equity protecting their brand equity, sometimes growing less fast than what they should do what they want to do but that's healthy I would say and that's also a way to really make sure that the bed.

Sue Nobby: The digital marketing and social media activation, what kind of ROI you're seeing for this marketing spend so far? and how the engagement differs by demographic. Thank you. Thank you. Good morning, Jonathan.

Speaker Change: Habits, if I may call. It of the past are behind us and even if cookies never went into this game things. Good that this is something that we are really seeing is that there is a shift in consumers are waiting to see how brands are going to behave so for us the 30 points above market performance, we had in the CAFTA was.

Sue Nobby: Thank you for your question. So, indeed, when it comes to China, the reality is that we are, that's my intuition, and again, no studies around this, but everything we see, we hear, we read, says that we are in the middle of two eras. There was the era where promotionality, daigus, all this kind of way of buying really created big bias in this market, and people were waiting for these occasions, for all these fairs where people could buy anything that's very desirable at prices that do not work usually with desirability. So this is something that lasted what it lasted, and now we are in a kind of era where it's, I would say, normalizing, where we are seeing the brands respecting more and more their own brand equity, protecting their brand equity, sometimes growing less fast than what they should do, what they want to do, but that's healthy, I would say, and that's also a way to really make sure that the bad habits, if I may call it, of the past are behind us, and even if Coty never went into this game, thanks God, but this is something that we are really seeing, is that there is a shift, and consumers are waiting to see how brands are going to behave.

Speaker Change: Really because we have the right brands because we have the right desirability behind these brands, mainly fragrance brands that are really giving consumers value for money, but not discounted value for money and that's a very important element for me. That's the key element that changes between the story of the last 20 years.

Speaker Change: And the upcoming story in the future.

Speaker Change: Now when it comes to digital marketing and social media Activations. Maybe go on you can say a few words about the L. I F.

Speaker Change: Absolutely I mean, what I can tell you our NIM is definitely that DIY is much much stronger.

Speaker Change: Compared.

Speaker Change: The traditional media and so of course, there is no magic number it depends on you know where TV activation with teaser launch, but do you see this clinically.

Speaker Change: Strong strong asset and now we are really you know the work we have done this over the last two years ways also to get the capabilities and to get to absorb the tools. Okay. So now we have a very strong <unk>.

Speaker Change: <unk> team, we're equipped and definitely able to to measure and we need to focus all of our investment. So this is definitely a strong improvement and that's why you we shared over so that no majority of our <unk> investment now a radio and in digital and social media. So this is very powerful.

Speaker Change: Full we can retarget bye bye and buyer demographic I would just highlight that.

Speaker Change: You can easily understand that it needs to be very strong on the Gen Z and that's very powerful because he sees OXXO way to to increase penetration from Gen Z, but not only <unk>. It is also a halloween effect on.

Sue Nobby: So for us, the 30 points above market performance we had in the quarter was really because we have the right brands, because we have the right desirability behind these brands, mainly fragrance brands that are really giving consumers value for money, but not discounted value for money, and that's a very important element. For me, that's the key element that changed between the story of the last 20 years and the upcoming story in the future.

Speaker Change: So mid <unk>. So it's really a it's a very a positive cycle and for us in terms of resource allocation.

Speaker Change: Great Great move and to complement with Lohan said, Jonathan LOI the best <unk>.

Speaker Change: <unk> is on the most disruptive products. So it's good news because it's in our hands, it's our job to create exciting desirable innovative new different better products and once you have these products in the hands of consumers you really starts from a very high level of ally and the rest is all around expenses.

Speaker Change: Wonderful thank you.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from Ashley <unk> with Jefferies. Please go ahead.

Ashley: Hey, good morning, Congrats on the nice quarter, just wanted to follow up on accident.

Laurent Mercier: Now, when it comes to digital marketing and social media activation, maybe Laurent, you can say a few words about the ROI of this. Absolutely. I mean, what I can tell you is definitely that the ROI is much, much stronger compared, you know, to traditional media. So, of course, there is no magic number.

Ashley: Your question about the dynamic skin care market that you mentioned.

Ashley: Are you seeing any trade down or shift.

Ashley: In preference to more domestic brand. Thanks.

Ashley: So again the shift towards domestic brands is indeed, something that is happening mainly on the mass market side I have to say since now several years and we've seen some very famous mass market brands at closing up there. This part of the business is very small that could teach namely as he does that we are having.

