Q4 2024 Coty Inc Earnings Call - Q&A

August 21, 2024

Speaker Change: [music]. Please standby your program is about to begin.

Operator: Please stand by your program as about to begin.

My name is Ashley, and I will be your conference operator today.

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[music].

Ashley: My name is Ashley, and I will be your conference operator today. At this time, I would like to welcome everyone to Cody's fourth quarter fiscal 2024 question-and-answer conference call. As a reminder, this conference call is being recorded today, August 21, 2024, at 8:15 a.m. Eastern time, or 2.15 p.m. Central European Time. Please note that on August 20, at that approximately 4:30 p.m. Eastern Time, or 10:30 p.m.

My name is Ashley and I will be your conference operator today at this time I would like to welcome everyone to <unk> fourth quarter fiscal 2020 for question and answer conference call. As a reminder, this conference call is being recorded today August 21, 2024 at 815, a M eastern time.

At this time, I would like to welcome everyone to Coty's 4th Quarter Fiscal 2024 Question, and Answer Conference Call.

We'll take our next question from Korinne Wolfmeyer with Piper Sandler.

Thank you for your participation.

At this time, I would like to welcome everyone to Coty's 4th Quarter Fiscal 2024 Question, and Answer Conference Call.

We will take our next question from Andrea Teixeira with J.P. Morgan.

Thank you for your participation.

You may disconnect at any time.

As a reminder, this conference call is being recorded today, August 21, 2024, at 8.15 a.m. Eastern Time or 2.15 p.m. Central European Time.

Please, go ahead.

As a reminder, this conference call is being recorded today, August 21, 2024, at 8.15 a.m. Eastern Time or 2.15 p.m. Central European Time.

Please go ahead.

Speaker Change: Hey.

Speaker Change: 215 P M Central European time. Please note that on August 20th at approximately 430 P. M. Eastern time, or 10 30 P. M Central European time, Cody issued a press release and prepared remarks webcast, which can be found on its investor website.

Speaker Change: Please note that on August 20th at approximately 4.30 p.m. Eastern Time or 10.30 p.m. Central, European Time, Coty issued a press release and prepared remarks webcast, which can be found on its investor website.

Speaker Change: Hi, good morning.

Unknown Executive: Central European Time, Cody issued a press release and prepared remarks webcast, which can be found on its investor website.

Speaker Change: Thank you for taking my question.

Ashley: On today's call are Sue Nabi, Chief Executive Officer, and the role of the third Chief Financial Officer. I would like to remind you that many of the comments today may contain forward-looking statements. Please refer to Cody's earnings released and the reports filed with the SEC, with the company list factors that could cause actual results to differ materially from the forward-looking statements. In addition, except where noted, the discussion of Cody's financial results and Cody's expectations reflected certain adjustments as specified in the non-GAAP financial measures section of the company's release.

Speaker Change: On today's call are Sue Nabi, Chief Executive Officer, and Laurent Mercier, Chief Financial, Officer.

Speaker Change: Good morning, team.

Speaker Change: On today's call are Sue Nabi, Chief Executive Officer, and Laurent Mercier, Chief Financial, Officer.

Speaker Change: So I wanted to, Sue, you sounded very confident of the launches that you have and what you're going to come up with Burberry Goddess and a lot of the launches that we have for the strong holiday season.

On today's call are still Nabi, Chief Executive Officer, and note Masseur, Chief Financial Officer, I would like to remind you that many of the comments today may contain forward looking statements. Please refer to <unk> earnings released in the reports filed with the FCC with the company lists factors that could cause actual results to differ materially from the forward.

Speaker Change: Thanks for taking the question.

Speaker Change: I would like to remind you that many of the comments today may contain forward-looking, statements. These refer to Coty's earnings released and the reports filed with the SEC with the company, list factors that could cause actual results to differ materially from the forward-looking statements.

Speaker Change: I'd like to touch on the guidance, for the year and the cadence you've alluded to.

Speaker Change: And obviously, understandably, you have to third visibility right now of the quarter.

Speaker Change: It seems like the back half is going to be fairly strong, and I would love to understand the level of visibility you believe you have into the back half of this fiscal year and what gives you confidence in those targets.

Speaker Change: But can you help us like look through channel and more of what you have gained in terms of like distribution to give us confidence that you can call that very strong comparison in the holidays last year?

Speaker Change: Looking statements. In addition, except where noted the discussion of <unk> financial results and kudos expectations reflect certain adjustments as specified in the non-GAAP financial measures section of the company's released with that I will now open the line for questions.

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

Speaker Change: And then additionally, on the well estate, if there's any color you can provide on progress, there, any updates on conversations you've had with potential suitors to sell it off to, and then I believe you talked a little bit about share repurchases in the group prepared remarks.

Ashley: With that, I 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 question at any time by pressing Star 2. Once again, that is star N1.

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

Speaker Change: So any commentary on updated thinking around share repurchases and capital allocation would be great.

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

Speaker Change: And given like how cyclical fragrances have been, I understand all the body oils and fragrances have been a wellness category for pretty much the last four years.

Speaker Change: But understandably, thinking about how the consumer is making tough choices as we go, in particular, in the key markets that you're in, understandably how this is going to unfold and what gives you confidence that then you're going to re-accelerate in the second half, given despite the comps.

Speaker Change: At this time, if you would like to ask a question, please press star 1 on your telephone, keypad.

Speaker Change: Thank you.

Speaker Change: At this time, if you would like to ask a question, please press star 1 on your telephone, keypad.

Speaker Change: I mean, the comps are the comps are, but I think it's important to see how you're planning the cadence of these of the launches to offset the tough comps and also like a clarification as we build into your guidance.

Speaker Change: At this time, if you would like to ask a question. Please press star one on your telephone keypad you may withdraw your question at any time by pressing star to you. Once again that is star N. One we'll take our first question from Oliver Chen with T. D. Cohen. Please go ahead.

Speaker Change: You may withdraw your question at any time by pressing star 2.

Speaker Change: Once again, that is star and 1.

Oliver Chin: We'll take our first question from Oliver Chin with TD Cohen. Please go ahead. Oliver, your line is open. Please check your mute function.

Speaker Change: We'll take our first question from Oliver Chin with TD Cohen.

Speaker Change: Okay.

Speaker Change: We'll take our first question from Oliver Chin with TD Cohen.

Speaker Change: I believe you mentioned hitting a margin of eighteen percent and given your guidance.

Speaker Change: Please go ahead.

Speaker Change: Oliver, your line is open.

Speaker Change: Thank you, Korinne.

Speaker Change: Oliver, your line is open.

Speaker Change: So first on the guidance, so I mean, first of all, indeed, so we are, you know, confirming our midterm algorithm for fiscal 25, which is 6 to 8%. We are indicating as we flag during the last earnings call that, you know, sequential improvement, in Q1, which is around 6%, and then indeed, you know, moving to the 6 to 8% algorithm in H1 and then in H2.

Speaker Change: Yeah.

Speaker Change: Oliver Your line is open please check your mute function.

Speaker Change: Please check your mute function.

Speaker Change: I mean, the key reason, you know, about these sequences is also about comps.

Speaker Change: Please check your mute function.

Speaker Change: Okay.

Speaker Change: We will take our next question from Susan Anderson with Canaccord Genuity.

Speaker Change: So, when you back it out, it actually would give you a higher revenue number than what you're implying your guidance understand that perhaps that number is a fact neutral that would give you close to a mid single digit increase in sales, as opposed to, let's say, a four percent increase in sales revenue.

Susan Anderson: Okay, we will take our next question from Susan Anderson with Canaccord Genuity. Please go ahead. Hi, good morning. Thanks for taking my question. Nice job on the quarter in the year.

Speaker Change: Okay. We will take our next question from Susan Anderson with Canaccord Genuity. Please go ahead.

Susan Anderson: Please go ahead.

Speaker Change: Please go ahead.

Susan Anderson: Hi.

Susan Anderson: Good morning.

Susan Anderson: As you remember, last year, there was very strong phasing. Our Q1 was plus 18%, our Q2 was 11%, and then Q3, 10, and then, you know, landing the year at 11%.

Susan Anderson: Good morning.

Susan Anderson: Hi, Good morning, Thanks for taking my question and nice job on the quarter and the year I guess, maybe just to start out I'm curious about the global distribution expansion for a beta I guess in this year I'm curious just you know the timeline what countries do you expect to expand into first and is this gonna roll out pretty quickly.

Susan Anderson: Thanks for taking my question.

Susan Anderson: Nice job on the quarter and the year.

Susan Anderson: So, fiscal twenty five, I guess that's a question all around.

Susan Anderson: I guess maybe just to start out, I'm curious about the global distribution expansion for, Aveda, I guess, in this year.

Susan Anderson: I guess maybe just to start out, I'm curious about the global distribution expansion for Oveda. I guess in this year. I'm curious just, you know, the timeline. What country do you expect to expand into first, and is this going to roll out pretty quickly, or should we kind of expect the flow roll out throughout the year and into next? And then also I'm curious if you already have retail distribution in place. Thanks.

Susan Anderson: I'm curious just, you know, the timeline, what countries do you expect to expand into, first, and is this going to roll out pretty quickly?

Susan Anderson: Or should we kind of expect a slow rollout throughout the year and into next?

Susan Anderson: Or should we kind of expect a slow rollout throughout the year and Internet and then also I'm curious if you already have retail distribution in place.

Susan Anderson: And then, also, I'm curious if you already have retail distribution in place.

Suzanne: Thanks.

Susan Anderson: Thanks.

Suzanne: Good morning, Susan.

Suzanne: So of course, we have high comps, and we are taking this into account in our algorithm.

Suzanne: Good morning, Susan.

Suzanne: Thank you very much for both.

Sue Nabi: Morning, Susan. Thank you for your question. This is to speaking. So regarding our skincare ambition. And indeed, the ultra premium brand of the idea is that we've been reading the brand with a year and a half with strategy. This brand got, I think, the highest probably one of the highest number of awards, specifically behind its omnipotent serum, which is the first of this kind of serums using synthetic technologies inspired by, I would say, pharmaceutical technologies. And this allowed the brand to have the highest number of awards. We've also been having the brand present in some department stores, such as Harrods in London, such as Saks with the new New York several Saks locations in the US.

Suzanne: Thank you for your question.

Suzanne: So comps are easier in the H2.

Suzanne: Thank you for your question.

Suzanne: My name is Suzanne. Thank you for your question. This is Stu speaking so regarding our skincare ambition and indeed to the.

Suzanne: This is Sue speaking.

Suzanne: Then definitely, we are modeling that our sellout should be aligned with our selling in the H2.

Suzanne: This is Sue speaking.

Suzanne: Yeah.

Suzanne: So, regarding our skincare ambition and, indeed, the ultra-premium brand Aveda, the idea is, that we've been readying the brand with a year-and-a-half whisper strategy.

Suzanne: And of course, I mean, this is supported by all the innovations that, you know, we are piping in starting now, but we will continue in H2, both on prestige and on consumer beauty.

Suzanne: So, regarding our skincare ambition and, indeed, the ultra-premium brand Aveda, the idea is, that we've been readying the brand with a year-and-a-half whisper strategy.

Suzanne: Okay.

Speaker Change: It's a premium brand of it though.

Speaker Change: So indeed, there are all these elements drivers, which are really captured in the sequencing of these growth algorithms.

Speaker Change: The idea is that we've been readying the brand with the year in the house, we supposed strategy. This Brian but I think the highest probably one of the highest number of awards specifically behind each of Newport in serum, which is a first of a.

Speaker Change: This brand got, I think, the highest, probably one of the highest number of awards, specifically, behind its omnipotent serum, which is a first of this kind of serums using senolytic technologies inspired by, I would say, pharmaceutical technologies. And this allowed the brand to have the highest number of awards.

Speaker Change: Then on your second part on capital allocation, I mean, first of all, I just want to remind again and again that deleveraging is the number one imperative for the company.

Speaker Change: And of course, that, you know, we keep targeting, you know, towards the two times end of calendar 25.

Speaker Change: This kind of serum using central Geeks technologies inspired by I would say, so I'm a surgical technologies and this allowed the brand to have the highest number of awards.

Speaker Change: We've also been having the brand present in some department stores, such as Harrods, in London, such as Saks Fifth Avenue in New York, several Saks locations in the U.S., and an own store in China, which is the Maison Aveda in Shanghai.

Speaker Change: Also being having the brand presence in some department stores, such as Harrods in London, such as Saks Fifth Avenue in New York, several Saks locations in the U S.

Sue Nabi: And an own store in China, which is the meso, Oveda in Shanghai.

Speaker Change: And one store in China, which is the Miss in Shanghai now is the right moment to accelerate the expansion of the brand the brand is going to open.

Speaker Change: Now is the right moment to accelerate the expansion of the brand.

Speaker Change: And I want really to insist that these two times is really without any Velastake divestiture.

Speaker Change: Now is the right moment to accelerate the expansion of the brand.

Sue Nabi: Now is the right moment to accelerate the expansion of the brand. The brand is going to open, you know, a lot of doors in the coming fiscal, starting in the first half. This is, of course, you know, high end doors need doors. We are not talking about specialty stores. We are not even talking about classical department stores. Because we are talking about high-end doors, what we believe the consumers who are able and ready and willing to shop $400 serum and a $300 moisturizer are shopping more and more. And this is really what is going to happen behind the brand.

Speaker Change: The brand is going to open, you know, a lot of doors in the coming fiscal, starting in, the first half. This is, of course, you know, high-end doors, niche doors.

Speaker Change: So it's really built by pure organic EBITDA expansion and cash flow generation.

Speaker Change: The brand is going to open, you know, a lot of doors in the coming fiscal, starting in, the first half. This is, of course, you know, high-end doors, niche doors.

Speaker Change: A lot of doors in the coming Cisco starting in the first half this is of course.

Speaker Change: Okay, so that's very important.

Speaker Change: So now definitely on Velastake, so it's really okay, we keep targeting, you know, these divestiture end of calendar 25.

Speaker Change: Now, as you know, this is definitely in the hands of the main shareholder, which is KKR.

No I endorse in these doors, we are not talking about.

Speaker Change: We are not talking about specialty stores.

Speaker Change: Especially two stores, we're not even talking about classical department stores, we are talking about high end doors. When we believe the consumers who are able and ready and willing to ship 400 dollar serum in the 300 dollar moisturizer shopping more and more and this is really what is going to happen behind the brand. So we are talking about an exit of.

Speaker Change: We are not even talking about classical department stores. We are talking about high-end doors, where we believe the consumers who are able and, ready and willing to shop a $400 serum and a $300 moisturizer are shopping more and more.

Speaker Change: So no specific news on this.

Speaker Change: And again, on share, you know, repurchase, as I indicated, definitely we confirm our plan really to move towards, you know, 800 million share count really by end of fiscal 27.

Speaker Change: So this agenda is unchanged.

Speaker Change: Definitely, Velastake divestiture will be an opportunity even, you know, to do it faster.

Speaker Change: And this is really what is going to happen behind the brand.

Speaker Change: This is really what we are taking into account in the algorithm.

Speaker Change: And this is really what is going to happen behind the brand.

Sue Nabi: So we are talking about an acceleration of the expansion of the brand in this fiscal 25, which was really something that was long awaited.

Speaker Change: We are talking about an acceleration of the expansion of the brand in this fiscal 25, which was really something that was long-awaited.

Speaker Change: So, so algorithm is unchanged and agenda remains the same.

Speaker Change: We are talking about an acceleration of the expansion of the brand in this fiscal 25, which was really something that was long-awaited.

Speaker Change: Ration of the expansion of the brand in this fiscal 'twenty five of which was really something that was long awaited.

Speaker Change: Thank you.

Speaker Change: Okay, great, that sounds exciting.

Speaker Change: We will take our next question from Andrea Teixeira with J.P. Morgan.

Speaker Change: Okay, great, that sounds exciting.

Susan Anderson: Okay, great! That sounds exciting. If I can maybe just add one more on the innovation pipeline, you mentioned a number of launches for physical 25s in the presentation.

Speaker Change: Okay, great that sounds exciting.

Speaker Change: I can maybe just add one more on the innovation pipeline you mentioned a number of launches for fiscal 'twenty five in the presentation. I'm curious are there any that haven't been announced yet that we should expect as we go throughout the year either in fragrance or in prestige cosmetics and then also maybe if you could touch on pricing versus volume mix for.

Speaker Change: If I could maybe just add one more on the innovation pipeline, you mentioned a number of launches for Fiscal 25 in the presentation.

Speaker Change: Please go ahead.

Speaker Change: If I could maybe just add one more on the innovation pipeline, you mentioned a number of launches for Fiscal 25 in the presentation.

Sue Nabi: I'm curious, are there any that haven't been announced yet that we should expect as we go throughout the year, either in fragrance or in prestige cosmetics, and then also maybe if you could touch on pricing versus volume mix for physical 25s? Yeah, let me start with the first part. And then maybe Laurent can take this. The pricing versus volume mix pack. So, in terms of innovation pipeline, as a reminder, you know, we've been very active since Q1 of last fiscal Fiscal 24 indeed started very, very big. Remember the company did the growth of 18% in the Q1 of fiscal 24, and prestige was even bigger.

Speaker Change: I'm curious, are there any that haven't been announced yet that we should expect as we go throughout the year, either in fragrance or in prestige cosmetics?

Speaker Change: And then also maybe if you could touch on pricing versus volume mix for Fiscal 25?

Speaker Change: Yeah, let me start with the first part, and then maybe Laurent can take the pricing versus volume mix part.

Our fiscal 'twenty five.

Speaker Change: Yeah, Let me start with the first stuff and then maybe you go Hong can take the pricing versus just a mix a buck.

Speaker Change: So in terms of innovation pipeline, as a reminder, you know, we've been very active since Q1 of last Fiscal.

Speaker Change: Hi, good morning.

Speaker Change: So in terms of innovation pipeline, as a reminder, you know, we've been very active since Q1 of last Fiscal.

Speaker Change: So in terms of innovation pipeline as a reminder, it you know we've been very active since our Q1 of last fiscal year.

Speaker Change: Fiscal 24 indeed started very, very big.

Speaker Change: Thank you for taking my question.

Speaker Change: Fiscal 24 indeed started very, very big.

Speaker Change: So, I mean, let me start indeed on the fiscal twenty four launches.

Speaker Change: Fiscal 'twenty four indeed start that very very big remember the continued DDA growth of 18% in the Q1 fiscal 'twenty four.

Speaker Change: Remember, the company did a growth of 18% in the Q1 of Fiscal 24.

Speaker Change: I mean, that's really a key question.

Speaker Change: And we explained several times that the strategy we put in place is exactly that we are not going to disrupt that.

Speaker Change: And prestige was even bigger it was about 20% of growth and this was chapter one of Doughbelly goodness. So we are adding belleville. He good there's intense that's surprising now which is clearly something on the huge success of the goodness launch.

Laurent Mercier: It was about 20% of growth. And this was chapter one of double goodness. So we are adding verbally goodness intense that's arising now, which is clearly surfing on the huge success of the goodness launch. That, by the way, allowed us to almost double the size of the brand. This is number one, number two. We are also having the carryover of the launches that happened in the second half of fiscal 24. So Mark Jacobs Desiwai, the number one innovation in spring in the U.S. will continue its carryover during H1. Kylie Cosmic is also going to continue its carryover during this H1 moment.

