Q3 2024 Coty Inc Earnings Call - Q&A

Speaker Change: [music].

Ashley: Good morning and good afternoon, everyone. My name is Ashley, and I will be your conference operator today. At this time, I would like to welcome everyone to COTI's third quarter fiscal 2024 question and answer conference call. As a reminder, this conference call is being held today, May 7, 2024 at 8.15 a.m. Eastern Time or 2.15 p.m. Central European Time. Please note that on May 6, at approximately 4.30 p.m. Eastern Time or 10.30 p.m. Central European Time, COTI issued a press release and prepared a remarks webcast, which can be found on our Investors Relations website.

Good morning, and good afternoon, everyone. My name is Ashley and I'll be your conference operator today at this time I would like to welcome everyone to Coty third quarter fiscal 2020 for question and answer conference call. As a reminder, this conference call is being recorded today may seven 2024 at 815 a M E.

Ashley: On today's call are Sue Nabi, Chief Executive Officer, and Laurent Mercier, Chief Financial Officer. I would like to remind you that many of the comments made today may contain forward-looking statements. Please refer to Coty's earnings release in the reports filed with the SEC, where the company lists facts that could cause actual results to differ materially from the forward-looking statement. In addition, except where noted, the discussion of Coty's financial results and Coty expectations reflect certain adjustments as specified in the Non-Gap Financial Measures section of the company's release.

Stern time or 215 P M Central European time. Please note that on May 6th at approximately 430 P. M. Eastern time, or 10 30 P M Central European time, Cody issued a press release.

Ashley: Parents spark webcast, which can be found on our Investor Relations website on today's call are Sue Nabi, Chief Executive officer, and the rent roll here Chief Financial Officer.

Ashley: I'd like to remind you that many of the comments today may contain forward looking statements. Please refer to the earnings release and our reports filed with the F. D C where the company lyft facts that could cause actual results to differ materially from the forward looking statement.

Ashley: In addition, except where noted the discussion of <unk> financial results and Cody expectations reflect certain adjustments as specified in the non-GAAP financial measures section of the Companys release with that we will now open the line for questions. At this time, if you would like to ask a question. Please press star one on your telephone keypad you may withdraw your.

Ashley: With that, we will now open the line for questions. At this time, if you would like to ask a question, please press Star 1 on your telephone keypad. You may withdraw your questions at any time by pressing Star 2. Again, that is Star and 1 for your questions, and we'll pause to allow any questions to queue. We'll take our first question from Filippo Falorni on Citi. Please go ahead.

Ashley: Our questions at any time by pressing star to again that is star and one for your questions and we will pause still have any questions to queue.

Ashley: We'll take our first question from Filippo <unk> with Citi. Please go ahead.

Filippo Falorni: Hey, good morning, everyone, and good afternoon for you guys. So I have two quick questions. One, I understand that you're going to give guidance for Fiscal 25 in August, but you mentioned in the release that you expect a sequential acceleration in like for like sales in the first half of fiscal 25. So maybe you can give us some color on what drives that confidence and what are the drivers of the acceleration?

Filippo: Hey, good morning, everyone and good afternoon for you guys I'm sure two quick questions one.

Filippo: Understand that youre going to give guidance for fiscal 'twenty five in August.

Filippo: But you mentioned in the release that you expect a sequential acceleration in like for like sales in the first half of 'twenty. Five. So maybe you can give us some color on what drives that confidence of what are the drivers of the acceleration and then the second one on the consumer beauty business.

Filippo Falorni: And then the second one on the consumer beauty business. You called out some softening softness in US mass cosmetics. How long do you think that softness can last and what are the setting parts of the business that drive the like for like sales in the business? Thank you.

Filippo: You called out some softening softness in U S mass cosmetics, how long do you think that softness can last and what are the offsetting parts of the business that drove the like for like sales in the in the basin. Thanks, Jim.

Jim: Yeah. Good morning, guys. So you have to think that this is just became so again, thank you for giving us this opportunity to indeed to comment on this.

Sue Nabi: Good morning Filippo, thank you. This is Sue speaking.

Speaker Change: She's got Telus resorts that are in the sign above expectations and above our guidance for the third time this year.

Sue Nabi: So again, thank you for giving us this opportunity to indeed comment on this 15th quarter of results that are, this time, above expectations and above our guidance for the third time this year. Indeed, the performance we are seeing in Prestige, which is, as you know, growing double digits, is giving us confidence to see and continue to see an acceleration in the first half sequentially from Q4. We've been outperforming the market during this quarter, Q3. The market is very dynamic, as you know. The Prestige fragrance market is even accelerating sequentially versus last quarter, and this is a global phenomenon, not just in the US.

Speaker Change: Indeed.

Speaker Change: We are seeing in prestige.

Speaker Change: Which is as you know we're.

Speaker Change: Growing double digits.

Speaker Change: And your confidence to see them to continue to see an acceleration in the first half so sequentially from Q4.

Speaker Change: We've been outperforming the market during this quarter Q3 are the.

Speaker Change: The market is very dynamic as you know with the prestige fragrance mascara to ease it even accelerating sequentially versus last quarter and this is a global phenomenon not just in the U S. It's also seen in big markets like in Europe and.

Sue Nabi: It's also seen in big markets like Europe. So on a very dynamic market that we expect to continue to be dynamic because of the fragrance index structural drivers, we believe we are going to continue to outperform this market, which explains why we think we are going to sequentially accelerate from the Q4 numbers in terms of sell-in. What gives us this confidence?

So on a very dynamic market that we expect to continue to be dynamic because of the fragrance index. The structural drivers. We believe we are going to continue to outperform this market, which explains why we think we are going to sequentially accelerates from the Q4 numbers in terms of setting.

Sue Nabi: Number one, the track record of the company. We saw a large number of our brands growing double digits last year, and this is continuing for most of these brands. I'm thinking about the top seven fragrance brands growing double digits last year. Most of them, the majority of them, continue to grow at the same rate.

Speaker Change: So what gives us this confidence number one the attack rate out of the company.

You know, we've being seeing a large number of cola brands growing double digits last year and this is continuing for most of these brands.

Speaker Change: I'm thinking about the Tuxhorn fragrance brand is growing double digits last year most of them. The majority of them continue to grow at the same rate we have a.

Sue Nabi: We have great highlights or great, I would say, superstars in the portfolio, such as Burberry. Burberry Goddess is indeed confirming its huge potential, more than its potential. It's today the number one innovation globally.

Speaker Change: Great highlight so great I would say sort of stops in the pump. So you are suggesting burglary did pretty good. This is indeed concerned me and gets a huge but then shows more than the potential is to get you. The number one innovation globally. Each today, having a fantastic halo effect on the overall brand pushing the order fragrance franchises.

Speaker Change: So the color cosmetics in the summer months and on top of this very good yes that is continuing to build over time and with.

Sue Nabi: It's today having a fantastic halo effect on the overall brand, pushing the other fragrance franchises but also the color cosmetics performance. And on top of this, Burberry Goddess is continuing to build over time and with increased penetration across the different markets around the world. We also have new stars arriving.

Speaker Change: With an increased penetration across the different markets around the world. We have also new styles that rising I'm thinking about cosmic.

Speaker Change: Cosmic <unk> agenda fragrance that started one the Montana house ago, which is the second innovation that number to innovation that the U S market. This calendar year to date and we have also another one that's the number one innovation in the U S market, which is a daisy Wang from Marc Jacobs. So these on top of.

Sue Nabi: I'm thinking about Cosmic Collegium, a fragrance that started one month and a half ago, which is the second innovation, the number two innovation, in the U.S. market this calendar year to date. And we have also another one that's the number one innovation in the U.S. market, which is Daisy Wild from Marc Jacobs. So this, on top of other brands growing double digits, I'm thinking about Chloé, I'm thinking about Davidoff, and, of course, as I said before, Burberry.

Speaker Change: Other brands growing in double digits I'm thinking about just the way I'm thinking about that he does and of course as I said this before.

Sue Nabi: So this is really what gives us the confidence that we are building launches that are going to stand the test of time, that are going to amplify and hopefully continue to increase the number of successes, which we call the track record in this very competitive fragrance business. We are also accelerating in Consumer Beauty. Consumer Beauty, as you remember, the story was about, you know, increasing the pace of innovation. This is happening now.

Speaker Change: So this is really what gives us the confidence that we are building our lunches.

Speaker Change: That's not going to stand the test of time that they go into amplify and hopefully continuing to increase the number of successes, which we called the taxi calling in this very competitive fragrance business. We are also accelerating in consumer beauty.

Sue Nabi: The latest innovations are all becoming viral. They are potentially innovations that have this ability to speak to influencers around the world. I'm thinking about CoverGirl Essence. I'm thinking about CoverGirl Yummy Gloss from last year that's continuing to do very well. CoverGirl Lip Stain.

Speaker Change: The beauty is you remember the story was about you know increasing the pace of innovation. This is happening now the latest innovations are all becoming viral D how that potentially innovations.

Speaker Change: Have a disability to two which speaks to the influenza is around the word that I'm thinking about the program as soon as I'm thinking about because I'll go give me give us some last year, that's continuing to do very well cooked up gal each day and I'm thinking about that he made wound up bone the mascara, which is the first bonding mascara cosmetics industry all these.