Laurent Mercier: It depends on, you know, what the activation, what the launch, but this is definitely, you know, a strong asset. And now we are really, you know, the work we have done over the last years was also to get the capabilities and to get the tools. Okay.

Ashley: She is not considered as a mascot mass market brands Adidas is or is it kind of a cool brand fashion brands phenomenon.

Ashley: Yes, and we have Max factor present in this market, but the reality is that the competition between international and mass brands and local brands is CSL than ever and this is really a question mark for those who have big rents over there regarding the prestige and skin care markets. We don't see at this there is a kind of cohabitation.

Laurent Mercier: So, now we have a very strong digital team, really quick, and definitely able to measure and really focus our investment. So, this is definitely a strong improvement, and that's why we shared also that now a majority of our ANCP investment is really in digital and social media. So, this is very powerful. We can really target. And by demographic, I would just highlight that, as you can easily understand, that it's really very strong on Gen Z, and that's very powerful because this is also a way to increase penetration from Gen Z, but not only Gen Z. It has a hollow effect on also millennials.

Ashley: Between our local new players specifically in the niche part of the market you've seen some brands are becoming more and more visible created by a Chinese founders together at the same time as a desirable I would say consumption of international brands a lot of them are with good T. So I wouldn't say that.

Ashley: I see this phenomenon happening in this in this regarding the trading down the trading down or it has been in China. The case for many many I would say our cost because of the promotional nature of the market is not people moving from an expensive brand to our lease expense you, Brian It's people looking for the promotion to buy at cheaper costs.

Laurent Mercier: So, it's really a very positive cycle and, for us, in terms of, you know, resource allocation, a great move. And to complement what Laurent said, Jonathan, on ROI, the best ROI we have is on the most disruptive products. So it's good news because it's in our hands.

Ashley: So the only thing I can tell you is that the path that's still very resilient beat in skincare and fragrances in China is the high end and the higher end of the market and this is the one that's protected so it wasn't talk about trading down I would talk about people chasing promotions, let's see how long this will last.

Speaker Change: Thank you.

Sue Nobby: It's our job to create exciting, desirable, innovative, new, different, better products. And once you have these products in the hands of consumers, you really start from a very high level of ROI, and the rest is an overall experience. Wonderful, thank you.

Ashley: Thank you. Our next question will come from Giovanna Chowdhry with Jpmorgan. Please go ahead.

Giovanna Chowdhry: Hi, Thank you for taking our question congrats on the impressive delivery in the first half, but it seems that you are assuming a steep deceleration can you. Please break down between volume and pricing is there any additional door our shelf space.

Sue Nobby: Thank you. Thank you. Our next question comes from Ashley Helgens with Jeffries. Please go ahead. Hey, good morning.

Giovanna Chowdhry: And more specifically do you see a path to the fragrance index specially in our prestige fragrances and too early to speak about fiscal 'twenty five but do you see this stimulus triggering outsized crowd for Cody again, thank you.

Ashley Helgens: Congratulations on the nice quarter. We just wanted to follow up on that prior question about the dynamic skin care market that you, So in China, are you seeing any... The Bulletproof Executive 2013, I'm in preference to more. So again, the shift towards domestic brands is indeed something that has been happening mainly on the mass market side for several years now, and we've seen some very famous mass market brands closing over there. This part of the business is very small at Coty; it's mainly Adidas that we have, which is not considered a mass market brand. Adidas is a kind of cool brand, fashion brand phenomenon, more or less.

Speaker Change: Alright, Okay, Stefan I think the fragrance I can take it and I want to be very clear. There is no deceleration. So we are talking about a normalization and again to two reminds a number that <unk> shared I mean definitely with what we are seeing is a <unk>.

Speaker Change: <unk> fragrance market being in the mid to high single digit and Definitly Coty will continue to over perform as he says this market and then on consumer beauty. The assumptions, we're making is low single digit to mid single digit and here I'm sure considering that took with <unk>.

Sue Nobby: And we have Max Factor present in this market. But the reality is that the competition between international mass brands and local brands is fiercer than ever. And this is really a question mark for those who have big brands over there. Regarding the prestige and skincare market, we don't see this yet. There is a kind of cohabitation between local new players, specifically in the niche part of the market. We've seen some brands becoming more and more visible, created by Chinese founders together at the same time as a desirable, I would say, consumption of international brands. A lot of them are with Coty.