Speaker Change: And prestige was even bigger, it was above 20% of growth, and this was Chapter 1 of Burberry Godess.

Speaker Change: But we are going to continue in fiscal twenty five.

Speaker Change: And obviously, understandably, you have to third visibility right now of the quarter.

Speaker Change: So we are adding Burberry Godess Intense that's arriving now, which is clearly surfing on the huge success of the, Godess launch.

Speaker Change: So it means that Burberry goddess will continue to grow.

Speaker Change: That, by the way, allowed us to almost double the size of the brand.

Speaker Change: By the way allowed us to almost double the size of the brands. This is number one number two we are also having the carryover of the launches that happened in the second half of fiscal 'twenty four so Marc Jacobs Daisy while the number one innovation in spring in the U S will continue its carryover doing H one.

Speaker Change: Cosmic is also going to continue its carryover during this H, one moment and number one volume in the U S. For this one and we are also you may have read it in a in a in Ww D. I think a few days ago.

Speaker Change: This is number one.

Laurent Mercier: Number one volume in the U.S. for this one. And we are also, you may have read it in WD. I think a few days ago. Chloe is doing its biggest launch ever. Chloe in intense, which is also writing in full. So the pipeline of fragrances beat. You know, chapter two of previous successes, adding on top of these innovations or the carryover from H2 of fiscal 24 plus new launch has just Chloe and tons are really giving us this confidence that we are going to continue the momentum behind our track record of blockbusters in prestige fragrance.

Speaker Change: Number two, we are also having the carryover of the launches that happened in the second half of Fiscal 24.

Speaker Change: And we are also Burberry goddess intense.

Speaker Change: So which is going to come on top.

Speaker Change: Okay.

Speaker Change: QE is doing its biggest launch ever kilian intense which he is already being enforced so the pipeline of fragrances beat.

Speaker Change: Chapter two previous successes are adding on top of these are innovations or the carryover from H two of fiscal 'twenty four plus new launches to just go in and those are really giving us. This country dance that we are going to continue the momentum behind our track record the best chosen prestige fragrances.

Laurent Mercier: Now, we are also active on other categories; we're active, of course, on color cosmetics. We have a few launches arriving without revealing these. We have a few launches arriving specifically behind our, I would say, most successful color cosmetics brand. I'm thinking about the tree. I'm thinking about Kylie Cosmetics. We have also skin care. There is a big thing arriving behind Lancaster in Europe. So Lancaster has been doing fantastically well in China, almost doubling year on year in terms of size. Now it's the turn of Europe for this brand so that we have really both sides of the picture activated behind this brand.

Speaker Change: Now we are also active on other categories, while active of course on color cosmetics and we have a few launches are rising without revealing these we have a few launches or anything specific behind.

Speaker Change: I would say most successful color cosmetics brand I'm thinking about the three I'm thinking about K E cosmetics.

Speaker Change: We have also skincare that he was a big thing of riding behind lung cancer in Europe. So I don't guess that has been doing fantastically well in China, almost doubling year on year in terms of size now it's the turn up Europe for these brands. So that we have really both sides of the picture.

Speaker Change: Behind these brands.

Laurent Mercier: And last but not least, we have also consumer beauty. We've announced at the launch of 3D mascara from CoverGirl, which we believe is going to be a big innovation. There is a three seeker extreme. From Remal and many, many other launchers, last but not least, consumer beauty is also going into fragrances in big with the first global launch of a fragrance line called Adidas Vibes, which we believe is clearly going to ignite the second leg of categories inside this division next to color cosmetics. We now have big fragrance launches happening in this division.

Speaker Change: Last but not least we have also consumer beauty, we've announced the launch of <unk>.

Speaker Change: Three D mascara from cutoff scale, which we believe is going to be a big innovation. There is a three seater extreme from retail and many many other lunches last but not least consumer beauty is also going into fragrances in big with the first global launch of the fragrance line called added asset values, which we believe is clearly.

Speaker Change: Going to ignite the second leg of categories inside This division next two Codell cosmetics, we know has a big fragrance launches happening in this division.

Laurent Mercier: Laurent pricing and volume? Yeah, absolutely. So, I mean, Susan, just to take back a little and really remind that from, I mean, fiscal 24, definitely a price was a big component of the growth. Now, it was a high single digit because it was definitely the year where we had a carryover from fiscal 23 pricing. And you know, it was a peak of inflation. We implemented on price increase. So we had really this carryover positive impact in fiscal 24. And we continued also to implement price increase in fiscal 24 at the beginning of the year, which was mid single digit, but also in the second half, which was more low single digit in fiscal 24.

Speaker Change: No home pricing and forgive me I'm, absolutely. So Suzanne just too just the banker detailing and re reminds us from I mean fiscal 'twenty four and definitely in price was a big component of the gross number was high single digit equally with different equals a year, where we had to.

Speaker Change: So Marc Jacobs, Desi Wilde, the number one innovation in spring in the U.S. will continue its carryover during H1.

Speaker Change: So it's really that, you know, your point about the comp.

Speaker Change: In fact, we manage this way and then on top is really we are doing this on the other franchise.

Speaker Change: And given like how cyclical fragrances have been, I understand all the body oils and fragrances have been a wellness category for pretty much the last four years.

Carey: Carey yogurt.

Carey: From a fiscal 'twenty three pricing and you know what.

Carey: I mean, the comps are the comps are, but I think it's important to see how you're planning the cadence of these of the launches to offset the tough comps and also like a clarification as we build into your guidance.

Carey: The peak of inflation, we implement pizza.

Carey: Kylie Kosmic is also going to continue its carryover, during this H1 moment, number one volume in the U.S. for this one.

Carey: I believe you mentioned hitting a margin of eighteen percent and given your guidance.

Carey: Kylie Kosmic is also going to continue its carryover, during this H1 moment, number one volume in the U.S. for this one.

Carey: This increase of weird resist carryover positive impact in fiscal 'twenty four and we continued also to implement price increases in fiscal 'twenty for <unk>.

Carey: And we are also, you may have read it in WWD, I think a few days ago, Chloé is doing its biggest launch ever, Chloé Intense, which is also arriving in fall.

Carey: At the beginning of the year, which was mid single digit but also in second half, which was more low single digits in fiscal 'twenty four so indeed, the in fiscal 'twenty for pricing was really a high single digit no.

Carey: You know, we are launching indeed.

Laurent Mercier: So indeed, in fiscal 24, pricing was really a high single digit.

Carey: Gucci, Flora, Orchid and these really, you know, it's part of the Flora range.

Laurent Mercier: Now moving forward to fiscal 25, definitely, I mean, our equation, our six to eight percent growth algorithm is more balanced between volume, price, and mix. So it means that indeed volume is absolutely key. And you know, through the innovation that Sue has just shared, of course, are really driving additional volumes. Pricing, we will continue definitely in a very targeted manner because we know we have the data. We definitely know where we can implement price increase. So this is very, very granular. And the last piece is, mix is very important. All the work we are doing is really to drive mix up, either in the current portfolio because we can really, you know, upgrade the portfolio, but also innovations, definitely is a strong way to improve the mix.

Carey: So, when you back it out, it actually would give you a higher revenue number than what you're implying your guidance understand that perhaps that number is a fact neutral that would give you close to a mid single digit increase in sales, as opposed to, let's say, a four percent increase in sales revenue.

Carey: Moving forward to fiscal 'twenty, five definitely I mean, our equation.

Speaker Change: Person to gross a gordy's army is more balanced between volume.

Speaker Change: So, fiscal twenty five, I guess that's a question all around.

Speaker Change: Price and mix.

Speaker Change: So it means that indeed, our volume is absolutely key.

Speaker Change: So the pipeline of fragrances, be it Chapter 2 of previous successes, adding on top of these innovations, or the carryover from H2 of Fiscal 24, plus new launches such as Chloé Intense, are really giving us this confidence that we are going to continue the momentum behind our track record of blockbusters in prestige fragrances.

Speaker Change: And here again, you know, it's really adding a growth in the Flora range.

Speaker Change: Who are the innovations that Suez just shale of course are really driving additional volumes pricing. We will continue definitely in a very targeted manner. Because we know we have the data we definitely nowhere, where we can implement price increase.

Speaker Change: Now we are also active on other categories.

Speaker Change: So that's definitely part of our of our strategy to continue really these expansion.

Speaker Change: That's the same on definitely on consumer beauty that we are doing this.

Speaker Change: So this is very very granular and the last piece the mix is very important.

Speaker Change: All the work we are doing is really to drive mix up.

Speaker Change: Iser ease in soccer on political you because we can really.

Speaker Change: Our grades of portfolio, but also innovations differently.

Speaker Change: He's a strong way to prove it.

Laurent Mercier: And all these initiatives are captured under a stream, which is strategic revenue management that now we are leading and is ready to unlock value on all SKUs possible. And of course, it's contributing to the net revenue, but also to the gross margin.

Speaker Change: And all of these initiatives are captured under stress.

Speaker Change: Stream, which is strategic revenue management or is that.

Speaker Change: We are leading in is really to unlock the value.

Speaker Change: <unk> use a placebo and of course, it's contributing user nuclear new Botox, which was the gross margin.

Unknown Executive: Thank you.

Speaker Change:

Speaker Change: We are active, of course, on color cosmetics.

Speaker Change: Thank you very much for both.

Speaker Change: We are active, of course, on color cosmetics.

Oliver Chin: We'll take our next question from Oliver Chin with TD Toe, and please go ahead. Hi Sue and Laura, very helpful. Thank you. You mentioned retailers replacing some order with caution and the near-term. Can you elaborate on that? That would be helpful in terms of what retailers are seeing and how you're planning inventory as a result. Second, would love your thoughts on comparing or contrasting how consumers and or customers are feeling regionally, just given there's lots of cross-currents in the environment, but fragrance clearly remains very attractive. And finally, as we think more generally about investments, this year, any highlights, especially in terms of the continued innovation and digital and best practices as well as R&D.

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

Speaker Change: We have a few launches arriving without revealing these.

Speaker Change: Yeah.

Speaker Change: We have a few launches arriving without revealing these.

Speaker Change: So I will answer also your question on the guidance.

Oliver Chen: We have a few launches arriving specifically behind our, I would say, most successful color cosmetics brand.

Speaker Change: We have a few launches arriving specifically behind our, I would say, most successful color cosmetics brand.

Speaker Change: So definitely what we are we are monitoring.

Oliver Chen: Okay.

Oliver Chen: So is really targeting the like for like growth.

Oliver Chen: Hi, Sue and Laura very helpful. Thank you you mentioned retailers are placing some order with caution in the near term can you elaborate on that that would be helpful. In terms of what retailers are seeing and how you're planning inventory as a result.

Oliver Chen: I'm thinking about Burberry.

Oliver Chen: So, I mean, let me start indeed on the fiscal twenty four launches.

Oliver Chen: I'm thinking about Burberry.

Oliver Chen: So this is a six to eight percent.

Oliver Chen: I mean, that's really a key question.

Speaker Change: Second would love your thoughts on comparing a contrasting how consumers and our customers are feeling regionally just given like lots of cross currents in the environment, but fragrance clearly remains very attractive.

Speaker Change: And finally, as we think more generally about investments this year any highlights, especially in terms of the continued innovation and digital and best practices as well as R&D. Thank you.

Unknown Executive: Thank you.

Sue Nabi: Oh, maybe you can start with the first question. Yeah, absolutely. So, Oliver, I think in your question, indeed, it's very important that you are putting this question in a very, in a way that is really depending on regions and also categories, because indeed, the dynamics can be very different. As you know, and really what we reflect is that we are seeing that beauty overall, I mean, keeps growing, keeps very dynamic and really being, you know, mid-single digit, technically, and we are seeing, indeed, the prestige being more in the upper end and consumer beauty being more in the lower end.

Speaker Change: Well, maybe you can start with the first yeah, absolutely. So I think in your question. Indeed, it's very important that you are putting these question in a very oh.

Speaker Change: I'm thinking about, Kylie Cosmetics.

Speaker Change: And we explained several times that the strategy we put in place is exactly that we are not going to disrupt that.

Oliver Chen: I'm thinking about, Kylie Cosmetics.

Oliver Chen: What's very important is also that our guidance on EBITDA is really the dollar value.

Speaker Change: In a way that team's really depending on the regions and and also categories because indeed.

Speaker Change: Dynamics can be a very different because as you know <unk> really what we flagged that we are seeing that too.

Speaker Change: <unk> keeps growing and keeps a very dynamic and we meet.

Speaker Change: Mid single digit <unk>, we are seeing needs of prestige being wanting to look around and consumer beauty being more in zillow right lower end and we are seeing them in metro markets.

Sue Nabi: And we are seeing, I mean, mature markets being also in the mid-single digit, and we are seeing, I mean, our growth engine, indeed, being in the double digit. Now, when we go more in depth, which is your question, indeed, on consumer beauty in the US, yes, we are seeing that indeed, the color cosmetic market indeed is challenged, and we are seeing indeed that some US retailers are managing their inventory, indeed, with discussion. Definitely, this is what we are seeing, but at the same time, I want to highlight that this is only a portion of our net revenue.

Speaker Change: Swings in mid singles.

Speaker Change: And we are seeing I mean your.

Speaker Change: Gross engineering with being in the double digits now when we go more in depth, which.

Speaker Change: Which is your question indeed on no.

Speaker Change: Consumer beauty in U S. A.

Speaker Change: Yes, we are seeing that indeed.

Speaker Change: The codell cosmetic market in the DC, the ease of East, China, and <unk> and we are seeing in needs at some U S retailers are managing their inventory indeed, with the with Cushman <unk> what.

Speaker Change: What we have seen but at the same time I want to highlight that.

Speaker Change: This is only a function of our niche whether new suites twilio smallpox.

Sue Nabi: So, it's really a small part, and we are seeing at the same time that on the other regions, I mean, we are seeing, you know, retailers keeping very dynamic, definitely on prestige, but also on consumer beauty in the growth engines market. So, that's why, definitely, I mean, it's driving our expectation for consumer beauty to be moderately positive in Q1. So, indeed, we are taking this into consideration in our algorithm.

Speaker Change: A small part and we are seeing at the same time that took on the also regions are I mean, we are seeing in our retailers keeping very dynamic if nuclear on prestige, but also on consumer beauty.

Speaker Change: The growth engines of growth engines.

Speaker Change: So that's why I definitely I mean, it's driving your expectation for consumer beauty to be moderately positive in Q1. So indeed, we are taking this into consideration in our algorithm.

Speaker Change: We have also skincare.

Speaker Change: But we are going to continue in fiscal twenty five.

Speaker Change: We have also skincare.

Speaker Change: This is really this is really the guidance that we are giving.

Sue Nabi: And Oliver, good morning. This is Sue speaking. So your second part of the question was about how consumers are feeling in the different regions. So, of course, the big region for us, the first big region for us is the US, where we clearly see that fragrances, specifically prestige fragrances, but also mass market fragrances, by the way, remain bright spots.

Speaker Change: There is a big thing arriving behind Lancaster in Europe.

Speaker Change: So it means that Burberry goddess will continue to grow.

Speaker Change: There is a big thing arriving behind Lancaster in Europe.

Speaker Change: And maybe if I was wondering this is Jim speaking so your second part of the question was about how consumers are seeing in the different regions. So of course, the big region for us as far as the Big region for US is the U S, where we clearly see that fragrances, specifically prestige fragrances potential mass market fragrances and by the way.

Speaker Change: So Lancaster has been doing fantastically well in China, almost doubling year on year in terms of, size.

Speaker Change: And we are also Burberry goddess intense.

Speaker Change: So Lancaster has been doing fantastically well in China, almost doubling year on year in terms of, size.

Speaker Change: So which is going to come on top.

Speaker Change: And you need to underpin by by margin expansion.

Speaker Change: So and I know this is a modeling you're trying to do.

Speaker Change: Okay.

Speaker Change: Of course, it's hard to see, you know, the full year for X impact.

Speaker Change: So I think this is definitely, you know, some fine tuning indications that we will give you as the year the year is going.

Speaker Change: But to help you also is definitely, yes, the margin.

Speaker Change: Yes, the margin growth could be indeed higher versus indeed what we are indicating here.

Speaker Change: Let me maybe just quickly conclude on the middle part of your question about what gives, us the confidence, as you know, of our launches sustaining over time and continuing to grow one after the other.

Speaker Change: I think this is really the main difference between the Coty of five years ago and the, Coty of today.

Speaker Change: We have put in place a way to select what is going to stand the test of time and to, grow over time.

Speaker Change: So it's really that, you know, your point about the comp.

Speaker Change: That's very important.

Speaker Change: In fact, we manage this way and then on top is really we are doing this on the other franchise.

Speaker Change: And every launch we are doing, specifically the big launches behind the big brands, are, really done if and only if we have a full confidence, high level of confidence, that this is not going to be something that's going to be high for the first year and then go down.

Speaker Change: So it's really about addiction.

Speaker Change: It's about positive addiction, if I may say, to reduce, of course, to the concept that, makes sure that this concept fits with the trends that are not the trends of the moment, but that are structural trends that are here to stay for the next decade.

I remain bright spots, it's really a story of two folds I would say people shopping high end fragrances are continuing to show up high end fragrances, mainly perfumes <unk> Oh, that's kind of a highly concentrated with a strong trade as fragrances, but at the same time.

Sue Nabi: It's really a story of two folds, I would say. People shopping high and the fragrances are continuing to shop high and fragrances, mainly presumes or the parfait, elixirs, or that kind of highly concentrated with a strong trade of fragrances, but at the same time, you also see in the same channel, entry prestige fragrances doing very, very well. So it's not either. It's not one or the other. It's both at the same time. And these entry prestige, I would say, users are, of course, towers, I would say smaller formats, a triathlete so much, but also, you know, including body sprays that we saw so heavily used by a lot of young generation.

Speaker Change: <unk> you also see in the same channel entry prestige fragrance is doing very very well. So it's not either it's not one or the other it's both at the same time and these entry prestige I would say users of course towards I would say smoking I felt much try to sell much but also you know including <unk>.

Speaker Change: You know, we are launching indeed.

Speaker Change: Gucci, Flora, Orchid and these really, you know, it's part of the Flora range.

Speaker Change: The spreads that we saw so heavily used by a lot. That's a younger generation. So this is clearly what we see on the fragrant stopped on color cosmetics, clearly interestingly, we see still some dynamism in this market.

Speaker Change: And here again, you know, it's really adding a growth in the Flora range.

Speaker Change: So that's definitely part of our of our strategy to continue really these expansion.

Sue Nabi: So this is clearly what we see on the fragrance part on color cosmetics. Clearly and interestingly, we see still some dynamism in this market, and a lot of the consumers know that the prices of mass market have been increasing quite strongly in the last two years. You see some trade up, which is really a first in this kind of environment. You see a portion of consumers from mass market trading up to entry prestige color cosmetics, so that's very interesting. So we are not at all seeing trade downs; we're seeing trade ups, and we are seeing consumers operating in the different price brackets are still very, very active in Europe. The dynamism of the beauty market is still intact; fragrances are there also a bright spot.