Speaker Change: Innovations are going to be amplified by all of our innovations are now set to you are in the.

Sue Nabi: I'm thinking about Rimmel Wonder Bond Mascara, which is the first bonding mascara in the color cosmetics industry. All these innovations are going to be amplified by other innovations. And I said to you in the beginning

Speaker Change: Previous earnings call that we are going to increase the pace of innovation. So all these elements should give us the country does that things are going to get a.

Speaker Change: To get to continue to do well and the beauty markets. We believe is going to continue to do well prestige is structurally driven to become a to continue to grow very strongly and mass. We so the mainly mainly in the U S that we should see goods that are not where we wanted them to be the rest of the world.

Sue Nabi: [inaudible] So, it's mainly in the U.S. that we see figures that are not where we want them to be. In the rest of the world, the mass market, especially color cosmetics, but also body care fragrances, is booming. But in the U.S., last month's figures are a bit better than the month before, so we are optimistic, and we think that this will improve after, you know, the shock of inflation, the shock of price increases, et cetera.

Speaker Change: Mass market, especially codelco smithy expects or so that you've got fragrances. It blew me, but in the U S. Last month's figures are a bit better than the month before so we are optimistic and we think that this would improve after you know the shock of the inflation the shock of the price increase as I said before we believe consumers are going to.

Sue Nabi: We believe consumers are going to see a clearer picture and, hopefully, they will continue to buy these premium innovations, new categories, et cetera. So, what allowed us to offset this weakness in the U.S. market was, indeed, categories and regions. Categories, because we are growing very, very strongly behind mass fragrances and this globally. We are growing very strongly behind body skin care, as I love to call it. And this is also an area that is not only premiumizing but is also accelerating. It's skin care for the body, if you want to name it differently.

Speaker Change: C. A T R a fixture and hopefully they will continue to.

Speaker Change: To buy this premium innovations new categories et cetera, So what allowed us to offset this weakness in the U S market is indeed categories and regions categories. Because we are growing very very strongly behind mass fragrances globally, we are growing very strongly behind our bogey.

Speaker Change: Skincare is I'd love to call. It and this is also an area that is not only the premier amazing, but also actually I really think its skin care for the body and she wanted to name it differently and we also believe in all the regions you know our our what we call the growth engine markets new regions that represent almost almost 20%.

Sue Nabi: And we are also bringing in other regions, you know, our, what we call the growth engine market, new regions that represent almost 20% are growing two times faster than the rest of the company. Last but not least, and I gave a purposeful, long answer so that the others also got maybe answers to the upcoming questions, Travel Retail is doing fantastically well, and also Ecom. So, if you add Travel Retail, Ecom, new regions, plus new categories, you have almost half of the business of the company that's growing two times faster than the more classical businesses, heritage businesses in mature markets.

Ashley: Thank you. We'll take our next question from Oliver Chen with TD Cohen. Please go ahead.

Speaker Change: He is growing two times faster than the than the rest of the company. That's been at least I didn't that was a long answer so that the others.

Speaker Change: Yeah, and as to the upcoming questions travel retail is doing fantastic the well and also E. Com. So if you add the total retail E comm new regions.

Speaker Change: New categories, you have almost half of the business of the company that's growing two times faster than the more classical businesses heavy touch businesses in mature markets.

Speaker Change: Okay.

Speaker Change: Thank you we'll take our next question from Oliver Chen with TD Cowen. Please go ahead.

Oliver Chen: Hi Sue and Laurent, The results continue to be really impressive. Was there opportunity to guide even higher given the momentum that you're seeing? And geographically, it looked very, very strong across markets. If you could help us contrast perhaps Europe versus America and what you're seeing with customers there. And then, as we think about the fragrance category, it looks like inventories are likely very clean at your retail partners given the sellout trends. What do you expect to happen with normalization?

Oliver Chen: Hi, Sue and Laurite the results continue to be.

Oliver Chen: It'd be really impressive what was their opportunity to to guide even even higher given the momentum that you're seeing and then geographically it looked very very strong across markets. If you could help US contrast, perhaps Europe versus Americas, and what you're seeing with customers there.

Oliver Chen: And then as we think about the fragrance category. It looks like inventories are likely very clean your retail partners given the sell out trends.

Oliver Chen: All the KPRs are so robust. Thank you.

Oliver Chen: What do you expect to happen with normalization.

Oliver Chen: All the all the Kpis are still robust thank you.

Speaker Change: Yeah. Thanks.

Sue Nabi: Thank you, Oliver. I hope that you are doing very well.

Speaker Change: I hope that you're all very well I wanted to start maybe with the last part of the question, which is around the fragrance.

Sue Nabi: I wanted to start maybe with the last part of the question, which is around fragrance normalization, as we call it. So indeed, this was something that everyone was referring to during the last earnings call. And even for almost a year now, we hear this kind of, "When is the normalization?" Some people call it a slowdown, others call it a trade down, but it's not happening. In fact, the reality is that it's

Speaker Change: Normalization as we call. It. So indeed this was something that everyone was referring to during your last earnings call and even since almost a year now we hear this.

Speaker Change: Kind of when he's the normalization some people call it slow down other call. It a trade down but it's not happening in fact, the reality is that it's accelerating.

Sue Nabi: So we see this accelerating thanks to volumes and thanks to premiumization. So it's not just a question of pricing; it's also volumes that are growing. And we see this fragrance index across the full board, in a way, from our mass fragrances, such as David Beckham, Vera Wong, or Adidas, to the most premium ones, including the recent launch of Infiniment Petit Paris at the tip of the iceberg.

Speaker Change: So we see this accelerating thanks to volumes and thanks to premium amortization. So it's not just a question of <unk>.

Speaker Change: Pricing is also volumes that are growing and we see these fragrance index across the food is all done in a way from our mass fragrances, such as David They come they are longer as it does to the most premium one including the recent launch or something you want to keep probably at the tip of the iceberg you clearly see all these.

Sue Nabi: You clearly see all these different price tiers continuing to grow, and consumers are continuing to use fragrances as mood boosters, as social connectors, and as feel-good categories, more or less. So we see this category probably not being as dynamic as it was two years ago, where we were talking about mid-teens growth in some markets, but it will continue to grow at levels that we believe are much higher than historical levels.

Speaker Change: The price tiers, continuing to grow and consumers are continuing to use fragrances as a you know a mood booster as especially connector and as if she'd goods category more or less so we we see this category probably going to be nuts as Diane.

Speaker Change: Because it was two years ago, we were talking about mid teens growth in some markets.

Speaker Change: But still it will continue to grow at levels that we believe are much higher than the historical levels, but there was no remember a pre pandemic when fragrance business was growing one 2%. It was already an achievement. So here we are talking about mid to high single digit growth for the fragrance business, which.

Sue Nabi: For those who remember pre-pandemic, when the fragrance business was growing one or two percent, it was already an achievement. So here we are talking about the need to have single-digit growth for the fragrance business, which we believe is going to be something that is sustainable over time. Now, the second part of your question about the contrast between Europe and the US, I have to say that Europe is very dynamic. You know, in both divisions, in both markets, color cosmetics is doing very well in Europe.

Speaker Change: We believe this is going to be something that is sustainable in a long time now the second part of your question around the contrast between Europe and the U S. I have to say that Europe is there any dynamic in both divisions in both markets Columbus, Netflix is doing very well in Europe prestige fragrances are doing very well in Europe skincare is doing also very.

Sue Nabi: Prestige fragrances are doing very well in Europe. Skin care is also doing very well in the US. The picture is almost as good as the one in Europe, except, as I said before, regarding the mass color cosmetics category.

Speaker Change: Well in the U S. The picture is almost as good as the one in Europe, except as I said it before regarding the mass color cosmetics category, but that we believe that after the I would say these price increases that.

Sue Nabi: But there we believe that after the, I would say, these price increases that put some pressure on, I would say, the low income consumers, the continuous innovation rate of this market, the continuous premiumization, and the ability to connect with consumers on social media will, in a way or another, compensate for this, I would say, more difficult moment. But we see this getting better during the last month compared to the previous month, where the figures were quite negative. Now, was there an opportunity to guide him even higher?

Speaker Change: Put some pressure on I would say the low income consumers the continuous innovation rate of this market the continuous and utilization the ability to connect with consumers in social media in a way or another compensate this I would say a more difficult moments that we see this.

Speaker Change: And getting better during the last months compared to the month of.

Speaker Change: The previous months.

Speaker Change: He goes were quite modest.

Sue Nabi: I believe that guiding at the upper end of 9 to 11% for this fiscal is an outstanding performance. It's probably the best in class among our peers now that almost everyone has finished. So I believe this is really a performance that we are super proud of. And again, what we tell you in terms of what we are starting to see around the Q1 figures is also a good element of confidence for the company and for everyone who's looking at it. Thank you. We'll take our next question from Anna Lizzul with Bank of America. Please go ahead. Good morning. You have Christian Junquera on for Anna Lizzul. Thank you for taking our question.

Now was there a proximity to guide even higher I believe that our guiding at the upper end of 9% to 11% for the Cisco is unnecessary and outstanding that's our message is probably the best in class among our peers now that's almost everyone has finished so I believe this is really a that's something.

Speaker Change: Most of that we are we are super proud does.