Speaker Change: Can video.

Speaker Change: As I say most same dynamics. So so there is there is no pause in the in fragrance index of fragrance index is fully up play and you see definitely I mean <unk> remains at two <unk>.

Speaker Change: There is a video.

Speaker Change: So a bit tight for premium amortization them, you'll see you know these are premium.

Speaker Change: And he's really is really booming there are really a penetration keeps growing in the U S and in China. So this is a I continues a still huge white space. So definitive there is a still a lot or not to expect on fragrance index also ease of so.

Sue Nobby: So I wouldn't say that I see this phenomenon happening in this part. Regarding the trading down, the trading down has been the case in China for many, many, I would say, quarters because of the promotionality of the market. It's not people moving from an expensive brand to the least expensive brand; it's people looking for the promotion to buy at cheaper costs. So the only thing I can tell you is that the part that's still very resilient, be it in skincare or in fragrances in China, is the high end and the higher end of the market. And this is the one that's protected.

Speaker Change: So it will continue and that's why you know we remain fully confident.

Speaker Change: Our algorithm for each to fiscal 'twenty, four and beyond for fiscal 'twenty and again be them.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question will come from Lauren Lieberman with Barclays. Please go ahead.

Sue Nobby: So I wouldn't talk about trading down. I would talk about people chasing promotions. Let's see how long this last. Thank you so much.

Lauren R. Lieberman: Great. Thanks, good morning.

Lauren R. Lieberman: I was hoping we could go back to your original sales growth algorithm bill to get to the 6% to 8% and over time just curious if the drivers that are still the same as the prestige fragrance category normalizes as you've described so historically, you've talked about 25% to 30% CAGR in skincare in prestige cosmetics and then mid singles.

Operator: Thank you. Thank you. Our next question will come from Shobana Chowdhury with J.P. Morgan. Please go ahead.

Shobana Chowdhury: Hi, thank you for taking our survey. Congress had an impressive delivery in the first half, but it seems that you are assuming a steep deceleration. Can you please break down between volume and pricing? Is there any additional door or shelf space?

Lauren R. Lieberman: Beauty and just.

Laurent Mercier: And more specifically, do you see a pause in the fragrance index, especially in your Prestige fragrances? And it's too early to speak about Fiscal 25, but do you see any stimulus triggering outsized growth for Coty again? Thanks. I want to be very clear. There is no deceleration.

Lauren R. Lieberman: And kind of given the flattish volume in consumer beauty.

Lauren R. Lieberman: The more tempered language on skincare and I would be curious to hear what tweaking to accommodate changes mean and I was just curious how you're thinking about the building blocks for that.

Laurent Mercier: So we are talking about normalization. And again, to remind you of the numbers that Sue shared, I mean, definitely, what we are seeing is the prestige fragrance market being in the mid to high single digits, and definitely, Coty will continue to overperform this market. And then on consumer beauty, the assumptions we are making are low single digit to mid single digit, and here also considering that Coty can really, you know, has the same

Speaker Change: Okay.

Speaker Change: Oh, Yeah, Hi, Lauren so indeed first of all I mean, we confirm indeed these are midterm algorithm, so six 6% to 8%.

Speaker Change: What we're really controlling tightly is we need to make sure that it's really a balance growth.

Speaker Change: Indeed between volume mix and pricing so as I. Just explained you understand that no we are shifting.

Laurent Mercier: So there is no pause in the fragrance index. The fragrance index is fully in play. And you see, definitely, all the elements that Sue shared are really that there is really, you know, an appetite for premiumization. You see, these premium high end brands are really booming. There is really penetration keeps growing in the U.S. and in China. So this is, I can tell you, still a huge white space.

Speaker Change: More from pricing to mix. Okay. So this is definitely what we are balancing the definitely on volumes of our algorithm is.

Speaker Change: We continue to have volume growth and again all the innovations that we have just the share gains that we will continue of course, our volume volume drivers. So indeed volume volume drivers of volume growth on prestige.

Laurent Mercier: So definitely, there is still a lot to expect on the fragrance index. And that's why, you know, we remain fully confident in our algorithm for H2 fiscal 24 and beyond for fiscal 25 and again beyond. Thank you. Our next question will come from Lauren Lieberman with Barclays. Please go ahead.