If you need audio assistance during your call today, please press star zero.

Operator: If you need audio assistance during your call today, please press star zero.

Speaker Change: A lot of the consumers now that the prices us mass market has been increasing quite strongly in the last two years you see some trade up which is really a first in this kind of environment you see a portion of consumers from mass market trading up to entry prestige color cosmetics. So that's very interesting. So we are not that towards seeing trade downs, we're seeing.

Ashley: My name is Ashley and I will be your conference operator today.

Ashley: My name is Ashley and I will be your conference operator today. At this time, I would like to welcome everyone to Cody's fourth quarter fiscal 2024 question and answer conference call. As a reminder, this conference call is being recorded today, August 21, 2024 at 8.15 a.m. Eastern time, or 2.15 p.m. Central European time. Please note that on August 20, at that approximately 4.30 p.m. Eastern time, or 10.30 p.m. Central European time, Cody issued a press release and prepared remarks webcast, which can be found on its investor website.

Speaker Change: At this time, I would like to welcome everyone to Cody's fourth quarter fiscal 2024 question and answer conference call.

Speaker Change: As a reminder, this conference call is being recorded today, August 21, 2024 at 8.15 a.m.

Speaker Change: Trade ups and we are seeing consumers operating in a different pricing bracket. So still very very active in Europe. The dynamism of the beauty market is still in fact.

Speaker Change: Eastern time, or 2.15 p.m.

Speaker Change: Central European time.

Speaker Change: Now it's the turn of Europe for this brand so that we have really both sides of the picture activated behind this brand.

Speaker Change: Please note that on August 20, at that approximately 4.30 p.m.

Speaker Change: Eastern time, or 10.30 p.m.

Speaker Change: And last but not least, we have also Consumer Beauty. We've announced the launch of 3D mascara from CoverGirl, which we believe is going to be a big innovation.

Speaker Change: There is Thrillseeker Extreme from Rimmel and many, many other launches.

Speaker Change: Central European time, Cody issued a press release and prepared remarks webcast, which can be found on its investor website.

Speaker Change: Fragrances are there also a bright spot color cosmetics in Europe are doing better than what they are doing in the U S and the reason the pressure we see in the U S on mainly drugstore chains.

Sue Nabi: Color cosmetics in Europe are doing better than what they are doing in the US. The reason the pressure we see in the US on mainly drugs or chains, where this is really what we see, the pressure the rest of the distribution in the US is for us less pressured. Last but not least, in Asia. So it's a two-fold story here again. If you look at the outside of China, there is dynamism specifically behind fragrances. Fragrance indexes at play penetration is very low, and there it's also a story from less than $10 to above $10. We see it in what we call growth engine markets. We got recently the news that one of our agile beauty initiatives is called Shonsondo. Shonsondo is a French Spanish brand that was active 20 years ago, that we reignited a year ago. We launched it in many countries, including South Africa and the $10.

Speaker Change: On today's call are Sue Nabi, Chief Executive Officer, and the role of the third Chief Financial Officer.

Ashley: On today's call are Sue Nabi, Chief Executive Officer, and the role of the third Chief Financial Officer. I would like to remind you that many of the comments today may contain forward-looking statements. Please refer to Cody's earnings released and the reports filed with the SEC with the company list factors that could cause actual results to differ materially from the forward-looking statements. In addition, except we're noted, the discussion of Cody's financial results and Cody's expectations reflected certain adjustments as specified in the non-GAAP financial measures section of the company's release.

This is really where we see the pressure the rest of the distribution in the U S as far as less pressured but.

Speaker Change: Last but not least, Consumer Beauty is also going into fragrances in big with the first global launch of a fragrance line called Adidas Vibes, which we believe is clearly going to ignite the second leg of categories inside this division next to color cosmetics. We now have big fragrance launches happening in this division.

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

Speaker Change: Please refer to Cody's earnings released and the reports filed with the SEC with the company list factors that could cause actual results to differ materially from the forward-looking statements.

Speaker Change: And at least in Asia. So it is just too twofold story here again, if you look at the outside of China. There is a dynamism specifically behind fragrances fragrance indexes that play penetration is very low and there is also a story from less than $10 to above $10. We see it in what we call growth.

Speaker Change: Laurent, pricing and volume?

Speaker Change: Yeah, absolutely.

Speaker Change: So, I mean, Susan, just to step back a little and really remind that from, I mean, fiscal, 24, definitely, I mean, price was a big component of the growth, was high single digit, because it was definitely the year where we had carryover from fiscal 23 pricing, and, you know, was a peak of inflation, we implemented a price increase. So we had really this carryover positive impact in fiscal 24.

Speaker Change: And we continued also to implement price increase in fiscal 24 at the beginning of the year, which was mid single digit, but also in second half, which was more low single digit in fiscal, 24. So, indeed, in fiscal 24, pricing was really a high single digit.

Speaker Change: In addition, except we're noted, the discussion of Cody's financial results and Cody's expectations reflected certain adjustments as specified in the non-GAAP financial measures section of the company's release.

Speaker Change: Now, moving forward to fiscal 25, definitely, I mean, our equation, our 6 to 8% growth algorithm, is more balanced between volume, price and mix. So it means that indeed, volume is absolutely key.

Speaker Change: The engine markets. We got recently the news that's one of our Ah <unk> beauty initiatives, he's called Samsung devotional songs Luisa French Spanish brand that was active 20 years ago that we reignited a year ago, we launched it in many countries, including South Africa under $10 needs to become the number.

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

Speaker Change: At this time, if you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: You may withdraw your question at any time by pressing star 2.

Speaker Change: Once again, that is star n1.

Speaker Change: We'll take our first question from Oliver Chin with TD Cohen.

Ashley: We'll take our first question from Oliver Chin with TD Cohen. Please go ahead. Oliver, your line is open.

Sue Nabi: And it's become the number one fragrance in this country recently.

Speaker Change: Please go ahead.

Speaker Change: <unk> fragrance in this country recently, so you clearly see that whatever is the price. There is still this huge demand for a few good look good I would say element highlights on investment in fiscal 'twenty five best practices I think the two best practice says that.

Unknown Executive: So you clearly see that whatever is the price, there is still this huge demand for feel good, look good, I would say element highlights on investment in fiscal 25 best practices.

Oliver Chin: Oliver, your line is open.

Speaker Change: Please check your mute function.

Operator: Please check your mute function.

Speaker Change: Okay, we will take our next question from Susan Anderson with Can Accord Genuity.

Ashley: Okay, we will take our next question from Susan Anderson with Can Accord Genuity. Please go ahead.

Unknown Executive: I think the two best practices that and two highlights of investment in fiscal 25 is to continue our best practices in blockbuster creation when it comes to prestige fragrances. You know, we are not anymore in a catch of phase like we used to be two years ago. Now we are becoming a trend setting company in this area, and we've been really, you know, driving in big, the gourmet slash vanilla slash, you know, banana blossom flower fragrances, which are resonating today from mass market to. So this is really something that we intend to continue. Second thing, we are also bringing up our advocacy model that we have put in place.

Speaker Change: Please go ahead.

Speaker Change: Hi, good morning.

Susan Anderson: Hi, good morning. Thanks for taking my question. Nice job on the quarter in the year. I guess maybe just to start out, I'm curious about the global distribution expansion for Oveda. I guess in this year. I'm curious just, you know, the timeline, what country do you expect to expand into first and is this going to roll out pretty quickly or should we kind of expect the flow roll out throughout the year and into next. And then also I'm curious if you already have retail distribution in place. Thanks.

Speaker Change: To highlight some investment and she's got 25 years to continue our best practices in a blockbuster creation. When it comes to prestige fragrances. You know we are not anymore in a catch up phase like we used to be two years ago. Now we are becoming a trend setting company in this area and we've been really.

Susan Anderson: Thanks for taking my question.

Speaker Change: Nice job on the quarter in the year.

Speaker Change: And the second thing is that while we're doing these big blockbuster juices that are now, setting trends for the long term instead of catching up, we are also very tactical in a way, positively tactical, playing with the formats, playing with the scenting at large.

Speaker Change: The scenting is becoming a much larger piano with much more touches than the traditional, eau de toilette or eau de parfum.

Speaker Change: I guess maybe just to start out, I'm curious about the global distribution expansion for Oveda.

Speaker Change: I guess in this year.

Speaker Change: And we are also activating other brands that we have not activated recently. You know, the beauty of the Coty portfolio is that we have a lot of brands and some of, these brands are going to be activated quite strongly, specifically the brands that are positioned on entry prestige.

Speaker Change: So all together, together with the fact that penetration is still not at the level of Brazil, that I was quoting just a few minutes ago, we believe we have room not only in the US, but also elsewhere to continue to grow our fragrance business.

Speaker Change: I'm curious just, you know, the timeline, what country do you expect to expand into first and is this going to roll out pretty quickly or should we kind of expect the flow roll out throughout the year and into next.

Speaker Change: And, you know, so the innovation that Sue has just shared, of course, are really driving, additional volumes.

Speaker Change: Thank you.

Speaker Change: You know driving a big legal more slash vanilla slash.

Speaker Change: And then also I'm curious if you already have retail distribution in place.

Speaker Change: So banana below some of our fragrances, which are resonating today from mass market to tighten.

Speaker Change: Thanks.

Speaker Change: Pricing, we will continue definitely in a very targeted manner, because we know we have, the data, we definitely know where we can implement price increase. So this is very, very granular.

Speaker Change: We'll take our next question from Olivia Tong with Raymond James.

Speaker Change: And the last piece is mix is very important.

Speaker Change: Morning, Susan.

Sue Nabi: Morning, Susan. Thank you for your question.

Speaker Change: All the work we are doing is really to drive mix up either in the current portfolio, because, we can really, you know, upgrade the portfolio, but also innovation definitely is a strong way to improve the mix.

Speaker Change: Thank you for your question.

Speaker Change: All these initiatives are captured under a stream, which is strategic revenue management, that now we are leading and is really to unlock value on all SKUs possible. And, of course, it's contributing to the net revenue, but also to the gross margin.

Speaker Change: This is to speaking.

Sue Nabi: This is to speaking. So regarding our skincare ambition. And indeed the ultra premium brand of the idea is that we've been reading the brand with a year and a half with strategy. This brand got I think the highest probably one of the highest number of awards, specifically behind its omnipotent serum, which is the first of this kind of serums using synthetic technologies inspired by, I would say, pharmaceutical technologies. And this allowed the brand to have the highest number of awards.

Speaker Change: So regarding our skincare ambition.

Speaker Change: Thank you.

Speaker Change: Please go ahead.

Speaker Change: This is really something that we intend to continue our second thing.

Speaker Change: And indeed the ultra premium brand of the idea is that we've been reading the brand with a year and a half with strategy.

Speaker Change: We are also.

Speaker Change: Bringing up our advocacy model that we have put in place you may have noticed during the prepared remarks that we've grown the envy of both remain in cocoa guided by 400% that's really a huge progress now we need to do is to increase the agility, if our innovation putting on the marketing of it.

Speaker Change: We'll take our next question from Oliver Chin with TD Tobin.

Speaker Change: Great.

Unknown Executive: You may have noticed during the prepared remarks that we've grown the EMV of both Riemel and Cogorger by 400%. That's really a huge progress.

Speaker Change: This brand got I think the highest probably one of the highest number of awards, specifically behind its omnipotent serum, which is the first of this kind of serums using synthetic technologies inspired by, I would say, pharmaceutical technologies. And this allowed the brand to have the highest number of awards.

Speaker Change: Please go ahead.

Speaker Change: Good morning.

Unknown Executive: Now what we need to do is to increase the agility of our innovation, putting on the market innovation as quickly as in six to nine months versus more than a year in the previous years. And this we are going to put in place a startup organization inside the company, so that this huge progress on advocacy marketing on one side coupled with an agile innovation startup machine inside CoT will allow us to multiply by two the level of innovation in core cosmetics, but also in fragrances in this division, knowing that we have already multiplied this level by three.

Speaker Change: Hi, Sue and Laura.

Speaker Change: Thank you so much.

Speaker Change: Asian as quickly as he can six to nine months those versus more than a year in the previous years and this we are going to put in place a startup organization inside the company. So that these huge progress on advocacy marketing on one side, coupled with an agile innovation startup machine inside Gucci with a lowest to multiply by two.

Speaker Change: Very helpful.

Speaker Change: We've also been having the brand present in some department stores, such as Harrods in London, such as Saks with the new New York several saks locations in the US.

Sue Nabi: We've also been having the brand present in some department stores, such as Harrods in London, such as Saks with the new New York several saks locations in the US. And an own store in China, which is the meso, Oveda in Shanghai. Now is the right moment to accelerate the expansion of the brand. The brand is going to open, you know, a lot of doors in the coming fiscal, starting in the first half.

Speaker Change: Thank you.

Speaker Change: You mentioned retailers are placing some order with caution in the near term.

Speaker Change: I wanted to sort of build on what you just said around fragrances and why you think fragrances, seem to be transitioning from what, you know, historically has been more of a discretionary category within beauty to one that is clearly less discretionary, but also seeing a willingness by consumers at the low end to trade in, even though they haven't historically participated in the category.

Speaker Change: Can you elaborate on that?

Speaker Change: It's pretty much, you know, price discovery at the ultra prestige end.

Speaker Change: And an own store in China, which is the meso, Oveda in Shanghai.

Speaker Change: Two the level of innovation in Caracas metrics, but also in fragrances and this division knowing that we have already multiplied this level by three so we are really in the high speed base last but not least we are also.

Speaker Change: That would be helpful in terms of what retailers are seeing and how you're planning inventory, as a result.

Speaker Change: Second, would love your thoughts on comparing or contrasting how consumers and or customers, are feeling regionally, just given there's lots of cross-currents in the environment, but fragrance clearly remains very attractive.

Speaker Change: Now is the right moment to accelerate the expansion of the brand.

Unknown Executive: So we are really in high speed base. Last but not least, we are also applying these best practices, sorry, be it advocacy marketing, fast beauty or, on the other side, fragrance momentum to mass market with a launch of added as rights that we believe is a huge mass fragrance opportunity.

Speaker Change: The brand is going to open, you know, a lot of doors in the coming fiscal, starting in the first half.

Speaker Change: Applying these bricks best practices, sorry beat advocacy marketing fast beauty or on the other sides fragrance momentum to mass market with the launch of Adidas. The types that we believe is a huge mass fragrances possibility.

Speaker Change: So, you know, clearly it sounds like there is significant momentum in prestige fragrances.

Speaker Change: This is, of course, you know, high end doors need doors.

Sue Nabi: This is, of course, you know, high end doors need doors. We are not talking about specialty stores. We are not even talking about classical department stores. Because we are talking about high end doors, what we believe the consumers who are able and ready and willing to shop $400 serum and a $300 moisturizer are shopping more and more. And this is really what is going to happen behind the brand.

Speaker Change: We are not talking about specialty stores.

Speaker Change: We are not even talking about classical department stores.

Speaker Change: Because we are talking about high end doors, what we believe the consumers who are able and ready and willing to shop $400 serum and a $300 moisturizer are shopping more and more.

Speaker Change: Hmm.

Unknown Executive: Thank you.

Filippo <unk>: And finally, as we think more generally about investments this year, any highlights, especially, in terms of the continued innovation and digital and best practices, as well as R&D?

Speaker Change: Are you assuming a similar level of contribution in Fiscal 25 as in Fiscal 24?

Filippo <unk>: Thank you we will take our next question from Filippo <unk> pleased with Citi. Please go ahead.

Filippo Florini: We will take our next question from Filippo Florini. Please, to city, please go ahead. Hi, everyone. Thanks for the questions. So, I wanted to go back to the consumer beauty business. What is a little promotional environment that you've seen in the US market? Clearly, we've seen the category be more under pressure, particularly with low-income consumers. So are you planning more promos in certain part of the portfolio, or are you planning to respond to kind of address the value of patients from some low income consumers?

Filippo <unk>: Thank you.

Filippo <unk>: That's the same on definitely on consumer beauty that we are doing this.

Filippo <unk>: And what are you incorporating insofar as concerns about more volatile macros?

Hi, Hi, everyone. Thanks for taking the question. So I wanted to go back to the consumer.

Speaker Change: And this is really what is going to happen behind the brand.

Speaker Change: So we are talking about an acceleration of the expansion of the brand in this fiscal 25, which was really something that was long awaited.

Susan Anderson: So we are talking about an acceleration of the expansion of the brand in this fiscal 25, which was really something that was long awaited. Okay, great, that sounds exciting.

Speaker Change: <unk> defense.

Filippo <unk>: What is that little promotional environment have you seen in the U S market clearly we've seen that the category would be more under pressure, particularly with lower income consumers. So are you planning more promos in certain parts of the portfolio or how are you planning to respond to kind of adjust the value equation for some <unk>.

Speaker Change: Okay, great, that sounds exciting.

Speaker Change: If I can maybe just add one more on the innovation pipeline, you mentioned a number of launches for physical 25s in the presentation.

Sue Nabi: If I can maybe just add one more on the innovation pipeline, you mentioned a number of launches for physical 25s in the presentation. I'm curious, are there any that haven't been announced yet that we should expect as we go throughout the year, either in fragrance or in prestige cosmetics, and then also maybe if you could touch on pricing versus volume mix for physical 25s? Yeah, let me start with the first part.

Speaker Change: I'm curious, are there any that haven't been announced yet that we should expect as we go throughout the year, either in fragrance or in prestige cosmetics, and then also maybe if you could touch on pricing versus volume mix for physical 25s?

Speaker Change: Income customers.

Sue Nabi: You know, a good morning city for this is speaking. We've done a lot of studies recently to really understand what are the levers to, in a way, support our growth in consumer beauty, which is mainly color cosmetics for Coty in the US to take this example. And what we are seeing is that really for a brand like Color Girl, which is really talking to people from 18 years old or even younger up to both 50, 60, 70 years old, it's really a kind of very specific mix of still TV advertising, still a lot of advocacy marketing, influencer marketing, and a little bit of coupon.

Speaker Change: Maybe you can start with the first one.

Speaker Change: So I will answer also your question on the guidance.

Filippo <unk>: And, you know, so the innovation that Sue has just shared, of course, are really driving, additional volumes.

Filippo <unk>: Thanks.

Speaker Change: I was wondering if you could put this is Jim speaking we've done a lot of studies recently to really understand what are the levers too in a way as to support our growth in consumer beauty, which is mainly a color cosmetics for Gucci in the U S to take this example, and what we are seeing is it.

Speaker Change: So definitely what we are we are monitoring.

Speaker Change: Yeah, let me start with the first part.

Speaker Change: And then maybe Laurent can take this.

Sue Nabi: And then maybe Laurent can take this. The pricing versus volume mix pack. So in terms of innovation pipeline, as a reminder, you know, we've been very active since Q1 of last fiscal fiscal 24 indeed started very, very big. Remember the company did the growth of 18% in the Q1 of fiscal 24 and prestige was even bigger. It was about 20% of growth. And this was chapter one of double goodness. So we are adding verbally goodness intense that's arising now, which is clearly surfing on the huge success of the goodness launch.