Speaker Change: And again, what we tell you in terms of what we are starting to see around Q1 figures is also a good amount of confidence for the company here for everyone Who's looking at this.

Ashley: Thank you. We'll take our next question from Anna Lizzul with Bank of America. Please go ahead. Good morning, you have Christian Inquirer on.

Speaker Change: Thank you we will take our next question from Ana <unk> with Bank of America. Please go ahead.

Ana: Good morning, you have Christian Junqueira on for analysts. Thank you for taking our question.

Ana: You mentioned E Commerce was particularly strong in the quarter now representing about one fifth of your business can you talk about the drivers of this with greater innovation and marketing and where do you see the potential for sales from E. Commerce and also do you expect to launch more products with e-commerce retailer similar to stay as long.

Ana: Of Clinique on Amazon the beauty store. Thank you.

Speaker Change: Yes. Good morning. Thank you very much for the question. Indeed, total youre right to call out the E. Commerce, that's all months, which is a for example in consumer beauty. It's half of that goes into division in prestige, it's a little bit under our house of the gross at the division. So we are outstandingly performing on this channel and we are.

Anna Jeanne Lizzul: Yes, good morning. Thank you very much for the question. Indeed, you're totally right to call out the e-commerce performance, which is, for example, in consumer beauty, half of the growth of the division. In prestige, it's a little bit under half of the growth of the division. So we are outstandingly performing on this channel, and we have a lot of room still to continue to grow compared to some of our peers. So this is really an area where we are doing the right things. We are accelerating, but still have a lot of room to continue to grow. What explains this performance?

Speaker Change: A lot of room still to continue to grow compared to some of our peers. So this is really an area, where we are doing the right things.

Speaker Change: Racing, but still with a lot of room to continue to grow what explains this performance if I take the consumer beauty division, where the growth has been astronomical. This is really where our brands are winning in the big Big way specifically called out in the U S. It has to do a lot with the digitization of our marketing means.

Sue Nabi: If I take the consumer beauty division, where growth has been astronomical, this is really where our brands are winning in a big, big way, specifically CoverGirl in the US. It has to do a lot with the digitalization of our marketing. In a way, we were, as you remember, communicating in a traditional way just two years ago, still talking to the loyal base of our consumers, which were, you know, people above 35 years old, and this is a precious part of the market that CoverGirl is one of the only brands that is continuing to take care of, in a way.

Speaker Change: In a way we were as you remember are communicating in the traditional way of just two years ago are still talking to the loyal base of our consumers, which were you know people above 35 years old and this is a precious.

Sue Nabi: But we were not using modern marketing tools, such as influencer marketing, advocacy, and all the funnel that goes with it, with retail media, search, etc. The progress we have made in this area, and the latest EMZ from CoverGirl in the US, where we moved from number six a year ago to number three in terms of EMZ in the very competitive US market, Same thing, by the way, on Remail in the UK, where we moved from nowhere to number four last month.

Speaker Change: Precious part of the market that's coming out of gel is one of the only brand that is continuing to take care of in a way that we were not using the mud down marketing tools, such as influenza marketing advocacy.

Speaker Change: All the funnels that goes with it with the retail meat substitute attach it to all.

Speaker Change: The progress we have done in this area and the latest E N Z from Coke oven gas in the U S, where we moved from number six a year ago to number three in terms of the ANZ and the very competitive U S market same thing by the way on the remaining U K, we moved from nowhere to numbers for last month. This explains a lot why we oh gosh I mean because as.

Sue Nabi: This explains a lot why we are overperforming, because as you can imagine, the bigger visibility of the brand online translates instantly into bigger sales online, as simple as this. So this is what explains the consumer beauty division, I would say, overperformance. And we are implementing this playbook into Prestige 2, and this is also an area where we are using the experiences we are doing with consumer beauty to drive penetration and the different launchers.

Speaker Change: You can imagine the bigger visibility of the brand online some states instantly into bigger sales online as simple as it is so so this is what explains the consumer beauty division I would say, although that's almonds and we are implementing this playbook into prestige to this is also an area where we are.

Speaker Change: Using the experiences we are doing with consumer beauty to drive the penetration in the different launches don't really good. This was one of the first lung shows that that's really used for.

Sue Nabi: Burberry Goddess was one of the first launchers that really used the power of fragrance influencers, and you see it in the results and in the very, very quick build-up of the performance. And we are doing more or less the same thing today with Daisy Wild. As you know, Mark Jacobs is the king of social media, so Daisy Wild will be, for sure, a key performer on this channel. But the same thing with Cosmic Kylie Jenner. As you can imagine, with a name that has more than 400 million followers online, you can imagine that the sales online are going to be very, very big.

Speaker Change: Really the power of fragrance Influencers and you see in the results and in the very very quickly because of the performance and we are doing more or less the same thing today with the Daisy Wang.

Speaker Change: Marc Jacobs is the king of session, Michelle So Disney wise will be for sure.

Speaker Change: It keeps us all on this channel.

Speaker Change: Same thing with customer generally as you can imagine with a with a name that has more than 400 for the 400 million photo, whereas online you can imagine that besides online are going to be very very big. So this is what the extent the tough top months are we going to explore opportunities with the key retailers. The answer is yes. This is really a.

Sue Nabi: So this is what extends the performance. Are we going to explore opportunities with the key retailers? The answer is yes. This is really driven by the brand strategies that we are, of course, doing a great job with Amazon, and we will continue to do this great job, and see which brands can sit with this.

Speaker Change: Driven by this brand strategies that we are of course.

Speaker Change: Doing a great job with Amazon, we knew we'd continue to do does a great job in which brands can can sit with this.

Speaker Change: It would be killers.

Speaker Change: Yeah.

Ashley: Thank you. We'll take our next question from Rob Ottenstein with Evercore. Please go ahead.

Speaker Change: Thank you we'll take our next question from Rob Einstein with Evercore. Please go ahead.

Robert Ottenstein: Thank you very much so you kind of touched on some of this throughout the call, but I'm you know it's it's it's important so let me just kind of go through some of these again so in terms of the Frac fragrance market acceleration.

Robert Ottenstein: Thank you very much. So you kind of touched on some of this throughout the call, but, you know, it's important. So, let me just kind of go through some of these again. So in terms of the fragrance market acceleration, Um, how much of that has to do with travel retail? So that's that's kind of question number one. Question number two is And again, I know you just sort of touched on it, but I'd love to get a chance for you to elaborate more. You know, there is increased competition in the fragrance area, but you guys continue to do incredibly well. You know Burberry has been a home run now. You're number one right with Marc Jacobs Daisy and number two with Kylie Cosmic. You mentioned some of the stuff around that, but maybe And then, just finally, maybe talk a little bit about the timing of Etro and Marni.

Speaker Change:

Robert Ottenstein: How much of that has to do with travel retail. So that's that's kind of question number. One question number two is in and again I know, you're just sort of touched on it but I'd love to get a chance for you to elaborate more.

Robert Ottenstein: There is increased competition in the fragrance CRE, yet, but you guys continue to do incredibly well.

Robert Ottenstein: You know Burberry has been a homerun now your number one right with the Marc Jacobs Daisy number two with Kylie cosmetics.

Robert Ottenstein: You mentioned some of the stuff around that but maybe if you could just kind of unpack sort of your competitive advantages in the fragrance market versus the competition that allows you to continually do better than everybody else and then just finally maybe talk.

Robert Ottenstein: But about the timing on extra when marni. Thank you.

Sue Nabi: Good morning, Robert. Thank you for your question. So, the first part, which is around how much is travel retail and how much is the rest, I would say that, at the end of the day, it's really a performance that's based on core US and Europe, mainly. The core is really US and Europe, which are booming. And on top of that is travel retail. So travel retail is not specifically overdriving this performance, but it comes in on top. And indeed, you're totally right to call travel retail, which represents now 9% of the company's net revenue, coming from 8% just a year and a half ago.

Speaker Change: Yeah. Good morning. Thank you for your question. So first part which is around how much is travel retail how much is the risk I would say that at the end of the day.

Speaker Change: Our performance data to uncover the U S and Europe, mainly on the core is really U S and Europe, which are booming.

Speaker Change: And then Scott is travel retail so salaries that is not specifically driving this ominous as it comes on top and indeed, you are totally right so quite out travel retail.

Speaker Change: Which represents 9% of the company's net revenue coming from 8% just a year and a half ago. So it's another way we are performing on the fragrance business, but also on color cosmetics, but also in skincare now when it comes to why we are you know doing good in a way in this in this very competitive.

Sue Nabi: So, it's a channel where we are overperforming on the fragrance business, but also on color cosmetics, but also on skincare. Now, when it comes to why we are doing good in a way in this very competitive market, I believe it's a mix of, first of all, finding ways to create ways of working, ways of creating what we call blockbuster fragrances that use data, that use understanding of consumers, that use ability to create juices that resonate globally, but also locally, ability to create advertising that's going to stand from the crowd, and making sure this is not depending on individuals.

Speaker Change: Market I believe it's a mix of you know first of all finding ways to create ways of working ways of creating what we call a blockbuster fragrances. That's US you know a desktop they use understanding of consumers that use our ability to create use.