Speaker Change: On consumer beauty definitely we focus a lot on mix.

Speaker Change: <unk> management and again same examples of innovations that we've just announced as you understand they are very <unk>.

Speaker Change: Improving the mix and on volumes I would say we are more assuming you know a slot volumes on consumer beauty. So so you see the modalities.

Lauren R. Lieberman: Thanks. Good morning. I was hoping we could go back to your original sales growth algorithm build. The Bulletproof Executive 2013, Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com/policies, and a So, hi, Lauren. So, indeed, first of all, I mean, we confirm, indeed, these midterm algorithms, so 6 to 8 percent.

Speaker Change: <unk> is more or less the same as we have always always shared and again I mean, we are still seeing you know a lot of white space in fragrance definitely is a as I explained you know reserves, thanks to penetration premium amortization.

Speaker Change: I mean, you will towards premium is a huge opportunity and on consumer beauty.

Speaker Change: Our resume and we explain we are also you know.

Speaker Change: A lot of white space in consumer beauty, we share them.

Speaker Change: Highlighting the great work that we're doing in Brazil.

Laurent Mercier: What we are really controlling tightly is really to make sure that it's really a balanced growth, indeed, between volumes, mix, and pricing. So, as I've just explained, you understand that now we are shifting more from pricing to mix, okay? So, this is definitely what we are balancing, but definitely on volumes, our algorithm is that we continue to have volume growth, and, again, all the innovation that we have just shared and that we will continue, of course, our volume drivers. So, indeed, volume drivers, volume growth on prestige. On consumer beauty, definitely, we focus a lot on mix management, and, again, the same example, the innovations that we have just announced, as you understand, they are improving the mix. And on volumes, I would say we are more assuming, you know, flat volumes in consumer beauty. So, you see, the model is more or less, I mean, the same as we have always shared. And, again, I mean, we are still seeing, you know, a lot of white space in fragrance, definitely, as I explained, thanks to penetration and premiumization. I mean, the ultra-premium is a huge opportunity.

Speaker Change: But also we have plans really on the emerging markets, where our brands are you know the right equity and the right positioning really to catch some some market share. So our model is perfectly on track.

Speaker Change: And indeed with this balance.

Speaker Change: Repeating these balanced portfolio and balance sheet grassy core low gross.

Speaker Change: Great and then just a follow up on the skincare commentary in the release.

Speaker Change: Yes.

Speaker Change: I think it's very pointed this sort of thing with tweaking to accommodate changes in the dynamic skincare market. So just curious what that means.

Speaker Change: Are you still on track to double that business I think it was my fiscal 'twenty six.

Speaker Change: Target, but please correct me if I'm wrong date.

Speaker Change: So a lot of emphasis to speaking skincare is still our biggest opportunity ever.

Speaker Change: Both in terms of growth in terms of white space in terms of profitability et cetera, et cetera, we have three fantastic brands operating exactly where the skincare market is growing today and will grow tomorrow and young.

Speaker Change: Brands that are really are rooted into premium market and of course, the brands that are more towers Gen Z and millennial suggest figures with you. So with these three brands, we really mapped the market in a very nice way.

Speaker Change: The other element that's very important is that when I saw how much we are performing in fragrances, how much we're doing the right things in this area, which is growing the business of the company I decided intentionally to slow down our skincare openings, okay I want to do it pretty.

Sue Nobby: And on consumer beauty, so in our algorithm, and we explained it, we have also, you know, a lot of white space in consumer beauty. We shared and, you know, highlighted all the great work that we are doing in Brazil. But also, we have plans, really, for emerging markets where our brands are, you know, at the right equity and the right positioning, really, to catch some market share. So, our model is perfectly on track. And, indeed, with this balance, you know, we keep repeating this balanced portfolio and balanced geographical growth. And then just to follow up on the skin care commentary in the release, www.youtube.com.uk. So, Lauren, this is Sue speaking. Skin care is still our biggest opportunity ever, both in terms of growth, in terms of white space, in terms of profitability, et cetera, et cetera. We have three fantastic brands operating exactly where the skin care market is growing today and will grow tomorrow, ultra-premium brands that are really rooted in the premium market, and, of course, brands that are more targeted at Gen Z and Millennia, such as Philosophy.