Speaker Change: The pricing versus volume mix pack.

Speaker Change: So in terms of innovation pipeline, as a reminder, you know, we've been very active since Q1 of last fiscal fiscal 24 indeed started very, very big.

Speaker Change: That's really for a brand like <unk>, which is really took into people's from 18 years old to even younger that's to both 50 60 70 years old.

Laurent: Remember the company did the growth of 18% in the Q1 of fiscal 24 and prestige was even bigger. It was about 20% of growth.

Speaker Change: Really kind of very specific mix of CTV advertising still let us advocacy marketing influencer marketing and a little bit of coupons, it's really a little bit of coupons, so promo promotional.

Laurent: And this was chapter one of double goodness.

Speaker Change: So we are adding verbally goodness intense that's arising now, which is clearly surfing on the huge success of the goodness launch. That by the way, allowed us to almost double the size of the brand.

Sue Nabi: It's really a little bit of coupon. So promotionality and prices, pressure on prices is not what is driving the consumption. Remember what it just said a few minutes ago; we are seeing some consumers trading out from consumer beauty color cosmetics category to entry prestige categories. So it's really this that we are seeing. So it's really the job of us and the job of all the players of this industry to put on the market, I would say prestige like innovation if I may call it like this, but at the prices of mass market. This is the recipe that works.

Speaker Change: Yeah, absolutely.

Speaker Change: And the last piece is mix is very important.

Speaker Change: And prices pressure on prices is not what is driving the consumption remember what you just said a few minutes ago. We are seeing some consumers trading gets from consumer beauty color cosmetics category to entry prestige category. So it's really this that we're seeing so it's really the job of us and the job is all the player.

Sue Nabi: That by the way, allowed us to almost double the size of the brand. This is number one, number two, we are also having the carryover of the launches that happened in the second half of fiscal 24. So Mark Jacobs Desiwai, the number one innovation in spring in the U.S, will continue its carryover during H1. Kylie Cosmic is also going to continue its carryover during this H1 moment. Number one volume in the U.S, for this one.

Speaker Change: This is number one, number two, we are also having the carryover of the launches that happened in the second half of fiscal 24.

Speaker Change: So is really targeting the like for like growth.

Speaker Change: So Mark Jacobs Desiwai, the number one innovation in spring in the U.S, will continue its carryover during H1.

Speaker Change: As of this industry to put on the market.

Speaker Change: Kylie Cosmic is also going to continue its carryover during this H1 moment.

Christy: I would say Christy.

Christy: Prestige like innovation, if I may call. It like this but at the prices of mass market. This is the recipe that works, it's not about cheaper brands cheaper brands are not taking the day.

Speaker Change: Number one volume in the U.S, for this one.

Speaker Change: And we are also, you may have read it in in in WD.

Sue Nabi: And we are also, you may have read it in in in WD. I think a few days ago. Chloe is doing its biggest launch ever. Chloe in intense, which is also writing in full. So the pipeline of fragrances beat. You know, chapter two of previous successes, adding on top of these innovations or the carryover from H2 of fiscal 24 plus new launch has just Chloe and tons are really giving us this confidence that we are going to continue the momentum behind our track record of blockbusters in prestige fragrance.

Sue Nabi: It's not about cheaper brands; cheaper brands are not taking the, I would say, the volumes. It's really about this part that is shared between upper mass and entry prestige.

Speaker Change: I think a few days ago.

Speaker Change: I would say the the volumes, it's really about this box that is shared between mass and entry prestige.

Speaker Change: Chloe is doing its biggest launch ever.

Speaker Change: Chloe in intense, which is also writing in full.

Speaker Change: So the pipeline of fragrances beat.

Speaker Change: Okay.

Javier Escalante: Thank you.

Speaker Change: You know, chapter two of previous successes, adding on top of these innovations or the carryover from H2 of fiscal 24 plus new launch has just Chloe and tons are really giving us this confidence that we are going to continue the momentum behind our track record of blockbusters in prestige fragrance.

Speaker Change: So, Oliver, I think in your question, it's very important that you are putting this question, in a way that is really depending on the regions and also categories, because indeed the dynamics can be very different.

Speaker Change: So this is a six to eight percent.

Speaker Change: Good morning, Olivia.

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

Javier Escalante: What's our next question from Javier Escalante with Evercore? Please go ahead. Hi, good morning, everyone. My question seems from in Brazil, about Brazil. If I understand on your prepare remarks, you mentioned that it could be very high double digits, gross margins increased for 100 basis points. So how do you accomplish so much in just one year? What is the role of Brazil in year two? Driving consumer profit margins? And I have a follow-up.

Speaker Change: As you know, and really what we reflect is that we are seeing that beauty overall keeps, growing, keeps very dynamic and really being mid-single digit definitely.

Speaker Change: Thank you for the question.

Javier Escalante: Hi, Good morning, everyone. My question is seeing some in Brazil, although Brazil.

Speaker Change: If I understood your prepared remarks, you mentioned that.

Speaker Change: Could you very high double digit.

Speaker Change: Now, we are also active on other categories were active, of course, on color cosmetics.

Sue Nabi: Now, we are also active on other categories were active, of course, on color cosmetics. We have a few launches arriving without revealing these. We have a few launches arriving specifically behind our, I would say, most successful color cosmetics brand. I'm thinking about the tree. I'm thinking about Kylie cosmetics. We have also skin care. There is a big thing arriving behind Lancaster in Europe. So Lancaster has been doing fantastically well in China, almost doubling year on year in terms of size.

Speaker Change: Gross margins increased 400 basis points so.

Speaker Change: How do you accomplish so much in just one year.

Speaker Change: We have a few launches arriving without revealing these.

Speaker Change: We have a few launches arriving specifically behind our, I would say, most successful color cosmetics brand.

Speaker Change: What is the role of Brazil.

Speaker Change: To.

Speaker Change: I'm thinking about the tree.

Speaker Change: Driving consumer profit.

Speaker Change: I'm thinking about Kylie cosmetics.

Speaker Change: We have also skin care.

Speaker Change: Margins and I have a follow up.

Speaker Change: There is a big thing arriving behind Lancaster in Europe.

Speaker Change: And we are seeing indeed the prestige being more in the upper end and consumer beauty, being more in the lower end.

Speaker Change: What's very important is also that our guidance on EBITDA is really the dollar value.

Speaker Change: Thank you.

Speaker Change: Let me try to answer.

Javier Escalante: Javier, let me start with the first part. And thank you very much for giving me and giving us the opportunity to highlight the fantastic, I would say, growth trajectory of the Brazilian market and the Brazilian COTI teams. So let me maybe update you on this market. So the Brazilian business has been growing very rapidly. It's more or less 20% of growth that we have seen on this market in fiscal 24. We are already a leader in many categories. We are the leader of the Nell category with a brand called Riscay. And COTI has very strong positions in body care, as we are the number one in scented body oils, which are becoming a global phenomenon, by the way.

Speaker Change: This is really this is really the guidance that we are giving.

Speaker Change: Yeah, Let me start with the first part then thank you very much for giving me and giving us the opportunity to highlight the fantastic I would say growth trajectory of the Brazilian market and the Brazilian Coty teams. So let me maybe update you on the on this on this market. So the Brazilian business has been growing very rapidly.

Speaker Change: So Lancaster has been doing fantastically well in China, almost doubling year on year in terms of size.

Speaker Change: Now it's the turn of Europe for this brand so that we have really both sides of the picture activated behind this brand.

Sue Nabi: Now it's the turn of Europe for this brand so that we have really both sides of the picture activated behind this brand. And last but not least, we have also consumer beauty. We've announced at the launch of 3D mascara from cover girl, which we believe is going to be a big innovation. There is a three seeker extreme. From remal and many many other launchers, last but not least consumer beauty is also going into fragrances in big with the first global launch of a fragrance line called Adidas vibes, which we believe is clearly going to ignite the second leg of categories inside this division next to color cosmetics.

Speaker Change: And we are seeing, I mean, mature markets being also in the mid-single digit.

Speaker Change: And you need to underpin by by margin expansion.

Speaker Change: We'll take our next question from Oliver Chin with TD Tobin.

Speaker Change: Again, you know, I hear some people saying fragrances are discretionary categories.

Speaker Change: And we are seeing, I mean, our growth engine indeed being in the double digit.

Speaker Change: And last but not least, we have also consumer beauty.

Speaker Change: Now, when we go more in depth, which is your question indeed on consumer beauty in US, yes, we are seeing that indeed the colour cosmetic market indeed is challenged.

Speaker Change: And we are seeing indeed that some US retailers are managing their inventory indeed with caution.

Speaker Change: We've announced at the launch of 3D mascara from cover girl, which we believe is going to be a big innovation.

Speaker Change: It's more or less 20% of growth that we have seen in this market in fiscal 'twenty four.

Speaker Change: Definitely, this is what we are seeing.

Speaker Change: So and I know this is a modeling you're trying to do.

Speaker Change: Please go ahead.

Speaker Change: Some other people saying that this is a cyclical category.

Speaker Change: There is a three seeker extreme.

Speaker Change: But at the same time, I want to highlight that this is only a portion of our net revenue.

Speaker Change: We are already a leader in many categories were the leader of the nail category with a brand called the risky and Coty has very strong positions in body care. As we are the number one in scented body oils, which are becoming a global phenomenon by the way and number two in body lotions with the brand called Madame Jay We are now in.

Speaker Change: From remal and many many other launchers, last but not least consumer beauty is also going into fragrances in big with the first global launch of a fragrance line called Adidas vibes, which we believe is clearly going to ignite the second leg of categories inside this division next to color cosmetics.

Speaker Change: So, it's really a small part.

Speaker Change: First, it was not a cyclical category.

Javier Escalante: And number two in body lotions with the brand called Monongé. We are now unlocking the substantial fragrance opportunity in this country. A little bit of context: the Brazilian market is a very big market, as you said it. It's over $2 billion market. And the penetration of fragrance usage or sending items usage is close to 70%. So you can imagine this is paradise for a company like COTI. So, while direct selling, particularly door-to-door, has been historically big in this country, the retail channel has been growing very strongly and very quickly in both mass and prestige recently.

Speaker Change: And we are seeing at the same time that on the other regions, I mean, we are seeing retailers, keeping very dynamic, definitely on prestige, but also on consumer beauty in the growth engines market.

Speaker Change: It has always been a category that was growing more or less at the low single digits prior, to COVID.

Speaker Change: So, that's why definitely, I mean, it's driving our expectation for consumer beauty to be moderately positive in Q1.

Speaker Change: And then something happened at the COVID moment where suddenly a full industry that has been, reinventing itself for the decade before was put in front of a younger generation of consumers who are both genders, younger, from diverse backgrounds, from diverse ethnicities, specifically, Hispanic community in the U.S. And suddenly you have really the encounter of two destinies, the encounter of a category, that reinvented itself with more quality, more creativity, multiple layers.

Speaker Change: Looking the substantial fragrance opportunity in this country.

Speaker Change: We now have big fragrance launches happening in this division.

Laurent Mercier: We now have big fragrance launches happening in this division.

A little bit of context, the Brazilian market is a very big market as you said it it's over $2 billion market and the penetration of fragrance usage or scenting items usage is close to 70%. So you can imagine this is paradise for a company like <unk>. So why is the direct selling of particular needs.

Speaker Change: Laurent Pricing and volume?

Laurent Mercier: Laurent Pricing and volume? Yeah, absolutely. So I mean, Susan, just to just take back a little and really remind that from, I mean, fiscal 24, definitely a price was a big component of the growth. Now, it was a high single digit because it was definitely the year where we had a carryover from fiscal 23 pricing. And you know, it was a peak of inflation. We implemented on price increase. So we had really this carryover positive impact in fiscal 24.

Speaker Change: Yeah, absolutely.

Speaker Change: So I mean, Susan, just to just take back a little and really remind that from, I mean, fiscal 24, definitely a price was a big component of the growth.

Speaker Change: So, indeed, we are taking this into consideration in our algorithm.

Speaker Change: Hi, Sue and Laura.

Susan Anderson: Now, it was a high single digit because it was definitely the year where we had a carryover from fiscal 23 pricing.

Speaker Change: Very helpful.

Doug: Doug has been historically a big in this country. The retail channel has been growing very strongly and very quickly in both mass and prestige recently in here as you can imagine our company is very well positioned to win as we are leveraging our global portfolio of mask, but also prestige fragrance.

Speaker Change: And you know, it was a peak of inflation.

Speaker Change: We implemented on price increase.

Speaker Change: So we had really this carryover positive impact in fiscal 24. And we continued also to implement price increase in fiscal 24 at the beginning of the year, which was mid single digit, but also in second half, which was more low single digit in fiscal 24.

Javier Escalante: And here, as you can imagine, our company is very well positioned to win as we are leveraging our global portfolio of mass, but also prestige fragrance brand. We are leveraging our leading fragrance capabilities, our extensive distribution in this country, as well as the fact that we have a big factory where we can manufacture locally. So only one year after launching a few of our mass fragrance brands in the Brazilian retail channel, we reached already the number six of rank in this country with over 4% of market share. Of course, we will continue to drive this through additional brand introduction.

Speaker Change: So indeed, in fiscal 24 pricing was really a high single digit.

Laurent Mercier: And we continued also to implement price increase in fiscal 24 at the beginning of the year, which was mid single digit, but also in second half, which was more low single digit in fiscal 24. So indeed, in fiscal 24 pricing was really a high single digit.

Speaker Change: Thank you.

Speaker Change: This was not just about entry prestige. It was all premium, ultra-premium, exclusive collections, et cetera, concentration, technology.

Speaker Change: You mentioned retailers are placing some order with caution in the near term.

Speaker Change: You know, the latest launch of Coty, Infiniium on Coty uses for the first time a patented, molecule that extends the longevity of a fragrance.

Speaker Change: Can you elaborate on that?

Doug: Brand, we are leveraging our leading fragrance capabilities, our extensive distribution in this country as well as the fact that we have a big factory, where we can manufacture look and so only one year after launching a few of our mass fragrance brands in the Brazilian retail channel we reached already.

Speaker Change: Now moving forward to fiscal 25, definitely, I mean, our equation, our six to eight percent growth algorithm is more balanced between volume, price and mix.

Laurent Mercier: Now moving forward to fiscal 25, definitely, I mean, our equation, our six to eight percent growth algorithm is more balanced between volume, price and mix. So it means that indeed volume is absolutely key. And you know, through the innovation that Sue has just shared, of course, are really driving additional volumes. Pricing, we will continue, definitely in a very targeted manner because we know we have the data, we definitely know where, where we can implement price increase.

Speaker Change: That would be helpful in terms of what retailers are seeing and how you're planning inventory, as a result.

Doug: Number six the rank in this country with over 4% market share of course, we will continue to drive this through additional brand introduction. It move it productivity and we are going to accelerate the expansion is a step too but it's also the story of prestige fragrances, where we took over the business from distributors a few.

Speaker Change: So it means that indeed volume is absolutely key.

Doug: Of course, it's hard to see, you know, the full year for X impact.

Doug: So I think this is definitely, you know, some fine tuning indications that we will give you as the year the year is going.

Speaker Change: And you know, through the innovation that Sue has just shared, of course, are really driving additional volumes.

Laurent Mercier: It proved productivity, and we are going to accelerate the expansion as a step too. But it's also the story of prestige fragrances, where we took over the business from distributors a few years ago, and we are now reaching almost 10% market share, up almost 200 basis points versus fiscal 21. And this is led by brands such as Calvin Klein and Hugo Boss. So you can imagine that for us, this is really a land of opportunities, and it's just the beginning of this story.

Speaker Change: Pricing, we will continue, definitely in a very targeted manner because we know we have the data, we definitely know where, where we can implement price increase.

Doug: Second, would love your thoughts on comparing or contrasting how consumers and or customers, are feeling regionally, just given there's lots of cross-currents in the environment, but fragrance clearly remains very attractive.

Doug: And finally, as we think more generally about investments this year, any highlights, especially, in terms of the continued innovation and digital and best practices, as well as R&D?

Doug: Years ago, and we are now reaching almost 10% market share.

Speaker Change: So this is very, very granular.

Laurent Mercier: So this is very, very granular. And the last piece is, mix is very important. All the work we are doing is really to drive mix up, either in the current portfolio because we can really, you know, upgrade the portfolio, but also innovations, definitely is a strong way to improve the mix. And all these initiatives are captured under a stream, which is strategic revenue management that now we are leading and is ready to, to unlock value on all SKUs possible. And of course, it's contributing to the net revenue, but also to the gross margin.

Speaker Change: Almost 200 basis points versus fiscal 'twenty, one and this is led by brands such as Calvin Klein and Hugo boss. So you can imagine that's for US. This is really a land of opportunity is just the beginning of this story now I'll, maybe you can complement on the profitability expected for fiscal <unk>.

Speaker Change: And the last piece is, mix is very important. All the work we are doing is really to drive mix up, either in the current portfolio because we can really, you know, upgrade the portfolio, but also innovations, definitely is a strong way to improve the mix.

Unknown Executive: Thank you.

Doug: Thank you.

Doug: Maybe you can start with the first one.

Doug: So you know, at the end of the day, when an offer becomes much more qualitative, much, more performant, it's not anymore a discretionary buying or a cyclical buying.

Doug: It becomes part of your life.

Doug: And we believe that fragrances are becoming structurally part of the life of millions, of people around the world, specifically the youngest, as connection builders.

Doug: You know, people ask each other, what do you wear, et cetera.

Doug: And that's a fantastic advertising campaign, if I may say.

Laurent Mercier: No, maybe you can compliment on the profitability part expected for fiscal absolutely. So indeed, the agenda for Brazil was, of course, its a strong growth engine, but it was really to make it in a very profitable manner. So this was definitely the mandate. And indeed, you see from the numbers that you know, even over-delivered. So starting with growth margin, a lot of initiatives will start first with pricing, and definitely we implemented a significant price increase because there was inflation. Number one, but also because really the pricing power was there. And again, the innovations, the strengths of the brands was really allowing to do this.

Doug: People are also using fragrances as mood boosters, as escapism tools, et cetera.

Doug: So we moved from something that was seen as a gift, if you think about the U.S., gift, item, into something I'd buy for myself because it makes me feel better.

Doug: Yeah, absolutely.

Doug: It makes me connect with others.

Doug: And the quality and the intensity of choice is ever bigger than it used to be in the past.

Speaker Change: We police or indeed.

Doug: So, Oliver, I think in your question, it's very important that you are putting this question, in a way that is really depending on the regions and also categories, because indeed the dynamics can be very different.

Doug: So that's the reason why I believe it's not a discretionary category.

Doug: As you know, and really what we reflect is that we are seeing that beauty overall keeps, growing, keeps very dynamic and really being mid-single digit definitely.

Speaker Change: Definitively the agenda, how Brazil was of course that you know, it's a strong growth engine, but was really to make eating a very profitable manner. So this will definitely see some mandate and then did you see from the numbers that even over delivered so starting you need with gross margin.