Speaker Change: Says that resonate globally, but also locally ability to create advertising that's going to stand from the crowds and making sure. This is not depending on individuals you know traditionally what happens in brands is that sometimes from time to time, you have one or several individuals who understand the brand very well.

Sue Nabi: Traditionally, what happens in brands is that sometimes, from time to time, you have one or several individuals who understand the brand very well and take it to a new level. This is, of course, always happening, but what we try to do is to be independent of this and make sure the organization is done in a way that it will, whatever, whoever is leading the brands, without, again, underestimating the power of individuals, which is super, super important. But still, it has to be both elements, and this is something we've been doing for the last few years, finding ways to understand what is going to resonate.

Speaker Change: Take you through a new hate this is of course always happening, but what we're trying to do is to be independent from this and make sure. The organization is done in a way that it will whatever whoever other people leading the brands without again are underestimating the power of individuals which is super Super important.

Speaker Change: But still it has to be both elements and this is something we've been doing for the last three years finding ways to understand what is going to resonate. There is also a question of.

Sue Nabi: There is also a question of, I would say, the ability to say this is going to be the big launch of the company. This is something that is intentionality. Intentionality is very important, but it's based, of course, on data.

Speaker Change: I would say.

Speaker Change: Our ability to say this is going to be the big long term. The company. This is something that is intentionally.

Speaker Change: Tension that it is very important but these days of course and that's all based on what you hear what you see how consumers are talking about our products. When we tested them et cetera. So it's a mix of organizational capabilities, but also our ability to be intentional and to be ambitious but not.

Sue Nabi: It's based on what you hear, what you see, how consumers are talking about our products when we test them, et cetera, so it's a mix of organizational capabilities, but also the ability to be intentional and to be ambitious, and last but not least, it's also a question about technology more and more. You've heard how much Anthony Mancotti Paris, the latest launch of the company, uses for the first time the power of technology to have increased longevity for the fragrances. Each and every fragrance of this line lasts for 30 hours at minimum, and this is chemistry.

Speaker Change: It's also a question more and more of technology, you've heard how much and senior non cookie Paris. The latest launch of the company use it for the first time the power of technology to have increased longevity for the fragrances each and every fragrance of this line last for 30 hours at minimum and this is chemistry.

Sue Nabi: This is science. This is technology, coupled with art and artistry and understanding of consumers. Last part of your question, which is around H2O and Marni. Marni, H2O, sorry, has already a fragrance line, so we are integrating this fragrance line into Coty ecosystem, as I may say, and as soon as this integration and registrations are done, this existing fragrance line will instantly be launched all around the world, which will give a base to the brand in terms of network use, and of course, in parallel, we are working on creating I would say the upcoming fragrances that represent the brand equity, and Marni, same thing.

Speaker Change: Science. This is technology, coupled with us in our history and understanding as consumers last part of your question, which is around extra in Miami Miami actually somebody has already a fragrance line. So we are you know.

Speaker Change: Integrating this fragrance line into <unk> ecosystem, if I may say and as soon as this integration and registrations I've done this existing fragrance sign will instantly be long shadow all around the world, which will keep the base to the brand in terms of net revenues and of course in parallel we are working on creating the.

Speaker Change: I would say the upcoming fragrance said that represent the.

Speaker Change: Brand equity and Miami same thing there there isn't a business that is existing today, but we started to work almost at the moment. We made the announcement a few months ago and we believe that in the next two years, we can see new things arriving from these two events.

Sue Nabi: There isn't a business that exists today, but we started to work almost at the moment we made the announcement a few months ago, and we believe that in the next two years, we can see new things arriving from the students.

Korinne N. Wolfmeyer: Thank you. We'll take our next question from Korinne Wolfmeyer with Piper Sandler. Please go ahead.

Ashley: Thank you. We'll take our next question from Korinne Wolfmeyer with Piper Sandler. Please go ahead. Hey, good morning. Thanks for taking the questions and congrats on the quarter. I'd like to touch on first

Korean: Thank you we'll take our next question from Korean <unk> with Piper Sandler. Please go ahead.

Korean: Hey, good morning, Thanks for taking the questions and congrats on the quarter.

Korean: Like to touch on first.

Korean: What youre seeing in the middle East and if there is any kind of headwind you're baking into guidance and if there's any change in trends that you're seeing there and then as we think about these neal.

Korean: Partnerships coming on line and then the one announced this morning, how should we be thinking about the contribution of <unk> to the longer term growth algorithm. Thank you.

Korean: So the new personnel cheap.

Sue Nabi: So when it comes to the first part of the question, again, this region, the Middle East, accounts for a mid-single-digit percentage of our revenues and is fairly broad-based. So this is the first element.

Speaker Change: Okay. So when it comes to the first half of the question.

Speaker Change: Again this region the middle East account sort of a mid single digit percentage of total revenues and 70 gross base. So this is the first of the month at present, we are not seeing a change in the business.

Sue Nabi: At present, we are not seeing a change in the business. In fact, I have to say that we are even seeing strong momentum in the Middle East, which is driven mainly by our prestige fragrances. So this is what we are seeing today in the Middle East.

Speaker Change: In fact, I have to say that we're seeing even a stronger momentum in the middle East, which is driven mainly by our prestige fragrances.

Speaker Change: Well. So this is what we are seeing today in the middle East are nothing that would be materially impacting your business over there.

Sue Nabi: Nothing that would materially impact our business over there. Now, when it comes to the new licenses, the idea is really to build businesses that are complementary to the current businesses of the company. These licenses have been chosen and chose us also because they are incremental to our portfolio. They bring new visions, they bring new ways to talk to consumers. And these are the main regions where we will end up working together.

Speaker Change: Now when it comes to the new licenses the idea is really to.

Speaker Change: Build businesses that are complementary to the current businesses of the company.

Speaker Change: These licenses have been chosen and chose US also because they are incremental.

Speaker Change: Two our portfolio they are bringing a new vision that bringing new ways to talk to consumers and these are the main reasons why we end up working together, it's because we believe new grants can bring new audiences in the case of Miami some years in the case of exploits social obvious if you think about the extension of mass.

Sue Nabi: It's because we believe new brands can bring new audiences. In the case of Marni, that's obvious. In the case of Etro, it's also obvious. If you think about the extension of Marc Jacobs' license to Color Cosmetics, it's also very obvious what a brand like Marc Jacobs can bring to the Color Cosmetics portfolio of a company like Coty with this kind of indie mix couture brand, which is a very unique positioning on the market. So that's the way we see it. It's really all about bringing additionality, targeting new audiences that increase the reach of the company over time.

Speaker Change: Jacobs license to pull off the Smith.

Speaker Change: Also very obvious what the brand like Marc Jacobs can bring to the color cosmetics portfolio of the company that I could see with this kind of E D.

Speaker Change: Brand, which is very unique positioning in the market. So that's the way we see used its really all about bringing additionally, T targeting new audiences.

Speaker Change: That increase the reach of the company Oh go ahead.

Ashley: Thank you. We will take our next question from Andrea Teixeira of J.P. Morgan. Please go ahead.

Speaker Change: Thank you we will take our next question from Andrea Teixeira with Jpmorgan. Please go ahead.

Andrea Faria Teixeira: Hi, this is Shovana Chowdhury on behalf of Andrea. I wanted to ask you for more color on consumption versus shipments. And more specifically, if you could please confirm if the now mid-single digit headwind from restocking in the base period that is expected in the fiscal fourth quarter, it seems it is not, if it's similar to the fiscal third quarter, because when you gave the guidance for the second half last quarter, the hit was expected to be low to mid-single digit, but now it's been raised to mid-sing

Shovana Nafiz Chowdhury: Hi, This is chevron <unk> Chowdhury on behalf of Andrea I want.

Shovana Nafiz Chowdhury: To ask you for more color on consumption.

Shovana Nafiz Chowdhury: Shipments and more specifically if you could please confirm F. B now mid single digit headwind from restocking in the Bay Spirit that is expected in the fiscal fourth quarter. It seems that it's not if it's similar to fiscal third quarter.

Shovana Nafiz Chowdhury: Because when you gave the guidance for a second half last quarter.

Shovana Nafiz Chowdhury: <unk> was expected to be low to mid single digit but now it's been.

Shovana Nafiz Chowdhury: Grace to mid single digits and also I wanted to ask you about your <unk> growth of 6% in consumer beauty did you see some pull forward of inventory building in this segment that could have a little bit of pressure on fiscal fourth quarter. Thank you.

Andrea Faria Teixeira: And also, I wanted to ask you about your LFL growth of 6% in consumer beauty. Did you see some pull-forward of inventory building in this segment that could have put a little bit of pressure on the fiscal fourth quarter? Thank you.

Laurent Mercier: Hello, good morning. First of all, I mean, consumption and shipments are fully aligned. Okay, so it's really that we are making sure that there is a strong correlation between our sell out, sell in, and we are making sure that, you know, there is no inventory building at the retailer level. So this is a very, very healthy equation.

Speaker Change: Hello, Good morning, So I mean first of all I mean, the consumption and shipments I mean are fully aligned. Okay. So is really that we are making sure that every user.

Speaker Change: Correlation between.

Speaker Change: Set out selling and indeed, we are making sure that you know there is no.

Speaker Change: Inventory building at <unk>.