Laurent Mercier: Victory and this is the best news is I may say of the year is not to go fast is to do the right thing and as I love to say what they explained it is affected by the time, it's not going to take another stab is going to take the right time. So don't expect us to change our strategy in skincare is still the number one obsession of the company for the.

Speaker Change: Our next years, it's very important part of the growth algorithm of the company, but the good news is at today, we can do without this growth that we have been mapped.

Sue Nobby: <unk> two years ago, and it's very good news, specifically when we see how some.

Speaker Change: In this area have been hit by a promotional <unk>, becoming Daegu favorites et cetera, we don't want to go there again, you see one anyway. So when you don't use these levers.

Speaker Change: Takes a bit more time, but is healthier and better in terms of brand equity protection.

Speaker Change: Thank you. Our next question will come from Mark Astra Chen with Stifel. Please go ahead.

Speaker Change: Yeah, Thanks and morning, everybody.

Speaker Change: Two questions related to expectations for some slowing in the category growth, particularly on the prestige side.

Sue Nobby: I guess, one why the increase.

Sue Nobby: So, with these three brands, we really map the market in a very nice way. The other element that's very important is that when I saw how much we were overperforming in fragrances, how much we were doing the right things in this area, which is growing the business of the company, I decided intentionally to slow down our skincare openings, okay? I want to do it perfectly, and this is the best news, as I may say, of the year. It's not to go fast.

Sue Nobby: Inventory for the working capital commentary, if you think category growth is going to slow, especially heading into a period of traditionally.

Olivia Tong: Waller sales in the back half of your fiscal year.

Sue Nobby: And related what gives confidence that.

Sue Nobby: Retailer inventories on that prestige side are.

Sue Nobby: Balanced or in the right spot today, given that your sales have exceeded consumer takeaway in the prestige business in recent quarters.

Sue Nobby: It's to do the right thing. And as I love to say, what takes time is respected by time. It's not going to take an endless amount of time. It's going to take the right time.

Speaker Change: Yes so.

Speaker Change: Thank you Omar so again I want to be to repeat again, I mean, it's not slowing prestige fragrance category, each BD normalization and unjust to retire debt.

Sue Nobby: So don't expect us to change our strategy in skincare. It's still the number one obsession of the company for the next years. It's a very important part of the growth algorithm of the company. But the good news is that today we can do it. We can do it without this growth that we had been mapping two years ago. And it's very good news, specifically when we see how some players in this area have been hit by overpromotionality, becoming Daigu favorites, et cetera. We don't want to go there again. Do you understand what I mean? So when you don't use these levers, it takes a bit more time.

Sue Nobby: Mid to high single digit fragrance.

Speaker Change: Fragrance category I mean, he's a very robust.

Sue Nobby: Gross and confirms a disease category easier is he's very dynamic, especially when you compare you know theyre Sousa the trends that were existing before before COVID-19. So.

Sue Nobby: On inventory I can tell you is that we are absolutely in control on.

Sue Nobby: On the OE inventory with our supply chain with very strong forecast accuracy. So we are we are running our business in a in a very intelligent manner. This clinically we made decision at the moment to increase inventories are.

Sue Nobby: But it's healthier and better in terms of brand equity protection. Thank you. Our next question will come from Mark Astrachan. Please go ahead.

Mark Stiefel Astrachan: Yeah, thanks, and morning, everybody. Questions related to expectations for some slowing in category growth, particularly on the prestige side, https://www.youtube.com.uk The Bulletproof Executive 2013, and related to what gives confidence that retailer inventories on that prestige side are balanced or in the right spot today. All of these years, sales have exceeded consumer take away in the perceived business in recent quarters. So, thank you, Mark. So, again, I want to be, to repeat again, I mean, you know, it's not a slowing in the prestige fragrance category; it's really normalization. And just to reiterate that, you know, need to high single-digit fragrances in both categories.

Mark Stiefel Astrachan: For example, he has been very good as I can tell you. They are very good as number one innovation on the market.

Mark Stiefel Astrachan: The biggest ever launch of Atco T. So definitely we made sure, especially as it because we started this project more than a year ago.

Mark Stiefel Astrachan: It takes where supply chain was chiller.

Mark Stiefel Astrachan: The challenge we made sure of course that we have sufficient component sufficient products of course to have a very good service. They Roland you see knows us obviously bodies is that 96% and even with these very big launches, which is the case in.