Speaker Change: And all these initiatives are captured under a stream, which is strategic revenue management that now we are leading and is ready to, to unlock value on all SKUs possible.

Doug: And we are seeing indeed the prestige being more in the upper end and consumer beauty, being more in the lower end.

Speaker Change: And of course, it's contributing to the net revenue, but also to the gross margin.

Speaker Change: But to help you also is definitely, yes, the margin.

Doug: It's not a cyclical category.

Speaker Change: And beauty is not a consumer goods industry neither.

Speaker Change: Thank you.

Speaker Change: A lot of initiatives I will start first with pricing on the nuclear we implemented significant price increases because there was inflation.

Speaker Change: Yes, the margin growth could be indeed higher versus indeed what we are indicating here.

Speaker Change: So it's very, very important that I restate this at the occasion of your question.

Speaker Change: We'll take our next question from Oliver Chin with TD Toe and please go ahead.

Oliver Chen: We'll take our next question from Oliver Chin with TD Toe and please go ahead. Hi Sue and Laura, very helpful. Thank you. You mentioned retailers replacing some order with caution and the near-term. Can you elaborate on that? That would be helpful in terms of what retailers are seeing and how you're planning inventory as a result. Second, would love your thoughts on comparing or contrasting how consumers and or customers are feeling regionally, just given there's lots of cross-currents in the environment, but fragrance clearly remains very attractive. And finally, as we think more generally about investments, this year, any highlights, especially in terms of the continued innovation and digital and best practices as well as R&D. Thank you.

Speaker Change: I think this is really the main difference between the Coty of five years ago and the, Coty of today.

Speaker Change: And we are seeing, I mean, mature markets being also in the mid-single digit.

Speaker Change: We have put in place a way to select what is going to stand the test of time and to, grow over time.

Speaker Change: And we are seeing, I mean, our growth engine indeed being in the double digit.

Speaker Change: Hi Sue and Laura, very helpful.

Sue Nabi: Oh, maybe you can start with the first question. Yeah, absolutely.

Speaker Change: Thank you.

Speaker Change: You mentioned retailers replacing some order with caution and the near-term. Can you elaborate on that?

Speaker Change: Number one, but also because readings of pricing power with their and again Z innovations the strength of the brands was really alluding to <unk>. Since it was really a deep review of the portfolio. Our stocking strategy revenue management is really a fantastic case, when your opinion Xu whisky brands, a mono brand all these brands.

Speaker Change: That would be helpful in terms of what retailers are seeing and how you're planning inventory as a result.

Laurent Mercier: And there was really a deep review of the portfolio. I was talking, you know, strategy revenue management is really a fantastic case when you open, you know, the risky brands, the Monarch brand, all these brands, I mean, and you apply the playbook, then we were really able to unlock a lot of opportunities. So indeed, this was really pricing. Keep in mind also that in Brazil we have also, you know, our own R&D; we have our own factory. So we were really able, with the additional volumes, really to gain six cost absorption and also to gain significant improvement on procurement.

Speaker Change: Second, would love your thoughts on comparing or contrasting how consumers and or customers are feeling regionally, just given there's lots of cross-currents in the environment, but fragrance clearly remains very attractive.

Speaker Change: That's very important.

Speaker Change: Thank you.

Speaker Change: So it's really about addiction.

Speaker Change: The scenting is becoming a much larger piano with much more touches than the traditional, eau de toilette or eau de parfum.

Speaker Change: <unk> Plaza playbook than we were really able to unlock a lot of opportunity. So indeed this was really pricing.

Speaker Change: Thank you.

Speaker Change: And finally, as we think more generally about investments, this year, any highlights, especially in terms of the continued innovation and digital and best practices as well as R&D.

Speaker Change: Keep in mind also that in Brazil. We are also you know our own R&D, we have our own factory. So we were really evolving.

Speaker Change: Additional volumes really to gain fixed cost absorption and also to gain significant.

Speaker Change: Thank you.

Speaker Change: Oh, maybe you can start with the first question.

Speaker Change: Improvement on on procurement. So this was really a boosting the gross margin and then you know is that <unk> have yet to have stockholders that we explained many times, where you believe you need to invest.

Speaker Change: Yeah, absolutely.

Speaker Change: So, Oliver, I think in your question, indeed, it's very important that you are putting this question in a very, in a way that is really depending on regions and also categories, because indeed, the dynamics can be very different.

Sue Nabi: So, Oliver, I think in your question, indeed, it's very important that you are putting this question in a very, in a way that is really depending on regions and also categories, because indeed, the dynamics can be very different. As you know, and really what we reflect is that we are seeing that beauty overall, I mean, keeps growing, keeps very dynamic and really being, you know, mid-single digit, technically, and we are seeing, indeed, the prestige being more in the upper end and consumer beauty being more in the lower end.

Laurent Mercier: So this was really boosting the growth margin. And then, you know, that's really the virtual circle that we explain many times. We're able really to invest in the new opportunities. So it means that for fiscal 25, in fact, Brazil is a creative for the equation, because the additional basis points that they are gaining, in fact, is moving even faster than the company. So it shows that, you know, our growth engines market that bring growth, but they bring profit, and because we have the right platform.

Speaker Change: In the new in the new opportunities. So it means that for fiscal 'twenty failure. In fact, Brasilia is a creative across the equation because of the additional basis points that we are gaining in fact, he's moving even faster and so complaining. So it shows that our growth in jeans market are they bring growth bids at <unk>.

Speaker Change: As you know, and really what we reflect is that we are seeing that beauty overall, I mean, keeps growing, keeps very dynamic and really being, you know, mid-single digit, technically, and we are seeing, indeed, the prestige being more in the upper end and consumer beauty being more in the lower end.

Speaker Change: Green profit and because we have the right platform.

Speaker Change: We'll take our next question from Olivia Tong with Raymond James.

Speaker Change: We'll take our next question.

Speaker Change: And we are seeing, I mean, mature markets being also in the mid-single digit, and we are seeing, I mean, our growth engine, indeed, being in the double digit.

Sue Nabi: And we are seeing, I mean, mature markets being also in the mid-single digit, and we are seeing, I mean, our growth engine, indeed, being in the double digit. Now, when we go more in depth, which is your question, indeed, on consumer beauty in US, yes, we are seeing that indeed, the color cosmetic market indeed is challenged, and we are seeing indeed that some US retailers are managing their inventory, indeed, with discussion.

Unknown Executive: Thank you.

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

Anna Lizzul: We'll pick our next question from Anna Lizzul. Would thank America. Please go ahead. Hi, good morning. Thank you so much for the question. I wanted to go back to the consumer beauty topic. You mentioned you're diving into innovation, doubling in the next couple of years, just given the strength of certain competitors in the space. Do you now view the mass beauty side as expanding and therefore more of a growth opportunity? And you mentioned trading up, which is very interesting. You know, from the mass space to entry level procedure. Are you seeing any benefit here in consumer beauty, though, from trade down and more challenging consumer environment?

Speaker Change: Please go ahead.

Speaker Change: Great.

Speaker Change: Now, when we go more in depth, which is your question indeed on consumer beauty in US, yes, we are seeing that indeed the colour cosmetic market indeed is challenged.

Speaker Change: Linda Bolton Weiser with D.A.

Speaker Change: Hi, good morning. Thank you so much for the question.

Speaker Change: Now, when we go more in depth, which is your question, indeed, on consumer beauty in US, yes, we are seeing that indeed, the color cosmetic market indeed is challenged, and we are seeing indeed that some US retailers are managing their inventory, indeed, with discussion.

Andrew: Wanted to go back to you on the consumer beauty topic, you mentioned your diving into innovation doubling in the next couple of years, just given the strength in certain competitors in the space do you now view the math 80 side is expanding and therefore are more of a growth opportunity and you mentioned trading up which is very interesting you know from the math based on your entry level.

Speaker Change: Proceeds are you seeing any benefit here in consumer beauty, though from trade down in a more challenging consumer environment. Thanks.

Speaker Change: Definitely, this is what we are seeing, but at the same time, I want to highlight that this is only a portion of our net revenue.

Sue Nabi: Definitely, this is what we are seeing, but at the same time, I want to highlight that this is only a portion of our net revenue. So, it's really a small part, and we are seeing at the same time that on the other regions, I mean, we are seeing, you know, retailers keeping very dynamic, definitely on prestige, but also on consumer beauty in the growth engines market. So, that's why, definitely, I mean, it's driving our expectation for consumer beauty to be moderately positive in Q1. So, indeed, we are taking this into consideration in our algorithm.

Anna Lizzul: Thanks.

Sue: Good morning, this is Sue speaking.

Sue: Good morning.

Speaker Change: And we are seeing indeed that some US retailers are managing their inventory indeed with caution.

Speaker Change: Davidson, please go ahead.

Speaker Change: So with.

Speaker Change: So, it's really a small part, and we are seeing at the same time that on the other regions, I mean, we are seeing, you know, retailers keeping very dynamic, definitely on prestige, but also on consumer beauty in the growth engines market.

Sue Nabi: So, good morning, Anna. This is Sue. So, if I understand where the question is about, let me just read it again, because someone is typing at the same time. Do we see mass beauty as more of a growth opportunity? Yes, of course, we see this as a growth opportunity. Mass beauty is not just the US market, where we are doing, I would say, a fantastic job that we have been doing for the last three or four years. You've seen probably in the recent, recently in the most recent scanners, plus, you know, on each other vision, that CoverGirl is one of the heritage brands that is resisting the best to, you know, not only the slow down on one side, but also for in front of some very, very nimble competitors.

Sue: So, your second part of the question was about how consumers, are feeling in the different regions.

Sue: Thank you so much.

Sue: Good morning, I know this is sue so if I understand where the question is about I mean, just to read it again because someone is typing at the same time.

Sue: I wanted to sort of build on what you just said around fragrances and why you think fragrances, seem to be transitioning from what, you know, historically has been more of a discretionary category within beauty to one that is clearly less discretionary, but also seeing a willingness by consumers at the low end to trade in, even though they haven't historically participated in the category.

Sue: It's pretty much, you know, price discovery at the ultra prestige end.

Sue: So, you know, clearly it sounds like there is significant momentum in prestige fragrances.

Sue: So, of course, the big region for us, the first big region for us is the US, where we clearly see that fragrances, specifically prestige fragrances, but also mass market fragrances, by the way, remain bright spots.

Speaker Change: Do we see mass beauty is more of a growth opportunity. Yes of course, we see a decent of course opportunity mass beauty is not just the U S markets, where we are doing I would say a fantastic job that we have been doing for the last three or four years, you've seen probably in the rest of it recently in the most recent a.

Sue: Definitely, this is what we are seeing.

Speaker Change: So, that's why, definitely, I mean, it's driving our expectation for consumer beauty to be moderately positive in Q1.

Speaker Change: So, indeed, we are taking this into consideration in our algorithm.

Speaker Change: Scanners, plus I'm, just trying to envision that Chicago is one of the heritage brand that is resisting the best to you know.

Speaker Change: And Oliver, good morning, this is Sue speaking.

Sue Nabi: And Oliver, good morning, this is Sue speaking. So your second part of the question was about how consumers are feeling in the different regions. So, of course, the big region for us, the first big region for us is the US, where we clearly see that fragrances specifically prestige fragrances, but also mass market fragrances, by the way, remain bright spots.

Oliver Chin: So your second part of the question was about how consumers are feeling in the different regions.

Speaker Change: Not only the slow down on one side, but also for in front of some very very nimble competitors, but we are learning quickly we are putting in place what needs to be put in place quickly.

Speaker Change: So, of course, the big region for us, the first big region for us is the US, where we clearly see that fragrances specifically prestige fragrances, but also mass market fragrances, by the way, remain bright spots.

Sue Nabi: But we are learning quickly; we are putting in place what needs to be put in place quickly. As you heard it, we have been doubling down on advocacy marketing and the full marketing that goes with it. And this is really changing the destiny of our brands that are suddenly visible in with the right light, with the right innovation, powers the rights consumers who are making the growth of this market. But now we are adding a second leg, which is this a giant beauty start up inside. It already was active. Now it's becoming something very, I would say, specialized team, multi, multi competency system.

Sue: But at the same time, I want to highlight that this is only a portion of our net revenue.

Sue: So, it's really a small part.

Speaker Change: As you heard that we have been doubling down on advocacy marketing and the food marketing that goes with it and this is really changing the destiny of our brands that are suddenly visible with the right light with the right innovation towards the rights of consumers, who are making the growth of this market, but now we are adding a <unk>.

Sue: And we are seeing at the same time that on the other regions, I mean, we are seeing retailers, keeping very dynamic, definitely on prestige, but also on consumer beauty in the growth engines market.

Speaker Change: It's really a story of two folds, I would say.

Speaker Change: People shopping high and the fragrances are continuing to shop high and fragrances, mainly presumes or the parfait, elixirs, or that kind of highly concentrated with a strong trade of fragrances, but at the same time, you also see in the same channel, entry prestige fragrances doing very, very well.

Sue Nabi: And these entry prestige, I would say, users are, of course, towers, I would say smaller formats, a triathlete so much, but also, you know, including body sprays that we saw so heavily used by a lot of young generation.

Speaker Change: It's really a story of twofold, I would say.

Sue: So, that's why definitely, I mean, it's driving our expectation for consumer beauty to be moderately positive in Q1.

Speaker Change: People shopping high-end fragrances are continuing to shop high-end fragrances, mainly perfumes, eau de parfum, elixirs, all that kind of highly concentrated with a strong trail of fragrances.

Speaker Change: Second leg, which is these are agile beauty stuffed up inside Gucci. It's already was <unk> now, it's becoming something very I would say a specialized team.

Speaker Change: But at the same time, you also see in the same channel, entry prestige fragrances doing very, very well. So, it's not either, it's not one or the other, it's both at the same time.

Speaker Change: And these entry prestige, I would say users are, of course, towards, I would say, smaller formats, trial formats, but also, you know, including body sprays that we saw so heavily used by a lot of younger generation.

Speaker Change: So it's not either.

Speaker Change: It's not one or the other.

Jim: Jim Mochi Medici competencies, Jim sorry, that's the word I was looking for so you can imagine that when you put these two together even in a market that is pressure, mainly mainly and drugstore chains because in E. Comm. The brands that we are having a blooming in fact, so it's not about mass beauty that.

Speaker Change: It's both at the same time.

Sue Nabi: Sorry, that's the way the word I was looking for. So you can imagine that when you couple this two together, even in a market that is pressured mainly in drugstore chains, because in e-commerce, the brands that we are having a booming impact. So it's not about mass beauty that is pressured. It's mass beauty in certain channels that explains the slowdown that we are seeing in some, I would say, retailer orders, etc. So I believe that mass beauty continues to have the future, assuming that we are as nimble as innovative with a look and shield of prestige.

Speaker Change: And these entry prestige, I would say, users are, of course, towers, I would say smaller formats, a triathlete so much, but also, you know, including body sprays that we saw so heavily used by a lot of young generation.

Speaker Change: So this is clearly what we see on the fragrance part on color cosmetics clearly and interestingly, we see still some dynamism in this market, and a lot of the consumers know that the prices of mass market has been increasing quite strongly in the last two years.

Sue Nabi: So this is clearly what we see on the fragrance part on color cosmetics clearly and interestingly, we see still some dynamism in this market, and a lot of the consumers know that the prices of mass market has been increasing quite strongly in the last two years. You see some trade up, which is really a first in this kind of environment, you see a portion of consumers from mass market trading up to entry prestige color cosmetics, so that's very interesting.

Jim: This pressured its mass beauty and certain channels that explains the slowdown that we're seeing in some I would say a retailer all dose et cetera. So I believe that mass beauty continues to have the future assuming that we are as nimble as easily achieve with the new can sheet of prestige. So this is number one number two.

Speaker Change: You see some trade up, which is really a first in this kind of environment, you see a portion of consumers from mass market trading up to entry prestige color cosmetics, so that's very interesting.

Speaker Change: Yes, thank you.

Sue Nabi: So this is number one. Number two, this U.S. market is one market among others in our equation. And we are really growing this division worldwide. Remail has been gaining market share for the last two quarters globally, and we are accelerating the same playbook behind Remail. And on top of this, when I move away from this color cosmetic category, we are also accelerating in mass fragrances. This is expected to be the fastest growing category of the division in the fiscal 25. We are accelerating in nails, specifically in artificial nails. And we are accelerating in what we call elevated body care, because there is a huge increase of penetration in body care all around the world.

Jim: This U S market is one market among others in our equation and we are really growing this division worldwide remit has been gaining market share for the last two quarters globally and we are accelerating the same play book behind Reman and on top of these when they move away from this cutoff cosmetics.

Speaker Change: So we are not at all seeing trade downs, we're seeing trade ups, and we are seeing consumers operating in the different price brackets are still very, very active in Europe, the dynamism of the beauty market is still intact fragrances are there also a bright spot.

Sue Nabi: So we are not at all seeing trade downs, we're seeing trade ups, and we are seeing consumers operating in the different price brackets are still very, very active in Europe, the dynamism of the beauty market is still intact fragrances are there also a bright spot.

Speaker Change: I was just curious about when you talk about innovation and consumer beauty.

Jim: So, this is clearly what we see on the fragrance part.

Jim: Category. We are also accelerating in mass fragrances. This is expected to be the fastest growing category of the division in the fiscal 'twenty five we are accelerating and nails, specifically artificial names and we are accelerating in what we call elevated body care because there is a huge increase of penetration in body care or the <unk>.

Speaker Change: Color cosmetics in Europe are doing better than what they are doing in the US, the reason the pressure we see in the US on mainly drugs or chains, where this is really what we see the pressure the rest of the distribution in the US is for us less pressured last but not least in Asia.

Sue Nabi: Color cosmetics in Europe are doing better than what they are doing in the US, the reason the pressure we see in the US on mainly drugs or chains, where this is really what we see the pressure the rest of the distribution in the US is for us less pressured last but not least in Asia. So it's a two-fold story here again, if you look at the outside of China, there is dynamism specifically behind fragrances, fragrance indexes at play penetration is very low and there it's also a story from less than $10 to above $10.

Jim: On color cosmetics, clearly and interestingly, we see still some dynamism in this market.

Jim: Usually when there's a big technology innovation in the nail category, that's a big driver of category growth. It's been quite a few years, I think, since the big innovation.

Jim: And a lot of the consumers, now that the prices of mass market has been increasing quite strongly in the last two years, you see some trade-up, which is really a first in this kind of environment. You see a portion of consumers from mass market trading up to entry prestige color cosmetics.

Jim: Can you talk if there's anything being worked on there?

Jim: And then my second question has to do with cash flow.

Sue Nabi: So, in a way or another, we will continue to grow the division because we are doing what is the right things to be done on the market that is highly competitive and under pressure, like the US one. But we also have massive other areas of oxygen in the coming year. And should I say in the coming years.

Jim: The world So in a way or another we will continue to grow the decision because we are doing what is the right things to be done on the market that is highly competitive and under pressure like the U S. One, but we also have massive other areas of oxygen in the coming year and should I say in the coming years.

Speaker Change: So it's a two-fold story here again, if you look at the outside of China, there is dynamism specifically behind fragrances, fragrance indexes at play penetration is very low and there it's also a story from less than $10 to above $10.