Speaker Change: At our retailers our label. So it is very very healthy equation, so no, but mid single digit to a headwind in Q4 I mean, we shared this several times and we show very clearly in the last earnings that indeed, there will be a deep balance Q3, and Q4 and in fact.

Laurent Mercier: So now about the mixed single-digit headwind in Q4, I mean, we shared several times, and we shared very clearly in the last earnings that indeed, there would be a de-balance between Q3 and Q4. And, in fact, the headwind in Q3, I mean, was very minimal. But then indeed, the headwind is definitely located in Q4, and this is mixed single-digit growth in Q4. But again, as Sue explained to me during the earnings call, this is really purely based on the effect of a shipment done last year, which was really service level recovery and also the pile fill of great innovations.

Speaker Change: The Haynesville, we had wins in Q3, I mean, it was very minimal.

Speaker Change: But then he needs ahead, we need definitely located in Q4 and it is mid single digits in Q4, but again as we explained during the earnings call. This is really purely based effect from a shipments done last year, which was really sell mislabeled recovery and <unk>.

Laurent Mercier: So this is definitely no change versus what we shared. So indeed, as we explained, I mean, was, you know, low single digit, mixed single digit in H2. So and this is again what we have been saying to me.

Speaker Change: And also as a seal of a greater of great innovation. So this is a this uniquely new Oh no change of Etsy.

Speaker Change: That's through sweat to what we shared so indeed as we explained I mean was low single digits mid single digits and in.

Speaker Change: So and this is again, what we have been seeing for many months.

Ashley: Thank you. We will take our next question from Olivia Tong with Raymond James. Please go ahead.

Speaker Change: Thank you we will take our next question from Olivia Tong with Raymond James. Please go ahead.

Unknown Attendee: Great, thanks. Good morning.

Unknown Attendee: Great. Thanks. Good morning. My question is primarily around the Mexican prestige versus mass obviously, given the strength in prestige mix, a second tier of efficacy pointed questions for 2015.

Laurent Mercier: My question is primarily around the mix between Prestige and Mass. You know, obviously, given the strength of Prestige, your mix has shifted to about 60-40 Prestige from 50-50 pre-pandemic. So this has clearly helped you drive pricing on top of the volume growth that you've been nicely, obviously, nicely on target to get to your mid-60s growth marketing target as well. So how has that changed your management of the overall business? You know, how much further can we go in terms of gross margin? And what are you embedding in terms of sort of a volume price mix going forward, you know, as you continue to push premiumization? Thank you.

Unknown Attendee: So this is clearly helped to drive pricing on top of the volume growth.

Speaker Change: Hey.

Unknown Attendee: I'm talking to get to your mid sixteens gross margin target as well.

Unknown Attendee: How has that changed your management of the overall.

Unknown Attendee: Ken how much further can we go in terms of gross margin and what are you embedding in terms of sort of a volume price mix going forward.

Ken: You know I think I can continue to pressure pumping utilization. Thank you.

Ken: Yeah. So.

Laurent Mercier: So indeed, I mean, you know, mixed. I mean, prestige, and weight have increased. But definitely, I mean, what you can see is that overall, our gross margin has significantly improved over the last four years. So you remember that we were at a level, you know, which was below 60 percent of gross margin. And now we are reaching this level of 65 percent.

Speaker Change: Indeed, I mean.

Ken: Mixed I mean prestige or weight increase but this uniquely I mean, what you can see that overall our gross margin.

Speaker Change: Significantly improved are those who likes to have for you. So you remember that we were at a level, which was below 60% of gross margin.

Speaker Change: We are now reaching these leave all of those 65% and I want to be very clear that disease gross margin expansion is coming from both divisions. Okay. So this is really.

Laurent Mercier: And I want to be very clear that this gross margin expansion is coming from both divisions. So this is really all the actions that we put in place, productivity. And we share many examples of productivity initiatives that we put in place on standardization, platforming, and this brought definitely a significant savings in gross margin. So that's number one.

Ken: All the actions that we put in place.

Ken: The activity and we share many examples of the productivity initiatives that we put in place on the standardization platforming and these broad this nuclear significant savings in gross margin. So that's number one number to use a pricing differently TB, we implement T V D. Some very.

Laurent Mercier: Number two is the pricing. Definitely, we implemented really some very targeted price increases on both divisions. And you see the result in this Q3 with a 190 basis point gross margin expansion. So this is what we did again on both divisions. And last but not least, is definitely mixed management. Same work, same playbook on both divisions.

Ken: You don't get the price increase on both divisions and you see the resulting Z. So Q3 young with 190 basis point gross margin expansion. So this is what we did again on boost on both divisions and last but not least these defeats he on mix management same work same playbook.

Ken: On both divisions, so easily and you know on prestige and all the work done right now we are seeing more and more <unk>.

Laurent Mercier: So it's really, you know, prestige, all the work done that now we are feeling more and more eau de parfum. We are, the niche category is booming. And this is, of course, gross margin accretive. But we also have in consumer beauty, all the new initiatives that we are launching in color cosmetics are, you know, strong. I mean, gross margin accretive, sometimes even at the level of prestige.

Ken: It's a niche category is booming and this is of course gross margin accretive, but we are also in consumer beauty that all the new initiatives that we are launching in color cosmetic.

Ken: Strong gross margin expertise, sometimes even that's really one of prestige and also the new categories that we are pushing such as mass fragrance and so on how does very stronger gross margin. So again, we really keep in mind that these gross margin expansion is really coming from a strong improvement on both.

Laurent Mercier: And also, the new categories that we are pushing, such as mass fragrance and so on, you know, have a very strong gross margin. So, again, really keep in mind that this gross margin expansion is really coming from a strong improvement in both on both divisions. It's not a division mix effect. This is pretty minor.

Ken: On both division, it's not division mix effect.

Speaker Change: <unk> this is pretty minor so now looking ahead.

Laurent Mercier: So now looking ahead, and you see again the results of this year on the fiscal year to date. You see, our volumes are low single digit prices, high single digit, and mix is low single digit. So definitely, we are making sure in our algorithm that we keep this good balance between volume mix and also pricing. Definitely, the pricing impact is going to be lower because we will not be at the same level of price increases as we did, you know, the last two years.

Speaker Change: And you saw you see you again.

Speaker Change: As a result says each year on a fiscal year to date you see our volumes are low single digit price is high single digit and mix is low single digit. So definitely we are making showing our algorithm that we keep this good balance between volume mix and also pricing. These sneaky pricing impact is going to look.

Speaker Change: Because we will not be at the same level of price increase as we did in the last two years, but I wanted to be clear that it will be really well balanced between the use of <unk>.

Laurent Mercier: But I want to be clear that it will be really well balanced between these three items. And again, what Sue has explained gives you concrete examples of volumes. I mean, all the work we are doing on new initiatives, the growth engine market. So really bring volumes. Mix is really, again, the continuous work we are doing on both divisions and pricing. We will continue pricing in a very targeted manner. Again, we are very well equipped. So, again, very balanced between these three items in terms of terms of top line growth and continued gross margin expansion in both divisions.

Speaker Change: Three items and again with Suez as explained these give you concrete examples that volumes I mean, all the work we are doing on new initiatives the growth engine market, so really bring volumes.

Speaker Change: <unk> is really begins a continuous work we are doing on both divisions and pricing. We will continue pricing in a very targeted mender again, we are very well equipped so again very balanced between these three items in terms of in terms of top line growth and continue our gross margin expansion in both divisions.

Speaker Change: Okay.

Ashley: Thank you. We'll take our next question from Chris Carey with Wells Fargo Securities. Please go ahead.

Speaker Change: Thank you we'll take our next question from Chris Carey with Wells Fargo Securities. Please go ahead.

Christopher Michael Carey: Hi, everyone. Thank you for the question.

Christopher Michael Carey: Hi everyone. Thank you for the question. So one follow-up on Consumer Beauty, and then more of a global strategic question. On Consumer Beauty, I think e-commerce was up over 30% or, and, and really was quite strong in the quarter does imply that I think that the brick and mortar business was weak. Can you just contextualize how important us brick and mortar is for the overall organization? The underlying trends that you're seeing in that business, and perhaps a bit of your, you know, sequential outlook from here, specifically for us brick and mortar. And then, globally, the prestige market is driven by balanced growth, but Asia and travel retail are actually exceeding what we're seeing in America and EMEA, which are also solid, but certainly higher growth.

Christopher Michael Carey: So one follow up on consumer beauty and then.

Christopher Michael Carey: More of a global strategic question.

Christopher Michael Carey: On consumer beauty, I think e-commerce was up.

Christopher Michael Carey: Over 30% or.

Christopher Michael Carey: And.

Christopher Michael Carey: It really was quite strong in the quarter. It does imply I think that the brick and mortar business was weak can you just contextualize how important U S brick and mortar is for the overall organization.

Christopher Michael Carey: Underlying trends that youre seeing in that business and perhaps a bit of your sequential outlook from here, specifically for U S brick and mortar.

Christopher Michael Carey: Then sue just a bit more globally.

Christopher Michael Carey: Rst's market is driven by balanced growth, but Asia and travel retail are actually exceeding what we're seeing in Americas, and EMEA, which are also solid but certainly higher growth.