Mark Stiefel Astrachan: Fragrance, but to absorb.

Mark Stiefel Astrachan: In prestige, but upswing consumer beauty. So we are very very tight control on inventory than on on the retailer side I can tell you that.

Laurent Mercier: I mean, it's very robust growth and, you know, confirms that this category is very dynamic, especially when you compare it with the trends that were existing before COVID. So, on inventory, I can tell you that we are absolutely in control of our inventory with our supply chain, you know, with very strong forecast accuracy. So, we are, you know, we are running our business in a very intelligent manner. Definitely, we made a decision at the moment to increase inventory. The clear example is Burberry Goddess.

Mark Stiefel Astrachan: The level of inventories that we have across all markets across our retailers is very healthy we are really tracking sell out and sell in and.

Laurent Mercier: And indeed as you can see here in <unk>.

Laurent Mercier: Members that I'll set out is ahead of the market. So this is really and we are really making sure with each market.

Laurent Mercier: All the teams.

Laurent Mercier: There is no new inventory that's inventory at retailers side is very very healthy and again the disciplines that sue is referring to this is definitely a big part of the discipline. We are we have put in place and we continue to manage it within Coty.

Laurent Mercier: I can tell you that Burberry Goddess is the number one innovation on the market, you know, the biggest ever launched at Coty. So, definitely, we made sure, especially because we started this project, you know, more than a year ago, in a context where the supply chain was still, you know, challenged, we made sure, of course, that we had sufficient components, sufficient products, of course, to have a very good service level. And you see now the service level is at, you know, 96%. And, you know, even with these very big launches, which is the case in fragrance, but also in prestige, but also in consumer goods. So, we have very, very tight control of inventories. Then, on the retailer side, I can tell you that the level of inventories that we have across our markets, across our retailers, is very healthy. We are really tracking sellout and sell-in. And, indeed, as you can see in our numbers, our sellout is ahead of the market. So, this is really, and we are really making sure with each market, you know, all the teams, that there is no inventory. You know, that inventory on the retailer side is very, very healthy.

Speaker Change: Thank you everyone. So.

Laurent Mercier: Again as you can imagine we are really very proud about this 14th Costa with reserves that are in line to ahead of both guidance and expectation is three years in the house already Huh. That's that's I would say an achievement and of course, we are here to continue this trajectory. So looking forward to seeing all of you in cagny within two weeks.

Speaker Change: Thank you very much.

Speaker Change: This does conclude todays <unk> second quarter fiscal 2020 for question and answer conference call. You may disconnect. Your line at this time and have a wonderful day.

Laurent Mercier: Okay.

Laurent Mercier:

Laurent Mercier: Yeah.

Laurent Mercier: And, again, the discipline that Sue is referring to, this is definitely a big, big part of the discipline we have put in place, and we continue to manage it within Coty. Thank you, everyone. So, again, as you can imagine, we are really very proud of this 14th quarter of results that are in line with both guidance and expectation. It's been three years and a half already. That's, I would say, an achievement.

Laurent Mercier: Yeah.

Laurent Mercier: Mhm.

Laurent Mercier: Hum.

Laurent Mercier: Okay.

Laurent Mercier: Mhm.

Laurent Mercier: Hum.

Laurent Mercier: Sure.

Laurent Mercier: Hum.

Laurent Mercier: Hum.

Laurent Mercier: Hum.

Sue Nobby: And, of course, we are here to continue this trajectory. So, I'm looking forward to seeing all of you in Cagney within two weeks. Thank you very much. This does conclude today's Coty second quarter fiscal 2024 question and answer conference call. You may disconnect your line at this time and have a wonderful day.

Laurent Mercier:

Sue Nobby: Hum.

Sue Nobby: [music].

Operator: .. Thanks for watching! Thank you for watching! Subs by www.zeoranger.co.uk. Bye! The Bulletproof Executive 2013, BF-WATCH TV 2021,... Subs by www.zeoranger.co.uk, The Bulletproof Executive 2013 BF-WATCH TV 2021, The Bulletproof Executive 2013

Operator: Okay.

Operator: [music].

Operator: Uh huh.

Operator: Yes.

Operator: Hum.

Operator: [music].

Operator: Yeah.

Operator: Yeah.

Operator: [music].

Operator:

Operator: Okay.

Operator: [music].