Speaker Change: We see it in what we call growth engine markets, we got recently the news that one of our agile beauty initiatives is called Shonsondo, Shonsondo is a French Spanish brand that was active 20 years ago, that we reignited a year ago, we launched it in many countries including South Africa and the $10.

Sue Nabi: We see it in what we call growth engine markets, we got recently the news that one of our agile beauty initiatives is called Shonsondo, Shonsondo is a French Spanish brand that was active 20 years ago, that we reignited a year ago, we launched it in many countries including South Africa and the $10. And it's become the number one fragrance in this country recently.

Jim: So, that's very interesting.

Jim: So, indeed, we are taking this into consideration in our algorithm.

Jim: I was curious what if you could quantify the cash flow benefits in FY 24 that won't recur in FY 25?

Jim: Yeah.

Coty and Wolfmeyer: Thank you. We'll take our next question from Coty and Wolfmeyer with Piper Sandler, please. Go ahead. Hey, good morning, team. Thanks for shaking the question. I'd like to touch on the guidance for the year and the cadence you've alluded to.

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

Jim: Good morning, this is Sue speaking.

Speaker Change: So, we are not at all seeing trade-downs, we're seeing trade-ups, and we are seeing consumers operating in the different price brackets, so still very, very active.

Speaker Change: Are you assuming a similar level of contribution in Fiscal 25 as in Fiscal 24?

Jim: So, your second part of the question was about how consumers, are feeling in the different regions.

Jim: Give a number behind that.

Speaker Change: Hey, good morning, Thanks for taking the question I'd like to touch on.

Speaker Change: In Europe, the dynamism of the beauty market is still intact.

Speaker Change: So, of course, the big region for us, the first big region for us is the US, where we clearly see that fragrances, specifically prestige fragrances, but also mass market fragrances, by the way, remain bright spots.

Speaker Change: Fragrances are there, also a bright spot.

Speaker Change: Color cosmetics in Europe are doing better than what they are doing in the U.S.

Speaker Change: The reason the pressure we see in the U.S. on mainly drugstore chains, where this is really where we see the pressure, the rest of the distribution in the U.S. is, for us, less pressured.

Speaker Change: The guidance for the year and the cadence is unlimited tail.

Coty and Wolfmeyer: Seems like the back half is going to be fairly strong, and I would love to understand the level of visibility you believe you have into on the back half of this fiscal year and what gives you confidence in those targets. And then additionally on the well estate, if there's any color, you can provide on progress. There are any updates on conversations you have with potential suitors to sell it off to. And then I believe you talk a little bit about Sherry purchases in the group prepared of marks.

Speaker Change: Seems like the back half is going to be fairly strong and I would love to understand the level of visibility you believe you.

Speaker Change: And it's become the number one fragrance in this country recently.

Speaker Change: So you clearly see that whatever is the price, there is still this huge demand for feel good, look good, I would say element highlights on investment in fiscal 25 best practices.

Sue Nabi: So you clearly see that whatever is the price, there is still this huge demand for feel good, look good, I would say element highlights on investment in fiscal 25 best practices. I think the two best practices that and two highlights of investment in fiscal 25 is to continue our best practices in blockbuster creation when it comes to prestige fragrances, you know, we are not anymore in a catch of phase like we used to be two years ago.

Speaker Change: <unk> and the back half of this fiscal year and what gives you confidence in those targets and then additionally on the well if there's any color you can provide on progress.

Speaker Change: Are there any updates on conversations you had a potential theatres too.

Speaker Change: I think the two best practices that and two highlights of investment in fiscal 25 is to continue our best practices in blockbuster creation when it comes to prestige fragrances, you know, we are not anymore in a catch of phase like we used to be two years ago.

And sell it off to you and then I believe you you talk a little bit about share repurchases and in her prepared remarks, so any commentary on updated thinking around share repurchases and capital allocation would be great. Thank you.

Laurent Mercier: So any commentary on updated thinking around the Sherry purchases and capital allocation would be great. Thank you. Thank you, Karin.

Speaker Change: Last but not least, in Asia, so it's a twofold story here again.

Speaker Change: And what are you incorporating insofar as concerns about more volatile macros?

Speaker Change: It's really a story of twofold, I would say.

Speaker Change: And then what is going on with cash flow in early 2025?

Speaker Change: Okay. Thank you recurring so first on the guidance. So I mean first of all indeed, so we are.

Speaker Change: If you look at the outside of China, there is dynamism specifically behind fragrances.

Andrea Teixeira: So first on the guidance. So I mean, first of all, indeed, so we are confirming our midterm algorithm for fiscal 25, which is a six to eight percent. We are indicating as we flag during the last term in school that you know sequential improvement in Q1, which is a one six percent. And then indeed, you know, moving to the six to eight percent algorithm in H1 and then in H2. I mean, the key reason, you know, about the sequence is also, but come as you remember last year, there was very strong facing. Our Q1 was plus 18%, or Q2 was 11%.

Speaker Change: Now we are becoming a trend setting company in this area and we've been really, you know, driving in big, the gourmet slash vanilla slash, you know, banana blossom flower fragrances, which are resonating today from mass market to.

Sue Nabi: Now we are becoming a trend setting company in this area and we've been really, you know, driving in big, the gourmet slash vanilla slash, you know, banana blossom flower fragrances, which are resonating today from mass market to. So this is really something that we intend to continue second thing we are also bringing up our advocacy model that we have put in place. You may have noticed during the prepared remarks that we've grown the EMV of both Riemel and Cogorger by 400%.

Speaker Change: Thanks.

Speaker Change: You said the retailers are managing something about cash and inventory.

Speaker Change: Confirming our midterm algorithm for fiscal 'twenty, five which is a 6% to 8% we are indicating as we flagged during the last earnings call that we see.

Speaker Change: Fragrance index is at play.

Speaker Change: Good morning, Olivia.

Speaker Change: And then also why your receivable seems very, very high.

Speaker Change: <unk> showed improvement in Q1.

Speaker Change: Penetration is very low.

Speaker Change: Thank you for the question.

Speaker Change: It seems to be kind of a drain on cash flow.

She has a one 6% and then indeed, you know moving to 6% to 8% algorithm each one and then in H two.

Speaker Change: So this is really something that we intend to continue second thing we are also bringing up our advocacy model that we have put in place.

Speaker Change: Thank you.

Speaker Change: The key reason <unk> sequence is also about comps.

Speaker Change: And there, it's also a story from less than $10 to above $10.

Speaker Change: Let me try to answer.

Speaker Change: So, this is clearly what we see on the fragrance part.

Speaker Change: Hello, Linda.

Speaker Change: On color cosmetics, clearly and interestingly, we see still some dynamism in this market.

As you remember.

Speaker Change: You may have noticed during the prepared remarks that we've grown the EMV of both Riemel and Cogorger by 400%.

Speaker Change: Last year. It was very strong phasing Q1, west plus 18%. Our Q2 was 11% and then Q3 10 and then you know lendings are you at 11%. So of course, we have the high comps and we are taking this.

Speaker Change: We see it in what we call growth engine markets.

Speaker Change: And a lot of the consumers, now that the prices of mass market has been increasing quite strongly in the last two years, you see some trade-up, which is really a first in this kind of environment. You see a portion of consumers from mass market trading up to entry prestige color cosmetics.

Speaker Change: Let me start with the cash flow.

Speaker Change: We got recently the news that one of our Agile Beauty initiatives is called Chanson d'Eau. Chanson d'Eau is a French-Spanish brand that was active 20 years ago that we reignited a year ago.

Speaker Change: That's really a huge progress.

Sue Nabi: That's really a huge progress. Now what we need to do is to increase the agility of our innovation, putting on the market innovation as quickly as in six to nine months versus more than a year in the previous years. And this we are going to put in place a startup organization inside the company, so that this huge progress on advocacy marketing on one side coupled with an agile innovation startup machine inside CoT will allow us to multiply by two, the level of innovation in core cosmetics, but also in fragrances in this division, knowing that we have already multiplied this level by three. So we are really in high speed base.

Laurent Mercier: And then Q3 10, and then you know, lending the year at 11%. So of course we have high cons, and we are taking this into account in our algorithm. So comes are easier in the H2. Then, definitely, we are modeling that our sell out should be aligned with our selling in the H2. And of course, I mean, this is supported by all the innovations that, you know, we are typing in starting now. But we will continue in H2 both on prestige and on consumer beauty. So indeed, there are all these elements drivers, which are really captured in the sequencing of these gross algorithm.

Speaker Change: We launched it in many countries, including in South Africa, under $10.

Speaker Change: Now what we need to do is to increase the agility of our innovation, putting on the market innovation as quickly as in six to nine months versus more than a year in the previous years.

Speaker Change: Into account.

Speaker Change: In our algorithms so comps are easier.

Speaker Change: And this we are going to put in place a startup organization inside the company, so that this huge progress on advocacy marketing on one side coupled with an agile innovation startup machine inside CoT will allow us to multiply by two, the level of innovation in core cosmetics, but also in fragrances in this division, knowing that we have already multiplied this level by three. So we are really in high speed base.

Speaker Change: It's true.

And definitely we are modeling that our sellout should be aligned with our sell in in the <unk> and of course I mean this is supported by all the innovation that.

Speaker Change: We are typing in starting now, but we will continue.

Speaker Change: Two both on prestige and and on consumer beauty. So these are all these elements drivers, which are really captured in <unk>.

Speaker Change: Last but not least, we are also applying these best practices, sorry, be it advocacy marketing, fast beauty or on the other side fragrance momentum to mass market with a launch of added as rights that we believe is a huge mass fragrance opportunity.

Unknown Executive: Last but not least, we are also applying these best practices, sorry, be it advocacy marketing, fast beauty or on the other side fragrance momentum to mass market with a launch of added as rights that we believe is a huge mass fragrance opportunity. Thank you.

Speaker Change: Sequencing of these Oh <unk> growth algorithm.

Laurent Mercier: Then on your second part on capital allocation. I mean, first of all, I just want to remind again and again that the leveraging is the number one imperative for the company. And of course that, you know, we keep targeting, you know, towards the two times end of calendar 25. And I want really to insist that these two times is really without any velocity. So it's really built by pure organic, a big expansion and cash flow generation. Okay, so that's very important. So now, definitely on the last take. So it's really okay. We keep targeting, you know, these digest teacher end of calendar 25.

Speaker Change: And then on your second part on the.

Speaker Change: Capital allocation I mean first of all I, just want to remind us again and again.

Speaker Change: Leveraging ease our number one priority for the company and of course with that.

Speaker Change: Thank you.

Speaker Change: We keep targeting.

Speaker Change: We will take our next question from Filippo Florini, please to city, please go ahead.

Filippo Falorni: We will take our next question from Filippo Florini, please to city, please go ahead. Hi, everyone. Thanks for the questions.

Speaker Change: Towards the two times end of calendar 'twenty, five and I want to insist that these two tons easily without any real estate divestiture suites treaty deal.

Speaker Change: Hi, everyone.

Speaker Change: Thanks for the questions.

Speaker Change: So, I wanted to go back to the consumer beauty business.

Susan Anderson: So, I wanted to go back to the consumer beauty business. What is a little promotional environment that you've seen in the US market? Clearly we've seen the category be more under pressure, particularly with low income consumers. So are you planning more promos in certain part of the portfolio, or are you planning to respond to kind of address the value of patients from some low income consumers?

Speaker Change: So, that's very interesting.

Speaker Change: By your pure organic.

Speaker Change: So, we are not at all seeing trade-downs, we're seeing trade-ups, and we are seeing consumers operating in the different price brackets, so still very, very active.

Speaker Change: In Europe, the dynamism of the beauty market is still intact.

Speaker Change: Fragrances are there, also a bright spot.

Speaker Change: EBITDA expansion and cash flow generation queso is that's very important so now definitely on villa stake. So it's really okay. We keep targeting he knows he's a divestiture end of calendar 'twenty five now as you know is this is definitely teams of hands.

Speaker Change: What is a little promotional environment that you've seen in the US market?

Speaker Change: Color cosmetics in Europe are doing better than what they are doing in the U.S.

Speaker Change: Last but not least, in Asia, so it's a twofold story here again.

Speaker Change: If you look at the outside of China, there is dynamism specifically behind fragrances.

Speaker Change: Clearly we've seen the category be more under pressure, particularly with low income consumers.

Speaker Change: So are you planning more promos in certain part of the portfolio, or are you planning to respond to kind of address the value of patients from some low income consumers?

Laurent Mercier: Now, as you know, this is definitely in the hands of the main shoulder, which is a KK, so no specific news on this. And on again, on share, you know, we purchase as I indicated, definitely we confirm our plan really to move towards, you know, 800 million share count really by end of fiscal 27. So this agenda is and change, definitely the last take that is teacher will be an opportunity, even you know, to do it faster. This is really what we are taking into account in the algorithm. So, so algorithm is and change and agenda remains the same.

The main shareholder which is a KKR so no specific news on the on <unk> and on them again on share repurchase.

Speaker Change: You know, a good morning city for this is speaking.

Sue Nabi: You know, a good morning city for this is speaking. We've done a lot of studies recently to really understand what are the levers to, in a way, support our growth in consumer beauty, which is mainly color cosmetics for Coty in the US to take this example. And what we are seeing is that really for a brand like color girl, which is really talking to people from 18 years old or even younger up to both 50, 60, 70 years old, it's really a kind of very specific mix of still TV advertising, still a lot of advocacy marketing, influencer marketing, and a little bit of coupon.

Speaker Change: We've done a lot of studies recently to really understand what are the levers to, in a way, support our growth in consumer beauty, which is mainly color cosmetics for Coty in the US to take this example.

Speaker Change: <unk> indicated <unk>, we confirm our plan and we need to remove two worlds.

Speaker Change: 800 million shut count.

Speaker Change: Really by the end of fiscal 2007, <unk> agenda is unchanged definitely did I state divestiture will be an opportunity then you need to do it faster and this is really what we are taking into account in the algorithm. So so algorithm is unchanged and agenda remains a thing.

Speaker Change: And what we are seeing is that really for a brand like color girl, which is really talking to people from 18 years old or even younger up to both 50, 60, 70 years old, it's really a kind of very specific mix of still TV advertising, still a lot of advocacy marketing, influencer marketing, and a little bit of coupon.

Laurent Mercier: Thank you.

Speaker Change: Okay.

Speaker Change: Fragrance index is at play.

Laurent Mercier: We will take our next question from Andrea Teixeira with JP Morgan. Please go ahead. Hi, good morning. Thank you for taking my question. So I wanted to so you, you, you found the very constant of the launches that you have in the combing. What are you going to call for? Very goddess and in a lot of the launches that we have for the strong holiday season. And obviously, understandably, you have to do the ability right now of the quarter. But can you help us like look through. Channel and more of what you have gained in terms of like distribution to give us confidence that you can call that very strong comparison in the holidays last year.

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

Speaker Change: Penetration is very low.

Andrea Teixeira: Hi, Good morning, Thank you for taking my question.

Speaker Change: And there, it's also a story from less than $10 to above $10.

Speaker Change: It's really a little bit of coupon.

Andrea Teixeira: And it's become the number one fragrance in this country recently.

Andrea Teixeira: Again, you know, I hear some people saying fragrances are discretionary categories.

Speaker Change: We see it in what we call growth engine markets.

Speaker Change: So promotionality and prices, pressure on prices is not what is driving the consumption.

Andrea Teixeira: So I wanted to show you you sounded very confident of the allowances.

Andrea Teixeira: We got recently the news that one of our Agile Beauty initiatives is called Chanson d'Eau. Chanson d'Eau is a French-Spanish brand that was active 20 years ago that we reignited a year ago.

Andrea Teixeira: We launched it in many countries, including in South Africa, under $10.

Andrea Teixeira: That you have in the campaign, what are you going to accomplish Barbara.

Speaker Change: Remember what it just said a few minutes ago, we are seeing some consumers trading out from consumer beauty color cosmetics category to entry prestige categories.

And a lot of the launches that we have for a strong holiday season.

Speaker Change: And obviously understandably youll have some visibility right now of the quarter.

Speaker Change: So it's really this that we are seeing.

Speaker Change: So it's really the job of us and the job of all the players of this industry to put on the market, I would say prestige like innovation if I may call it like this, but at the prices of mass market, this is the recipe that works.

Sue Nabi: So it's really the job of us and the job of all the players of this industry to put on the market, I would say prestige like innovation if I may call it like this, but at the prices of mass market, this is the recipe that works. It's not about cheaper brands, cheaper brands are not taking the, I would say, the volumes. It's really about this part that is shared between upper mass and entry prestige.

But can you help us like look thrill.

Speaker Change: Channel and more.

Speaker Change: He has gained in terms of like distribution to give us confidence that you can call that very strong comparison in the holiday last year.

Speaker Change: It's not about cheaper brands, cheaper brands are not taking the, I would say, the volumes. It's really about this part that is shared between upper mass and entry prestige.

Laurent Mercier: And given that how cyclical fragrances have been, I understand all the body oils and fragrances have been a wellness category for pretty much the last four years. But understandably, thinking about how the consumer is making tough choices as we go, in particular in the key markets that you're in. Understandably, how this is going to unfold and what gives you confidence. And then you're going to reaccelerate in the second half given despite the comps. I mean the comps are the comps are, but I think it's important to see how you're planning the cadence of these launches to offset, you know, the tough comps.

Speaker Change: Some other people saying that this is a cyclical category.

Andrea Teixeira: And it's become the number one fragrance in this country recently.

Speaker Change: And given that how cyclical.

Speaker Change: Thank you.

Speaker Change: Fragrances have been I understand all the body aisle and fragrances have been.

Speaker Change: Our wellness category for pretty much the last four years, but understandably thinking about how the consumer is making tough choices we call in particular in the key markets.

Speaker Change: What's our next question from Javier Escalante with Evercore?

Unknown Executive: Thank you.

Speaker Change: Please go ahead.

Javier Escalante: What's our next question from Javier Escalante with Evercore? Please go ahead. Hi, good morning, everyone.

Speaker Change: Hi, good morning, everyone.

Javier Escalante: My question seems from in Brazil, about Brazil. If I understand on your prepare remarks, you mentioned that it could be very high double digits, gross margins increased for 100 basis points. So how do you accomplish so much in just one year? What is the role of Brazil in year two? Driving consumer profit margins? And I have a follow-up.

Javier Escalante: My question seems from in Brazil, about Brazil.

Speaker Change: If I understand on your prepare remarks, you mentioned that it could be very high double digits, gross margins increased for 100 basis points.

Speaker Change: And.

Dan: Understandably, how this is going to unfold and what gives you confidence that Dan.

Dan: Reaccelerate in the second half.

Speaker Change: And despite the comps the comps the comps are but I think it's important to see how youre planning the cadence heartbeat.

Speaker Change: So how do you accomplish so much in just one year?

Speaker Change: What is the role of Brazil in year two?

Speaker Change: Phase two so offset the tough comps.