Christopher Michael Carey: You're so thoughtful about the sustainability of growth and the durability of growth. Are you seeing anything in these markets that might give you a little bit of pause about whether they're perhaps growing faster in areas that don't seem to give you multi-year returns, as we've seen with some of your peers? So just the concept of responsible growth globally and whether you're seeing any hotspots in Asia and travel retail that might give you some pause as far as your longer-term objectives. Thanks.

Christopher Michael Carey: So thoughtful about sustainability.

Christopher Michael Carey: Sustainability of growth the durability of growth are you seeing anything in these markets that might give you a little bit of pause about whether there perhaps growing faster in areas that don't seem to give you a multi year returns as we've seen with some of your peers. So just the concept of responsible growth globally and whether youre seeing any.

Christopher Michael Carey: Hotspots in Asia, and travel retail that might give you some pause as far as your longer term objectives.

Speaker Change: Yes. Thank you for the question. So indeed econ was indeed.

Sue Nabi: Yeah, thank you for the question. So indeed, Ecom was indeed a top performer in the Consumer Beauty division. But you're right, the Brick and Mortar performance was not as high as the one from Ecom. But in a way, another way to say it is that among, I would say, the big players among what we call historical brands on the US market, CoverGirl, if we think about this brand, is the one that's resisting the best in a way, including in Brick and Mortar.

Speaker Change: Now for the consumer Beauty Division.

Speaker Change: You're right he cannot that performance was not as high as the ones in telecom, but in a way another way to say it is that in longer I would say a big players among what we call historical brands.

Speaker Change: In the U S market because I can tell is we think about this Brian is the one that is resisting the best anyway, including in the brick and mortar so we.

Sue Nabi: We are in the middle of a transformation of this brand, as you know it. We are doing the, I would say, fastest part of the market, which is the online reinvention, with new brand equities, and Codergerly is still the number one brand equity in terms of score in the US, great rate of innovation, supported by advocacy marketing, all this translating into a huge increase in terms of penetration online, but we are also taking care of our stores, and we are working hand-in-hand with our key partners to reinvent what the shopping experience in Ricamorte could be for a color cosmetics brand, and there are beautiful things that I see in the work, so hopefully this will help us to also make sure that both sides of the story are performing equally and well for both sides.

Speaker Change: We are in the middle of a transformation of this.

Speaker Change: Brand as you know it we are doing.

Speaker Change: I would say the fastest part of the market, which is the online reinvention with the new brand equities because all that is still the number one brand equity in terms of scoring in the U S.

Speaker Change: Great some rate of innovation supported by a book is in marketing all this translating into a huge increase in terms of penetration online, but we are also taking care of our stores and.

Speaker Change: And we are working hand in hand, with our key personnel to reinvent what the shopping experience in our in zinc I'm not that could be for a cutoff cosmetics brand and they are beautiful things.

Speaker Change: I see in the work. So hopefully this will help us to also make sure that both sides of the story.

Sue Nabi: So, this is to answer your question about the brick and mortar versus the e-commerce for the consumer duty division. Now, when it comes to prestige, I have to say that the net revenues that we got for prestige in the EMEA region are very good, double digit growth during the quarter, the US market remains very, very strong, so again, it's very balanced, and it's not tied to one region or another region, but again, you know, the best way to be ready for whatever can happen and could happen is that you multiply the number of growth engines, be it in terms of categories or in terms of regions.

Speaker Change: Equity and well for both sides. So this is to answer your question about the the break in Mustang versus the E com for the consumer Beauty Division now when it comes to precision.

Speaker Change: I have to say that the net revenues that we got for prestige in the EMEA region, a very good double digit growth during the quarter. The U S market remains very very strong. So again, it's very balanced and it's not tied to one region or another region.

Speaker Change: Again, you know the best way to be ready for whatever can happen and could happen is that you multiply the number of growth engines be it in terms of categories or in terms of the regions if I start with our regions.

Sue Nabi: If I start with regions, we were just a week ago visiting the Southeast Asian region, we were in Vietnam, we were in Thailand, in China, and many other countries, and these are markets where the fragrance penetration is also increasing, people are more and more looking for fragrances specifically on both sides of the market, be it very accessible price tiers or very high-end price tiers, and these are markets where the company is growing two times faster than the rest of the portfolio, the rest of the regions, so we are in a way preparing for the next growth engines, but also in terms of categories, color cosmetics is accelerating like never before in the prestige division, mid-teens growth, and skincare, I didn't get the question for once, but I can answer it even if no one has asked, but skincare is accelerating, it's been a year in, you know, test, learn, correct, test, learn, correct, and now the brand equities of each of the three brands are quite clear, they are performing, and skincare is increasing by double digits inside the company, some brands are the smallest, are even triple digits, so we are preparing for the future, and we are preparing in terms of categories, in terms of regions, and using the power of both divisions, so that's the way I would answer your question about maybe growth coming from here and there, it's not a reality.

Speaker Change: We're just a week ago visiting the Southeast Asian region. We were in you know are in.

Speaker Change: In Vietnam, we were in Taiwan, and China, and many other countries and these are markets, where the fragrance penetration is also increasing people are more and more looking for fragrance is specifically on both sides of the market B b very accessible price tiers or very high end Ics and these are markets.

Speaker Change: The company is growing two times faster than the rest of the portfolio and the rest of the regions. So we are in a way preparing for the next growth engines, but also in terms of categories Codelco genetics is accelerating like never before in the prestige division mid teens growth in <unk>.

Speaker Change: <unk> I didn't get the question for once but I can't answer it even if no. One has asked about skincare is accelerates he's been a year in a test learn correct Tesla and correct and now the brand equities of each of the three brands are quite clear.

Speaker Change: So me and skincare is increasing by double digits inside the company some grants the smallest or even triple digits. So whenever we are preparing for the future and we are preparing in terms of categories in terms of regions and using the power of both divisions. So thats the way I would answer your question about maybe growth coming from.

Speaker Change: Here and there it's not the reality.

Ashley: Thank you. We'll take our next question from Ashley Helgans with Jeffreys. Please go ahead.

Ashley: Thank you. We'll take our next question from Ashley Helgans with Jeffries. Please go ahead.

Speaker Change: Thank you we'll take our next question from Ashley Hogan with Jefferies. Please go ahead.

Ashley Elizabeth Helgans: Hey, good morning, Congrats on the nice quarter, we wanted to ask about the current promotional environment and then just anything you can tell us about your expectations on promos as we head into holiday, especially here in the U S.

Ashley Elizabeth Helgans: Yeah, So I mean, we.

Laurent Mercier: So, I mean, we are not seeing any major change, definitely, in terms of the promotional environment. So, I mean, as we just explained, definitely, we are going through some adjustment. The market is going through an adjustment following, I mean, some significant price increases which were done over the last two years. But definitely, the last results we are seeing are really, you know, a slight recovery of the market.

Ashley Elizabeth Helgans: We are not seeing any major change definitely now in terms of the promotional environment. So I mean, there's a we just explained dish Nicky. We are we are going through some adjustment I mean, the market is going through an adjustment. Following I mean, some significant price increase which was done over the last few years BJ sneaky there last week.

Ashley Elizabeth Helgans: We are seeing is really a slight recovery of the market and again, our brands are really ends, namely a covalent east.

Laurent Mercier: And again, I mean, our brands are really, namely, CoverGirl is gaining market share omnichannel, I mean, across brick and mortar and e-commerce. So, it's really performing really well. And the way we do it is really through, you know, premium innovations, in fact. So, this is what matters.

Ashley Elizabeth Helgans: <unk> is gaining market share omnichannel immuno across brick and mortar and E. Commerce, so he's really performing really well.

Ashley Elizabeth Helgans: The way, we do it is really slow.

Ashley Elizabeth Helgans: Premium innovations in fact tons. So this is what matters and this is also as at Juno coming with high quality products.

Laurent Mercier: And this is also about coming with high quality products. I mean, the launch of Simply Edgeless Essence has been a great success. And it's, you know, it's a pretty premium product. So, you see that really coming with high quality products is giving really some ammunition. And it's not about increasing promotions. And again, we are making sure that within Coty, you know, we are not playing that game.

Ashley Elizabeth Helgans: Launch of the <unk> is a great success.

Ashley Elizabeth Helgans: <unk> premium products, so you'll see that really coming with high quality product is getting really some munition and it's not about <unk>.

Ashley Elizabeth Helgans: Increasing promotions and again, we are making sure that within Coty. We are not we are not playing that game.

Ashley Elizabeth Helgans: Okay.

Ashley: Thank you. We'll take our next question from Lauren Lieberman with Barclays. Please go ahead.

Ashley Elizabeth Helgans: Thank you we'll take our next question from Lauren Lieberman with Barclays. Please go ahead.

Lauren Rae Lieberman: Great, thanks. Good morning.

Lauren Rae Lieberman: Great. Thanks, good morning.

Lauren Rae Lieberman: You've you've offered a lot of risk that gives this morning, and so we may have lost a bit in the details but.

Sue Nabi: Sue, you've offered a lot of perspective this morning, and so I may have lost a bit in the details. But I was just wondering if you could comment on why you think there's been a slowing in U.S. mass cosmetics, just kind of getting behind the why, not the fact that it's happened, but why. And then thoughts on why it may or may not impact other categories. You know, what are the, you know, where are the consumers spending?