Laurent Mercier: And also like a clarification, as we build into your guidance, I believe you mentioned giving EBDA of margin of 18% and giving your guidance for EBDA when you back it out, it actually would give you a higher revenue number than what you're implying your guidance. Understand that perhaps, you know, that number is a fact neutral that would give you close to a mid single digit increase in sales as opposed to, let's say, a 4% increase in sales for fiscal 25. I guess that's a question for around. Thank you very much for both.

Speaker Change: And also like a clarification as we deal with and so your guidance I believe you mentioned hitting EBITDA of marching up 18% and then given your guidance for EBITDA. When you back it out it actually gives you a higher revenue number than what you.

Speaker Change: Driving consumer profit margins?

Speaker Change: And I have a follow-up.

Speaker Change: Javier, let me start with the first part.

Laurent Mercier: Javier, let me start with the first part. And thank you very much for giving me and giving us the opportunity to highlight the fantastic, I would say, growth trajectory of the Brazilian market and the Brazilian COTI teams. So let me maybe update you on this market. So the Brazilian business has been growing very rapidly. It's more or less 20% of growth that we have seen on this market in fiscal 24. We are already a leader in many categories.

Speaker Change: And thank you very much for giving me and giving us the opportunity to highlight the fantastic, I would say, growth trajectory of the Brazilian market and the Brazilian COTI teams.

Speaker Change: You're implying your guidance I understand that perhaps that number is FX neutral that would get you close to a mid single digit increase in sales as opposed to let's say a 4% increase in sales for fiscal 2005.

Javier Escalante: So let me maybe update you on this market.

Speaker Change: So the Brazilian business has been growing very rapidly. It's more or less 20% of growth that we have seen on this market in fiscal 24.

Speaker Change: We are already a leader in many categories.

Speaker Change: Hi.

Speaker Change: We are the leader of the Nell category with a brand called Riscay.

Laurent Mercier: We are the leader of the Nell category with a brand called Riscay. And COTI has very strong positions in body care, as we are the number one in scented body oils, which are becoming a global phenomenon, by the way. And number two in body lotions with the brand called Monongé. We are now unlocking the substantial fragrance opportunity in this country. A little bit of context, the Brazilian market is very big market, as you said it.

Speaker Change: That's a question for Laura Thank you very much for both.

Speaker Change: And COTI has very strong positions in body care, as we are the number one in scented body oils, which are becoming a global phenomenon, by the way.

Speaker Change: Yes.

Speaker Change: So you clearly see that whatever is the price, there is still this huge demand for feel-good, look-good, I would say, element.

Speaker Change: Indeed, as I shared, we are landing our free cash flow fiscal 24 at a level of $370 million.

Laurent Mercier: Okay, so I mean let me start indeed on the fiscal 24 launches. I need that's really a key question, and we explain several times that the strategy we put in place is exactly that we are not, you know, in this trap that we launch a big innovation in your one and then you're still is dropping, not at all. So this is exactly very good as is a perfect example, so indeed it's you know great success, which really contributed to fiscal 24 top line significantly. But we are going to continue in fiscal 25, so it means that very good as we continue to grow and we are doing also very good as intense, so which is going to come on top.

Speaker Change: Okay.

Speaker Change: Let me start indeed on the.

Speaker Change: Fiscal 'twenty for.

Speaker Change: Launches I mean, that's really a key question and we explained several times that the strategy. We put in place is exactly that we are not <unk> that we launch a big innovation and got one and then your fleets dropped not that towards so this is exactly beggary. Good days. He is a perfect example, so indeed it too.

Speaker Change: And number two in body lotions with the brand called Monongé.

Speaker Change: We are now unlocking the substantial fragrance opportunity in this country.

Speaker Change: A little bit of context, the Brazilian market is very big market, as you said it.

Laurent Mercier: It's over $2 billion market. And the penetration of fragrance usage or sending items usage is close to 70%. So you can imagine this is paradise for a company like COTI. So while direct selling, particularly door to door has been historically big in this country, the retail channel has been growing very strongly and very quickly in both mass and prestige recently. And here, as you can imagine, our company is very well positioned to win as we are leveraging our global portfolio of mass, but also prestige fragrance brand.

Speaker Change: It's over $2 billion market.

Speaker Change: And the penetration of fragrance usage or sending items usage is close to 70%.

Speaker Change: <unk> success, which really contributed to fiscal 'twenty four top line significantly, but we are going to continue in fiscal 2005. So it means at Burberry goodness will continue to grow and we are in Europe. So they're very good is intense so which is going to come on top okay. So it's really that.

Speaker Change: So you can imagine this is paradise for a company like COTI.

Speaker Change: Highlights on investment in Fiscal 25, best practices. I think the two, best practices and two highlights of investment in Fiscal 25 is to continue our best practices in blockbuster creation when it comes to prestige fragrances.

Speaker Change: Definitely, there were some elements that do not repeat.

Speaker Change: So while direct selling, particularly door to door has been historically big in this country, the retail channel has been growing very strongly and very quickly in both mass and prestige recently.

Laurent Mercier: Okay, so it's really that, you know, your point about the comp, in fact, we manage this way and then on top is really we are doing this on the other franchise, you know, we are launching indeed. It's a good sheet of Laura orchid, and this really, you know, it's part of the floor arrange, and here again, you know, it's really adding a growth in the floor arrange, and it's starting very well because it is already the number one that's for a worldwide. But this is the same on the bus, this is the same of course on I mean on March Jacob because March Jacob's also in terms of facing Daisy wide we launched in March.

Speaker Change: Your point about the comp in fact, we managed this way and then on top is really we are doing some yoga franchise.

Speaker Change: And here, as you can imagine, our company is very well positioned to win as we are leveraging our global portfolio of mass, but also prestige fragrance brand.

Speaker Change: We are launching indeed.

Speaker Change #100: Gucci of La Quinta and these really you know it's part of the floor.

Speaker Change #100: We are leveraging our leading fragrance capabilities, our extensive distribution in this country, as well as the fact that we have big factory where we can manufacture locally. So only one year after launching a few of our mass fragrance brands in the Brazilian retail channel, we reached already the number six of rank in this country with over 4% of market share.

Laurent Mercier: We are leveraging our leading fragrance capabilities, our extensive distribution in this country, as well as the fact that we have big factory where we can manufacture locally. So only one year after launching a few of our mass fragrance brands in the Brazilian retail channel, we reached already the number six of rank in this country with over 4% of market share. Of course, we will continue to drive this through additional brand introduction.

Speaker Change #100: Ranjan.

Speaker Change #100: <unk>.

Speaker Change #101: Adding a growth in <unk> and he's starting very well because this is where there is a number one at Cisco or worldwide. But this is the same on the bus as he sees the same of course.

Speaker Change #102: I mean on magic quadrant, because Marc Jacobs, so in terms of phasing Disney wide, we launched in March. So in fact, we have the full impact now in Q1 and Q2. So that's why now we're also facing these launches.

Laurent Mercier: So, in fact, we have the full impact now in Q1 and in Q2. So, that's why now we are also facing these launches that, if not only, you know, only one window during the year, but we opened two or three windows so that we can really say and avoid, you know, this comp element. So, that's definitely part of our strategy to continue. Really, is this expansion that's the same on, definitely on on consumer beauty that we are doing this? So, I will answer also your question on, you know, the guidance. So definitely what we are monitoring, so it's really targeting the light for like gross, so this is a six to eight percent.

Speaker Change #100: Of course, we will continue to drive this through additional brand introduction.

Speaker Change #100: It proved productivity and we are going to accelerate the expansion as a step too.

Laurent Mercier: It proved productivity and we are going to accelerate the expansion as a step too. But it's also the story of prestige fragrances where we took over the business from distributors a few years ago, and we are now reaching almost 10% market share up almost 200 basis points versus fiscal 21. And this is led by brands such as Calvin Klein and Hugo Bus.

Speaker Change #103: Not only you know only.

Speaker Change #104: Only one window during the year, we opened two or three windows. So that we can really save them to avoid this comp.

Speaker Change #101: But it's also the story of prestige fragrances where we took over the business from distributors a few years ago, and we are now reaching almost 10% market share up almost 200 basis points versus fiscal 21.

Speaker Change: Definitely, this is really a year where we are starting to pay significant cash tax.

Speaker Change #104: So that's definitely part of our of our strategy to continue really.

Speaker Change #104: These are these extension is that the same on this uniquely on consumer beauty that we are doing so.

Speaker Change #101: And this is led by brands such as Calvin Klein and Hugo Bus.

Speaker Change #101: So you can imagine that for us, this is really a land of opportunities and it's just the beginning of this story.

Laurent Mercier: So you can imagine that for us, this is really a land of opportunities and it's just the beginning of this story.

Speaker Change #105: I will I will answer them. So your question on <unk>.

Speaker Change #102: No, maybe you can compliment on the profitability part expected for fiscal absolutely.

Laurent Mercier: No, maybe you can compliment on the profitability part expected for fiscal absolutely. So indeed, the agenda for Brazil was of course, it's a strong growth engine, but it was really to make it in a very profitable manner. So this was definitely the mandate. And indeed, you see from the numbers that you know, even over-delivered. So starting with growth margin, a lot of initiatives will start first with pricing and definitely we implemented a significant price increase because there was inflation.

Speaker Change #106: The guidance.

Speaker Change #106: So definitely what.

Speaker Change #103: So indeed, the agenda for Brazil was of course, it's a strong growth engine, but it was really to make it in a very profitable manner.

Speaker Change #106: What we are we are monitoring so he's really targeting.

Speaker Change #107: Targeting the like for like growth. So is it is a 6% to 8%. What's very important is also is that our guidance on EBITDA as we use a dollar to dollar value. This is really a this is really the guidance that we're giving and need underpinned by you and by margin expansion. So and I know this is a modeling.

Laurent Mercier: What's very important is also that our guidance on a bid is really the dollar the dollar value and this is really this is really the guidance that we are giving and I'm done pinned by by margin expansion so and I know this is a modeling you're trying to do of course it's hard to see you know the full year correct impact so I think this is definitely you know some functioning. I mean indications that we will give you as a year the year is going but to help you also is definitely yes the margin yes the margin growth could be indeed higher versus indeed what we are indicating here.

Speaker Change #103: So this was definitely the mandate.

Speaker Change #103: And indeed, you see from the numbers that you know, even over-delivered.

Speaker Change #104: So starting with growth margin, a lot of initiatives will start first with pricing and definitely we implemented a significant price increase because there was inflation. Number one, but also because really the pricing power was there.

You're trying to do of course, it's hard to see you lose a full year Forex impact. So I think this is definitely you know some fine tuning indications that we will give you as the year as the euro is growing but.

Speaker Change #104: And again, the innovations, the strengths of the brands was really allowing to do this.

Laurent Mercier: Number one, but also because really the pricing power was there. And again, the innovations, the strengths of the brands was really allowing to do this. And there was really a deep review of the portfolio. I was talking, you know, strategy revenue management is really a fantastic case when you open, you know, the risky brands, the monarch brand, all these brands, I mean, and you apply the playbook, then we were really able to unlock a lot of opportunities.

Speaker Change #104: And there was really a deep review of the portfolio.

Speaker Change #108: To help you also is definitely yes, zumel gene, yes, imagine growth could be indeed higher VLCC. Indeed, what we are indicating here.

Speaker Change #105: I was talking, you know, strategy revenue management is really a fantastic case when you open, you know, the risky brands, the monarch brand, all these brands, I mean, and you apply the playbook, then we were really able to unlock a lot of opportunities.

Laurent Mercier: Let me just quickly conclude on the middle part of your question about what gave us the confidence of our launchers sustaining other time and continuing to grow one or so the other. I think this is really the main difference between the growth of our time. That's very important. And every launch we are doing, specifically the big launchers behind the big brands, are really done even only if we have a full confidence, high level of confidence, that this is not going to be something that's going to be high for the first year and then go down.

Speaker Change #109: Yeah, Let me maybe just 60 concluded on the second part on the Middle part of your question about what gives us the confidence and you know of our launches are sustaining all the time and continuing to grow on us or the other I think this is really the main difference between the Gucci of five years ago into equity yesterday, we have put in place a way.

Speaker Change #105: So indeed, this was really pricing.

Laurent Mercier: So indeed, this was really pricing. Keep in mind also that in Brazil we have also, you know, our own R&D, we have our own factory. So we were really able with the additional volumes really to gain six cost absorption and also to gain significant improvement on procurement. So this was really boosting the growth margin. And then, you know, that's really the virtual circle that we explain many times, we're able really to invest in the new opportunities.

Speaker Change #105: Keep in mind also that in Brazil we have also, you know, our own R&D, we have our own factory.

Speaker Change #109: We are not anymore in a catch-up phase like we used to be two years ago.

Speaker Change: We are not anymore in a catch-up phase like we used to be two years ago.

Speaker Change #105: So we were really able with the additional volumes really to gain six cost absorption and also to gain significant improvement on procurement. So this was really boosting the growth margin.

Speaker Change #109: Now we are becoming a trend-setting company in this area. And we've been really driving in big the gourmand-slash-vanilla-slash-banana blossom, flower fragrances, which are resonating today from mass market to ultra niche.

Speaker Change #109: So this is really something that we intend to continue.

Speaker Change #109: <unk> to select what is going to stand the test of time and to grow over time, and that's very important and every launch we're doing specifically the big launches behind the big brands are really done if and only if we have full confidence high level of confidence that this is not going to be something that's going to be high for the first year.

Speaker Change #105: And then, you know, that's really the virtual circle that we explain many times, we're able really to invest in the new opportunities.

Speaker Change #106: So it means that for fiscal 25, in fact, Brazil is a creative for the equation, because the additional basis points that they are gaining, in fact, is moving even faster than the company.

Laurent Mercier: So it means that for fiscal 25, in fact, Brazil is a creative for the equation, because the additional basis points that they are gaining, in fact, is moving even faster than the company. So it shows that, you know, our growth engines market that bring growth, but they bring profit, and because we have the right platform.

Speaker Change #109: <unk> and then go down so with three about addiction, it's about positive addiction, if I may say to reduce of course to the concept that make sure that this concept fits with the trends that I'm not the trends at the moment, but that that's a structural trends that are here to stay for the next decade and the second thing is that while we're doing this.

Laurent Mercier: So it's real about addiction. It's about positive addiction, if I may say, to the use of course, to the concept that makes sure that this concept sits with the trends that are not the trends of the moment, but that are structural trends that are here to save for the next decade. And the second thing is that while we are doing this big blockbuster juices that are now setting trends for the long term instead of catching up, we are also very tactical in a way, positively tactical, playing with the formats, playing with the setting at large. The setting is becoming much larger piano with much more touches than the traditional audio toilet or audio parra.

Speaker Change #106: So it shows that, you know, our growth engines market that bring growth, but they bring profit, and because we have the right platform.

Unknown Executive: Thank you.

Speaker Change #110: Second thing, we are also bringing up our advocacy model that we have put in place.

Speaker Change #109: Second thing, we are also bringing up our advocacy model that we have put in place.

Speaker Change #106: Thank you.

Anna Lizzul: We'll pick our next question from Anna Lizzul. Would thank America.

Speaker Change #106: We'll pick our next question from Anna Lizzul.

Speaker Change #110: Big blockbuster juices, but theyre not setting trends for the long term instead of catching up we are also very tactical in a way it positively tactical playing with the formats, playing with the centering our cloud percentage is becoming a much larger piano with much more textures than the traditional.

Speaker Change #106: Would thank America.

Speaker Change #110: You may have noticed during the prepared remarks that we've grown the EMV of both Riemel and Covergirl by 400%.

Speaker Change #107: Please go ahead.

Anna Lizzul: Please go ahead. Hi, good morning. Thank you so much for the question. I wanted to go back to the consumer beauty topic. You mentioned you're diving into innovation, doubling in the next couple of years, just given the strength of certain competitors in the space. Do you now view the mass beauty side as expanding and there for more of a growth opportunity? And you mentioned trading up, which is very interesting, you know, from the mass space to entry level procedure. Are you seeing any benefit here in consumer beauty, though, from trade down and more challenging consumer environment? Thanks.

Speaker Change #110: That's really a huge progress.

Speaker Change #110: Now what we need to do is to increase the agility for innovation, putting on the market innovation as quickly as in six to nine months versus more than a year in the previous years.

Speaker Change #108: Hi, good morning.

Speaker Change #110: And this, we are going to put in place a startup organization inside the company so that this huge progress on advocacy marketing on one side, coupled with an agile innovation startup machine inside Coty will allow us to multiply by two the level of innovation in color cosmetics, but also in fragrances in this division, knowing that we have already multiplied this level by three.

Speaker Change #109: Thank you so much for the question.

Speaker Change #110: So we are really in a high speed pace.

Speaker Change #109: I wanted to go back to the consumer beauty topic.

Speaker Change #110: Last but not least, we are also applying these best practices, be it advocacy marketing, fast beauty, or on the other side, fragrance momentum to mass market with the launch of Adidas Vibes that we believe is a huge mass fragrance opportunity.

Speaker Change #109: You mentioned you're diving into innovation, doubling in the next couple of years, just given the strength of certain competitors in the space.

Speaker Change #109: Do you now view the mass beauty side as expanding and there for more of a growth opportunity?

Speaker Change #110:

Laurent Mercier: And we are also activating all the brands that we have not activated recently. You know, the beauty of the city portfolio is that we have a lot of brands, and some of these brands are going to be activated quite strongly, specifically the brands that are positioned on entry prestige. So all together, together with the fact that penetration is still not the level of Brazil that I was quoting just a few minutes ago. So we believe we have room not only in the US, but also as well to continue to grow our fragrance business. Thank you.

Speaker Change #111: Uh Huh and we are also activating all the brands that we have not activated recently.

Speaker Change #110: And you mentioned trading up, which is very interesting, you know, from the mass space to entry level procedure.

Speaker Change #112: <unk> of the Coty portfolio that we have a lot of brands and some of these brands are going to be activated quite strongly specifically the brands that are positioned on entry prestige so altogether.

Speaker Change #111: Are you seeing any benefit here in consumer beauty, though, from trade down and more challenging consumer environment?

Speaker Change #111: Thanks.

Speaker Change #112: So, good morning, Anna.

Sue Nabi: This is Sue.

Speaker Change #114: So, if I understand where the question is about, let me just read it again, because someone is typing at the same time.

Speaker Change #113: Together with the fact that penetration you're still not at the level of Brazil that I was quoting just a few minutes ago. We believe we have room not only in the U S. But also as you have to continue to grow the fragrance business.

Speaker Change #115: Do we see mass beauty as more of a growth opportunity?

Speaker Change #116: Yes, of course, we see this as a growth opportunity.

Speaker Change #117: Mass beauty is not just the US market, where we are doing, I would say, a fantastic job that we have been doing for the last three or four years.

Speaker Change #112: Yes.

Speaker Change #114: Thank you.

Speaker Change #114: Thank you we'll take our next question from.

Olivia Tongue: We'll take our next question from Olivia Tongue with Raymond James. Please go ahead. Great. Good morning. Thank you so much.

Speaker Change #114: We will take our next question from Filippo Filorini, please go ahead.

Speaker Change #114: Olivia Tong with Raymond James Please go ahead.