Lauren Rae Lieberman: I was just wondering if you could comment on why you think there has been a slowing in U S. Mass cosmetics, just kind of getting behind the why not the fact that it's happened but why.

Lauren Rae Lieberman: And then thoughts on why it may or may not impact other categories what are the.

Lauren Rae Lieberman: Where are the consumer spending are they allocating differently or their pantries to full of stuff.

Sue Nabi: Are they allocating differently? Are their pantries too full of stuff? And then with that backdrop on category growth, just curious when we look, you called out in your slide last night, the expected acceleration into the first half of next year. I know you've got easier comparisons, obviously, but just curious if that's an expectation to be sort of on algorithm growth as we get into Q1 and the comps start to ease. Thanks.

Lauren Rae Lieberman: And then with that backdrop on category growth just curious when we look you called out in your slides last night the expected acceleration into the first half of next year I know you've got easier comparisons obviously.

Lauren Rae Lieberman: But just curious if that's an expectation can be sort of an algorithm growth.

Lauren Rae Lieberman: As we get into Q1, and the comps start to ease.

Sue Nabi: Good morning, Lauren. So again, let me start with the last part of your question, which is around the acceleration in the first half. And I have to correct something now, which is it's not an easy comparison at all. This Q1 of last year was double-digit growth, the high teens, mid-teens, if I'm not wrong, and the prestige division. This was the biggest quarter ever at Coty.

Speaker Change: Hey, good morning, So again, let me start with the last part of your question, which is around the acceleration in the first half and I have to correct something there now which is it's not easy competitive at all this Q1 of last year was double digit growth high teens mid teens, if I'm not shrunk and prestige Division. This was the biggest.

Speaker Change: Costa as at Gucci. It was the launch of Burberry goodness, the launch of fragrance and the Hugo boss answer for fragrances under you know Gucci all the brands, we're doing launches at that time. So you cannot say that we are getting into easy comparison, I would love to but it's not the case. So that's an important point to correct before answering your.

Sue Nabi: It was the launch of Burberry Goddess, the launch of fragrances under Ugo Boss, the launch of fragrances under, you know, Gucci; all the brands were doing launches at that time. So you cannot say that we are getting into easy comparisons. I would love to, but it's not the case.

Sue Nabi: So that's an important point to correct before answering your question. So, let me now maybe move to the first part of your question. And I'm sorry, but I'm going to give you even more details.

Speaker Change: Question. So let me now may be moved to the first part of your question and I'm, sorry, I'm going to give you even more detail so get ready, but when it comes to the U S. We kept performance when it comes to color cosmetics. We believe there are a few things at play.

Sue Nabi: So be ready. But when it comes to the US's weaker performance, when it comes to color cosmetics, we believe there are a few things at play. Number one, pricing, as you can imagine, was a contributor to the higher growth of the category in the last couple of years. And now the pricing benefit, by definition, is moderating by several percentage points.

Speaker Change: Number one pricing as you can imagine it was a contributor to the higher growth of the category in the last couple of years and now the pricing benefit by definition is moderating by several percentage points number two the mass cosmetics consumption in the U S was growing here again like on fragrances above historical levels.

Sue Nabi: Number two, mass cosmetics consumption in the US was growing here again, like for fragrances, above historical levels in recent years. And we are now seeing some easing in these dynamics, since consumers are stocked on some products related to this element of stocking up at home coupled with economic pressure, particularly on lower incomes. There has been some decline in cosmetic household penetration across age groups, which we see, but at the same time, and this is very important, younger consumers are changing the dynamics of the market, including, number one, shifting to new channels, which are not captured by Nissan, such as ultra-low-cost Amazon dollar stores. Number two, shifting to new ways and new consumption when it comes to color cosmetics. I'm thinking about primers, I'm thinking about concealers, I'm thinking about highlighters, and brow products.

Speaker Change: In the last years and we are seeing now some easing in this dynamics since consumers are stuck on some projects.

Speaker Change: Weighted to that element of stuck up at home coupled with economic pressure.

Speaker Change: Lower incomes there has been some decline in cosmetic household penetration across age groups. This we see that at the same time and this is a very important younger consumers are changing the dynamics of the market, including number one.

Speaker Change: <unk>, two new channels, which are not captured by Nielsen such as Ulta Amazon dollar stores number two shifting to new ways of new consumption. When it comes to Conoco Smith.

Speaker Change: I'm thinking about primary I'm thinking about considers I'm thinking about Highlighters Brill products and this comes at the expense of traditional products explanations and mascara, which used to be the queen categories number three these consumers even trading up and we see them trading up to Masstige brands and two masstige.

Sue Nabi: And this comes at the expense of traditional products like foundations and mascaras, which used to be the queen categories. Number three, these consumers are even trading up, and we see them trading up to must-see brands and to must-see channels, because they are looking for what we call cool beauty, trending beauty, etc. And it has been seen, in fact, that prestige color cosmetics is benefiting from this. That's what explains the health of this part.

Speaker Change: Those because they are looking for what we call could beauty trending beauty et cetera, and this has been seen in fact that prestige color cosmetics is benefiting from this that's what explains the health of this but the good news for a company like <unk>.

Sue Nabi: The good news for a company like Coty is that we are really adjusting, you know, actively adjusting in keeping with changing consumer behaviors. Number one, as you've seen it with the performance of Consumer Beauty, we are doubling down on e-com, particularly Amazon, where our brands, I'm thinking about CoverGirl, I'm thinking about Sally Hansen, are growing by close to 30%, 3-0 in the last quarter Number two, we are picking up distribution in growing channels. I'm thinking about channels like Dollar General or Five Below.

Speaker Change: Is that were really adjusting.

Speaker Change: Actually if you are just seeing in keeping with this changing consumer behaviors number one as you've seen it with the performance of consumer beauty, we are doubling down on E com.

Speaker Change: Amazon where our brands.

Speaker Change: King about because I'm again, I'm thinking about Sally Hansen and drilling by close to 30% three zero in the last quarter number two we are picking up distribution in growing channels I am thinking about channels like doled out.

Sue Nabi: We are also reallocating media on the one hand towards advocacy to drive penetration with younger consumers. But, and this is a very important but, we are also keeping the right level of media to continue to keep the consumption of consumers above 30 years old because they are a big part of the market. Number four, we are also, you've seen it, launching products that are more and more disruptive, distinct, and made to viralize on social media.

Speaker Change: Or a size below we are also relocating me.

Speaker Change: On the one hand towards advocacy to drive penetration with younger consumers, but and this is a very important that we are also keeping the right level of media to continue to keep the consumption of consumers above 30 years old because of that a big part of the market number four we are also you've seen at launching products that are more and more disruptive.

Speaker Change: <unk> distinct made to their lives on social media, we are amplifying the cool factor of our brands. So at the end of the day. It is important to note that all these global trends as cosmetic demand in other parts of the world remain very solid, including strong category growth in Germany, and UK, Poland and Brazil, So the American market.

Sue Nabi: We are amplifying the cool factor of our brands. So at the end of the day, it's important to note that all these global trends, as cosmetic demand in other parts of the world remains very solid, including strong category growth in Germany, the UK, Poland, and Brazil. So, in sum, this again reinforces the ability of the company, in terms of its multi-channel, multi-category international portfolio, to be, in a way, a good differentiator and a point of strength versus competition.

Speaker Change: So in the same direction. So in sum this again reinforces the ability of the company in terms of multichannel multi category intervention with thoughts for you to be in a weird.

Speaker Change: The differentiator in the point of strength versus competition.

Speaker Change: Yeah.

Ashley: Thank you. We'll take our next question from Linda Bolton-Weiser with D.A. Davidson. Please go ahead.

Speaker Change: Thank you we'll take our next question from Linda Bolton Weiser with D. A Davidson. Please go ahead.

Linda Ann Bolton: Yes, hi. Um, I was wondering if you could comment. First, on fragrance, you called out different things that are really drivers, like goddess. But I was curious about Gucci and Hugo Boss; you didn't really call those out. So are there plans for the upcoming quarters there? And maybe you could comment on how, with Hugo Boss, just in general, how men's fragrance is doing. And then secondly, on Lancaster, I was curious, what does it take to see before you kind of expand it beyond Asia, in terms of making it a broader global anti-aging skincare brand? Thanks.

Speaker Change: Yes, hi.

Speaker Change: I was wondering if you could comment.

Speaker Change: Sure.

Speaker Change: I'm.

Speaker Change: Im sorry grants you called out different things that are really drivers like.

Speaker Change: Got it.

Speaker Change: But I was curious about Gucci and Hugo boss he didn't really called those out so are there plans in the upcoming quarters there.

Speaker Change: And maybe you could comment on how would you go box just in general how men's fragrance is doing and then secondly, Lancaster I was curious.

Speaker Change: Hum.

Speaker Change: What what does it take to see before you kind of expand that beyond age.

Speaker Change: In terms of making it a broader global anti aging skincare brand. Thanks.

Speaker Change: Yes. Good morning. Thank you for the question. So let me start with the Lancaster, Indeed, you know that.

Sue Nabi: Good morning, Linda. Thank you for the question. So, let me start with Lancaster. Indeed, you know, the brand is not an Asian brand. The brand is mainly a European brand. Lancaster is the number one photo-aging or sun care brand in Europe in prestige channels. And this is something that is important to remind everyone.

Speaker Change: It's not an Asian brand the brand is mainly a European brand.

Speaker Change: Like I said is the number one photo aging or Sun care brand in Europe, and prestige channels and this is something that is important to remind everyone. So it's a big business in Europe is one of the fastest growing some protection grant in Europe, and we took the brand to China, mainly to see how we can confront to the super very calm.

Sue Nabi: So it's a big business in Europe. It's one of the fastest growing sun protection brands in Europe. And we took the brand to China mainly to see how we can compete in this super, very competitive market. So you see Lancaster acting now on two legs, Asia on one side and Europe on the other side in both categories, be it photo protection or skin care. So the brand will be double-sided photo aging and photo repair, which is skin care and UV protection, but also has two legs, one European leg and one Chinese slash Asian leg. So that hopefully answers your question.

Speaker Change: It is market. So you would see on cash they are acting now on two legs Asia on one site in Europe and the other side on both categories.

Speaker Change: Lot of protection of skincare, So the brand will be.

Speaker Change: Double sided photo aging and sort of hit that which is skincare and UV protection, but also two legs, one European leg and one Chinese slashed Asian mix. So that hopefully answers. Your question and this is going to happen in the calendar year that we are into this.

Sue Nabi: And this is going to happen in the calendar year that we are in this year. Now, when it comes to the fragrance part, we are talking about entry-level prestige fragrance brands. I can tell you that a brand like Davidoff, for example, is booming in the portfolio of Coty simply because this brand is a quality brand at the same time, much more affordable than many other brands. And this part of the market is doing well.

Speaker Change: This year now when it comes to the fragrance part you were talking about entry prestige fragrance brands.

Speaker Change: Can't tell you that the brand like that it does for example is booming in the portfolio of <unk> simply because of these brands is a quality brand at the same time much more affordable than many other brands in this part of the market is doing well Hugo boss is also doing well again, it's part of our top seven brands that have been growing double digits.

Sue Nabi: Hugo Boss is also doing well. Again, it's part of our top seven brands that have been growing double digits until the end of last year. And we see all these brands accelerating more and more inside the portfolio. Are there plans? Of course, there are plans. I'm not going to reveal whatever is going to happen in the fall because of competitors listening to us. But this part is very important as a growth driver for the company and men's fragrances.

Speaker Change: Until the end of last year, and we see also all these brands accelerating more and more inside the portfolio that lends there of course, there are plans I'm not going to read whatever is going to happen in the fall because of competitors listening to us but this part is very important as a growth driver of the company and men's fragrances.

Sue Nabi: Indeed, Hugo Boss is a huge leader, specifically in a country like France. I have to tell you that the other performance of Burberry, Chloé, and Hugo Boss in a country like France explains why Coty is one of the only two companies that gained market share on the very competitive French market during the last quarter.

Speaker Change: Indeed, Hugo boss is a huge either specifically in countries like France I have to tell you that the assortments of elderly Chloe and Hugo boss in a country like France explains that Coty is one of the only two companies that are gaining market share on the very competitive market.

Speaker Change: During the last quarter.

Speaker Change: Okay.

Ashley: Thank you. We will take our final question from Mark Astrachan with Stiefel. Please go ahead.

Speaker Change: Thank you we will take our final question from Mark Astrachan with Stifel. Please go ahead.

Mark Stiefel Astrachan: Question on fragrance. I guess maybe more specifically on the prestige side, I wanted to ask how you think about the category broken out between Unknown Speaker Designer brands, which is sort of the bulk of your portfolio, the prestige beauty brands that also have fragrance extensions, and those that are more or less pure play ultra-premium fragrance brands, where I feel like you're gaining, obviously, a lot of share relative to some others. And is it that some of those other segments are decelerating, the designers are accelerating? You know, what's driving that.

Mark Stiefel Astrachan: Yes, Thanks, and hi, everyone.

Mark Stiefel Astrachan: Question on fragrance, I guess, maybe more specifically on the prestige side wanted to ask how how to think about.

Mark Stiefel Astrachan: The category broken out between.

Mark Stiefel Astrachan: Our designer brands, which is sort of the bulk of your portfolio the <unk>.

Mark Stiefel Astrachan: <unk> beauty brands that also have fragrance extensions and those that are more or less pure play ultra prestige fragrance brands, where you feel like youre, gaining obviously a lot of share relative to some others.

Speaker Change: Is it that some of the other.

Speaker Change: Segments are decelerating the designers are accelerating and what's driving that.

Sue Nabi: Yeah, that's a good question. Indeed, you perfectly described the three parts of the market, you know, fragrances coming from beauty brands, fragrances coming from designer brands, and including what we call collections, which are the high end of designer brands and pure players in the niche. The part that's doing the best, the one that's accelerating, is indeed pure players. So it's really fragrance brands that are not tied to fashion companies or to beauty companies, more or less.

Speaker Change: Yeah, that's a that's a good question.

Speaker Change: You you perfectly describes the three parts of the markets you know fragrance coming from beauty brands fragrance is coming from designer brands and including what we call collections, which is the high end of the designer brands and a few players at the niche.

Speaker Change: That's doing the best the one that's accelerating in these few players. So it's really fragrance brands that are not tied to fashion companies or two beauty companies more on this it's really pure players you know.

Sue Nabi: It's really pure players. You know, some of them, I'm not going to quote our competitors, but infinite Coty Paris is exactly that. It's a pure player, it's not tied to a fashion brand, and it's not even coming from a beauty name, if I may call it that.

Speaker Change: Some of them are not going to quote our competitors, but asking democracy.

Speaker Change: It is exactly this is a pure play you're it's not tied to a fashion brand and its nothing either coming from a beauty name if I may call. It like this this is the fastest growing part of the market and this is even representing in some regions like China almost a third if not 40% of the market. We believe this is going to be the fastest growing part of the mark.

Speaker Change: For the next decade, and this is where more and more consumers are shopping then you have designer brands with the fragrance successes such as the elderly good there. So dizzy wild of cosmic that we launched recently some of these brands have collections, which is a small fraction of the business is the fastest growing but growing less than.

Sue Nabi: This is the fastest growing part of the market. And this represents, in some regions, like China, almost a third, if not 40%, of the market. We believe this is going to be the fastest growing part of the market for the next decade. And this is where more and more consumers are shopping. Then you have designer brands with fragrance successors such as Burberry Goddess or Daisy Wild, or Kylie Cosmic, which we launched recently.

Sue Nabi: Some of these brands have collections, which is a small portion of the business, is the fastest growing part, but growing less than pure players. And indeed, the part that we see is not growing anymore, at least last time I looked at this, it was not the part that was growing.

Speaker Change: Few players and indeed, the past that we see not growing anymore at least last time I looked at this was not the part that is growing and it's I would say more than a decade of trend is beauty brands doing fragrances, which is really in a way a shrinking year after year and over the last decade, that's the one.

Sue Nabi: And it's, I would say, more than a decade trend of beauty brands doing fragrances, which is really, in a way, shrinking year after year and over the last decade. That's the way I would describe this fragrance market. For us, we have a fantastic opportunity, as you can imagine, for niche pure players. This is an area where we are working very hard. And infinitely Coty Paris is clearly one of the best that we're doing in this area.

Speaker Change: I was.

Speaker Change: Describe this fragrance market for us we have a fantastic opportunity as you can imagine on the niche players. This is an area, where we are working very hard.

Speaker Change: Democracy body is clearly one of these bets that we're doing in this area. We are of course double betting on designer brands. The success is the recent successes we've been posting a really a great Testament to how much. This category is something we understand well and in which we are going to compete more and more but also collections clearly ought to be.

Sue Nabi: We are, of course, double betting on designer brands. The recent successes we've been posting are really a great testament to how much this category is something we understand well and in which we are going to compete more and more. But also collections. Chloé Atelier des Fleurs is one of the fastest growing collections in the portfolio of the company, but also Hugo Boss La Collection, which was launched a year ago for a more masculine audience. This one is also doing very, very well. So that's more or less the way I would answer your question.

Speaker Change: This is one of the fastest growing collection among the posture of portfolio of the company, but also yugo bus that critics show, which was launched a year ago with a more masking audience. This one is also doing very very well, so that's more or less the way I would answer your question.

Ashley: And there are no further questions at this time. I'll turn the call over to the speakers for closing remarks.

Speaker Change: And there are no further questions at this time I'll turn the call to the speakers for closing remarks.

Sue Nabi: Thank you very much, everyone. I think this is another quarter of results that are above expectations, 16th quarter, almost four years. So we are super, super happy, super proud. And we are going to continue to create the most innovative, the most exciting, the trendiest things that consumers are not expecting, because this is the way the beauty industry works.

Speaker Change: Thank you very much everyone. I think this is another a cross sell of results that are above expectation 16, scottsville almost four years. So we're super Super Happy Super proud that we're going to continue to create.

Speaker Change: The most innovative the most exciting the most.

Speaker Change: <unk> thinks that consumers are not expecting because this is the way the beauty industry work and see you in August for the Q4 earnings. Thank you very much.

Ashley: And see you in August for the Q4 earnings. Thank you very much. Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.

Speaker Change: Okay.

Speaker Change: Thank you. This does conclude today's program. Thank you for your participation you may disconnect at any time.

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