Speaker Change #118: You've seen probably in the recent, recently in the most recent scanners, plus, you know, on each other vision, that cover girl is one of the heritage brand that is resisting the best to, you know, not only the slow down on one side, but also for in front of some very, very nimble competitors.

Sue Nabi: You've seen probably in the recent, recently in the most recent scanners, plus, you know, on each other vision, that cover girl is one of the heritage brand that is resisting the best to, you know, not only the slow down on one side, but also for in front of some very, very nimble competitors. But we are learning quickly, we are putting in place what needs to be put in place quickly. As you heard it, we have been doubling down on advocacy marketing and the full marketing that goes with it. And this is really changing the destiny of our brands that are suddenly visible in with the right light with the right innovation, powers the rights consumers who are making the growth of this market.

Speaker Change #114: Yes.

Speaker Change #114: That's really a huge progress.

Speaker Change #114: And this, we are going to put in place a startup organization inside the company so that this huge progress on advocacy marketing on one side, coupled with an agile innovation startup machine inside Coty will allow us to multiply by two the level of innovation in color cosmetics, but also in fragrances in this division, knowing that we have already multiplied this level by three.

Olivia Tong: Great. Good morning, Thank you so much.

Speaker Change #114: Now what we need to do is to increase the agility for innovation, putting on the market innovation as quickly as in six to nine months versus more than a year in the previous years.

Olivia Tongue: I wanted to sort of build on what you just said around fragrances and why you think fragrances seem to be transitioning from what, you know, historically has been more of a discretionary category within beauty to one that is clearly less discretionary, but also seeing a willingness by consumers at the low end to trade in even though they haven't historically participated in the category. It's pretty much no price discovery at the ultra prestige, and so, you know, clearly it sounds like there are significant momentum in prestige fragrances. Are you assuming a similar level contribution fiscal 25 is in fiscal 24.

Speaker Change #116: Sort of build on what you eat what you just sat around fragrances.

Olivia Tong: Why you think fragrance and seem to be kind of thing from.

Speaker Change #117: What historically has been more of a discretionary category within beauty to one that is clearly less discretionary but also seen a willingness by consumers at the low end to trade in even though they haven't historically participated in the category, it's pretty material price discovery at the ultra prestige and so you know clearly it sounds like there is significant momentum and.

Speaker Change #118: But we are learning quickly, we are putting in place what needs to be put in place quickly.

Speaker Change #119: As you heard it, we have been doubling down on advocacy marketing and the full marketing that goes with it.

Speaker Change #120: And this is really changing the destiny of our brands that are suddenly visible in with the right light with the right innovation, powers the rights consumers who are making the growth of this market.

Speaker Change #118: Prestige fragrances are you assuming a similar level of contribution in fiscal 'twenty five is in fiscal 'twenty four and what are you incorporating into far its concerns about more volatile macros.

Laurent Mercier: And what are you incorporating into, far as concerns about more volatile macro? Thanks.

Speaker Change #120: But now we are adding a second leg, which is this a giant beauty start up inside.

Sue Nabi: But now we are adding a second leg, which is this a giant beauty start up inside. It already was active. Now it's becoming something very, I would say, specialized team, multi, multi competency system. Sorry, that's the way the word I was looking for. So you can imagine that when you couple this two together, even in a market that is pressured mainly mainly in drugstore chains, because in e-commerce, the brands that we are having a booming impact.

Speaker Change #118: Hi everyone.

Speaker Change #114: So we are really in a high speed pace.

Laurent Mercier: Morning, Olivia. Thank you for the question. So let me try to answer. Again, you know, I hear some people saying fragrance is a discretionary category. Some other people are saying that this is a cyclical category. First, it was not a cyclical category. It has always been a category that was growing more or less at the low single digits prior to Covid. And then something happened at the covid moment where suddenly a full industry that has been reinventing itself for the decade before was put in front of a younger generation of consumers who are both genders, younger, from diverse backgrounds, from diverse ethnicities, specifically Hispanic community in the US.

Speaker Change #118: Thanks for taking the question.

When you go to jail I. Thank you for the question. So let me try to answer.

Speaker Change #120: It already was active.

Again, you know I hear some people, saying of fragrances in discretionary categories. Some other people are saying that this is a cyclical category Hearst it was not a cyclical or a category. It has always been a category that was growing more or less.

Speaker Change #120: Now it's becoming something very, I would say, specialized team, multi, multi competency system.

Speaker Change #118: First, it was not a cyclical category.

Speaker Change #118: It has always been a category that was growing more or less at the low single digits prior, to COVID.

Speaker Change #121: Sorry, that's the way the word I was looking for.

Low single digits prior to Covid, and then something happens at the current moment where suddenly.

Speaker Change #122: So you can imagine that when you couple this two together, even in a market that is pressured mainly mainly in drugstore chains, because in e-commerce, the brands that we are having a booming impact.

Speaker Change #118: And then something happened at the COVID moment where suddenly a full industry that has been, reinventing itself for the decade before was put in front of a younger generation of consumers who are both genders, younger, from diverse backgrounds, from diverse ethnicities, specifically, Hispanic community in the U.S. And suddenly you have really the encounter of two destinies, the encounter of a category, that reinvented itself with more quality, more creativity, multiple layers.

Speaker Change #119: Our food industry that has been reinventing itself for the decade before was put in front of the younger generation of consumers, who are both genders younger from diverse backgrounds from diverse ethnicities, specifically Hispanic community in the U S and suddenly you have really the encounter of too distant.

Speaker Change #122: So it's not about mass beauty that is pressured.

Sue Nabi: So it's not about mass beauty that is pressured. It's mass beauty in certain channels that explains the slow down that we are seeing in some, I would say, retailer orders, etc. So I believe that mass beauty continues to have the future assuming that we are as nimble as innovative with a look and shield of prestige.

Speaker Change #122: It's mass beauty in certain channels that explains the slow down that we are seeing in some, I would say, retailer orders, etc.

Sue Nabi: And suddenly you have really the encounter of two destinies, the encounter of a category that reinvented itself with more quality, more creativity, multiple layers. This was not just about entry prestige. It was all premium, ultra premium, exclusive collections, et cetera. Concentration technology, you know, the latest launch of Cutie and Cinema Cutie uses for the first time, a patented molecule that extends the longevity of a fragrance. So you know, at the end of the day when an offer becomes much more qualitative, much more performant. It's not anymore discretionary buying or a cyclical buying. It becomes part of your life, and we believe that fragrances are becoming structurally part of the life of millions of people around the world, specifically the youngest, as connection builders. You know, people ask each other what you were, et cetera.

Speaker Change #122: So I believe that mass beauty continues to have the future assuming that we are as nimble as innovative with a look and shield of prestige.

Speaker Change #120: He is the encounter us.

Speaker Change #121: Degree that reinvented itself with more quality more creativity multiple layers. It was not just about entry prestige towards or premium premium exclusive collections et cetera concentration technology. You know the latest launch of Gucci asking them on could you use it for the first time a patented.

Speaker Change #122: So this is number one.

Sue Nabi: So this is number one. Number two, this US market is one market among others in our equation. And we are really growing this division worldwide. Remail has been gaining market share for the last two quarters globally, and we are accelerating the same playbook behind remail. And on top of this, when I move away from this color cosmetic category, we are also accelerating in mass fragrances. This is expected to be the fastest growing category of the division in the fiscal 25.

Speaker Change #121: This was not just about entry prestige. It was all premium, ultra-premium, exclusive collections, et cetera, concentration, technology.

Speaker Change #122: Number two, this US market is one market among others in our equation.

Speaker Change #122: And we are really growing this division worldwide.

Speaker Change #122: Remail has been gaining market share for the last two quarters globally, and we are accelerating the same playbook behind remail.

Speaker Change #121: You know, the latest launch of Coty, Infiniium on Coty uses for the first time a patented, molecule that extends the longevity of a fragrance.

Speaker Change #121: What do you call that extends the longevity of our fragrance. So you know at the end of the day, when and Ofer becomes much more qualitative much more.

Speaker Change #121: So you know, at the end of the day, when an offer becomes much more qualitative, much, more performant, it's not anymore a discretionary buying or a cyclical buying.

Speaker Change #123: And on top of this, when I move away from this color cosmetic category, we are also accelerating in mass fragrances. This is expected to be the fastest growing category of the division in the fiscal 25.

Speaker Change #121: And it's not anymore, a discretionary buying or a cyclical buying it becomes part of your life and we believe that fragrances are becoming structurally part of the life of me billions of people around the world specifically the youngest as connection builders you know people ask each other what do you wear et cetera, that's a fantastic.

Speaker Change #121: It becomes part of your life.

Speaker Change #123: We are accelerating in nails, specifically in artificial nails.

Sue Nabi: We are accelerating in nails, specifically in artificial nails. And we are accelerating in what we call elevated body care, because there is a huge increase of penetration in body care all around the world. So in a way or another, we will continue to grow the division because we are doing what is the right things to be done on the market that is highly competitive and under pressure like the US one. But we also have massive other areas of oxygen in the coming year. And should I say in the coming years. Thank you.

Speaker Change #121: And we believe that fragrances are becoming structurally part of the life of millions, of people around the world, specifically the youngest, as connection builders.

Speaker Change #123: And we are accelerating in what we call elevated body care, because there is a huge increase of penetration in body care all around the world.

Speaker Change #121: You know, people ask each other, what do you wear, et cetera.

Speaker Change #123: So in a way or another, we will continue to grow the division because we are doing what is the right things to be done on the market that is highly competitive and under pressure like the US one.

Sue Nabi: And that's a fantastic advertising campaign; some, I say, people are also using fragrances as mood boosters, as escapism tools, et cetera. So we moved from something that was seen as a gift, if you think about the US gift item, into something I buy for myself because it makes me feel better. It makes me connect with others, and the quality and the intensity of choice is ever bigger than it used to be in the past. So that's the reason why I believe it's not a discretionary category. It's not a cyclical category, and beauty is not a consumer views goods industry leader.

Speaker Change #122: And that's a fantastic advertising campaign, if I may say.

Speaker Change #122: <unk> advertising campaign as I may say.

Speaker Change #122: People are also using fragrances as mood boosters, as escapism tools, et cetera.

Speaker Change #122: People are also using fragrances as mood boosters as escapees tools et cetera. So we moved from something that was seen as a gift. If you think about the U S gift item into something I'd buy for myself because it makes me feel better it makes me connect with others and the quality and the intensity of <unk>.

Speaker Change #123: But we also have massive other areas of oxygen in the coming year.

Speaker Change #122: So we moved from something that was seen as a gift, if you think about the U.S., gift, item, into something I'd buy for myself because it makes me feel better.

Speaker Change #123: And should I say in the coming years.

Speaker Change #123: Thank you.

Speaker Change #122: It makes me connect with others.

Speaker Change #124: We'll take our next question from Coty and Wolfmeyer with Piper Sandler, please.

Korinne Wolfmeyer: We'll take our next question from Coty and Wolfmeyer with Piper Sandler, please. Go ahead. Hey, good morning, team. Thanks for shaking the question. I'd like to touch on the guidance for the year and the cadence you've alluded to.

Speaker Change #122: And the quality and the intensity of choice is ever bigger than it used to be in the past.

Speaker Change #124: Go ahead.

Chris is ever bigger than it used to be in the past. So that's the reason why I believe it's not a discretionary category.

Speaker Change #125: Hey, good morning, team.

Speaker Change #126: Thanks for shaking the question.

Speaker Change #122: So that's the reason why I believe it's not a discretionary category.

Speaker Change #127: I'd like to touch on the guidance for the year and the cadence you've alluded to.

Speaker Change #123: It's not a cyclical category.

Speaker Change #123: It's not the silica securitize category in beauty is not a consumer reviews of goods industry. Neither so it's very very important I restate. This at the occasion of your question.

Speaker Change #128: Seems like the back half is going to be fairly strong and I would love to understand the level of visibility you believe you have into on the back half of this fiscal year and what gives you confidence in those targets.

Laurent Mercier: Seems like the back half is going to be fairly strong and I would love to understand the level of visibility you believe you have into on the back half of this fiscal year and what gives you confidence in those targets. And then additionally on the well estate, if there's any color, you can provide on on progress. There are any updates on conversations you have with potential suitors to sell it off to. And then I believe you talk a little bit about Sherry purchases in the group prepared of marks. So any commentary on updated thinking around the Sherry purchases and capital allocation would be great. Thank you.

Speaker Change #123: And beauty is not a consumer goods industry neither.

Sue Nabi: So it's very, very important that I restate this at the occasion of your question. Thank you.

Speaker Change #123: So it's very, very important that I restate this at the occasion of your question.

Speaker Change #122: Thank you.

Speaker Change #122: Yeah.

Speaker Change #128: And then additionally on the well estate, if there's any color, you can provide on on progress.

Speaker Change #124: Thank you.

Linda Bolton: We'll take our next question. And to Bolton, why is there with the A.

Thank you.

Speaker Change #125: And the Bolton Weiser with D. A Davidson. Please go ahead.

Speaker Change #129: There are any updates on conversations you have with potential suitors to sell it off to.

Linda Bolton: Davidson, please go ahead. Yes, thank you. I was just curious about when you talk about innovation and consumer beauty. Usually, when there's a big technology innovation in the nail category, that's a big driver of category growth. It's been quite a few years, I think, since a big innovation.

Bolton Weiser: So I wanted to go back to the consumer beauty business.

Bolton Weiser: We'll take our next question.

Bolton Weiser: Yes. Thank you.

Speaker Change #129: And then I believe you talk a little bit about Sherry purchases in the group prepared of marks.

I was just curious about.

Speaker Change #127: When you talk about innovation in consumer beauty.

Speaker Change #130: So any commentary on updated thinking around the Sherry purchases and capital allocation would be great.

Speaker Change #128: Usually when there's a big technology innovation in the nail category, that's the big driver of category growth.

Speaker Change #130: Thank you.

Speaker Change #131: Thank you, Karin.

Laurent Mercier: Thank you, Karin. So first on the guidance. So I mean, first of all, indeed, so we are confirming our midterm algorithm for fiscal 25, which is a six to eight percent. We are indicating as we flag during the last term in school that you know sequential improvement in Q1, which is a one six percent. And then indeed, you know, moving to the six to eight percent algorithm in H1 and then in H2.

Speaker Change #129: Quite a few years I think that's a big innovation can you talk if theres anything thing work down there.

Speaker Change #131: So first on the guidance.

Linda Bolton: Can you talk if there's anything worked on there?

Speaker Change #132: So I mean, first of all, indeed, so we are confirming our midterm algorithm for fiscal 25, which is a six to eight percent.

Laurent Mercier: And then my second question has to do with cash flow. I was curious, what if you could quantify the cash flow benefits in FY 24 that won't recur in FY 25, give a number behind that. And then what is going on with cash flow in early 2025? You said the retailers are managing something about cash and inventory. And then also why your receivable seems very, very high. It seems to be kind of a drain and cash flow. Thank you.

Speaker Change #130: And then my second question has to do with cash flow.

Speaker Change #131: I was curious if you could quantify the cash flow benefits in FY 'twenty for that won't reoccur in FY 'twenty five.

Speaker Change #133: We are indicating as we flag during the last term in school that you know sequential improvement in Q1, which is a one six percent.

Speaker Change #133: And then indeed, you know, moving to the six to eight percent algorithm in H1 and then in H2.

Speaker Change #132: You have a number behind that and then what is going on with cash flow in in early 2025, you said the retailers are managing something about cash and inventory and then also why your receivables seemed very very high it seem to be kind of a drain on cash flow. Thank you.

Speaker Change #134: I mean, the key reason, you know, about the sequence is also but come as you remember last year, there was very strong facing our Q1 was plus 18% or Q2 was 11%.

Laurent Mercier: I mean, the key reason, you know, about the sequence is also but come as you remember last year, there was very strong facing our Q1 was plus 18% or Q2 was 11%. And then Q3 10 and then you know, lending the year at 11% so of course we have high cons and we are taking this into account in our algorithm.

Laurent Mercier: Yeah, so let me, hello, Linda, let me start with the cash flow. So indeed, as you know, I shared we are lending our free cash flow fiscal 24th level of 370 million, but definitely there were some elements that do not repeat. I mean, definitely this is really a year where we are starting to say, you know, significant cash tax. So this was around 90 million. So I would say it's really driven by, you know, that we are increasing and improving in a lot of jurisdictions. Second, as I explained, indeed, we are also this year some investments and inventory, but related to S for an implementation, which, as I explained, is, you know, we went live mid-July and very successful.

Speaker Change #132: What level of promotional environment have you seen in the U.S. market?

Speaker Change #132: Linda Bolton Weiser with D.A.

Speaker Change #132: Yes, So let me Hello, Linda let me start with.

Speaker Change #135: And then Q3 10 and then you know, lending the year at 11% so of course we have high cons and we are taking this into account in our algorithm.

Speaker Change #133: Cash flow so indeed as.

Speaker Change #134: We are lending our free cash flow Cisco low 24 at a level of 370 million. Additionally, there were some elements that.

Speaker Change #134: Davidson, please go ahead.

Speaker Change #135: So comes are easier in the H2.

Laurent Mercier: So comes are easier in the H2. Then, definitely, we are modeling that our sell out should be aligned with our selling in the H2. And of course, I mean, this is supported by all the innovations that, you know, we are typing in starting now. But we will continue in H2 both on prestige and on consumer beauty. So indeed, there are all these elements drivers, which are really captured in the sequencing of these of these gross algorithm.

Speaker Change #134: Yes, thank you.

Speaker Change #134: I was just curious about when you talk about innovation and consumer beauty.

Speaker Change #135: Then, definitely, we are modeling that our sell out should be aligned with our selling in the H2.

Speaker Change #134: Do not repeat I mean different thesis is really a year, where we are starting to to pay significant cash tax. So it was this was around 90 million. So I would say it's really good.

Speaker Change #134: This was around $90 million.

Speaker Change #135: And of course, I mean, this is supported by all the innovations that, you know, we are typing in starting now.

Speaker Change #134: So I would say it's really driven by the fact that we are increasing and improving in a lot of jurisdictions.

Speaker Change #134: Driven by our unit.

Speaker Change #134: We are increasing and improving a lot of jurisdictions second as I explained. Indeed, we are also this year some investments in inventory buildup related to asphalt and implementation, which as I explained is we went like mid July am very successfully so it's a very strong asset for the company. So of course these are.

Speaker Change #135: But we will continue in H2 both on prestige and on consumer beauty.

Speaker Change #134: Second, as I explained, indeed, we had also this year some investment and inventory buildup related to S4M implementation, which, as I explained, we went live mid-July and very successfully.

Speaker Change #135: So indeed, there are all these elements drivers, which are really captured in the sequencing of these of these gross algorithm.

Speaker Change #134: So it's a very strong asset for the company.

Laurent Mercier: So it's a very strong asset for the company.

Speaker Change #135: Then on your second part on capital allocation.

Speaker Change #134: Clearly we've seen the category being more under pressure, particularly with low-income consumers.

Speaker Change #134: So, of course, these are headwinds that will not repeat in fiscal 25.

Laurent Mercier: So, of course, these are headwinds that will not repeat in FY 25. Now, if it's called 25, indeed, we are getting, you know, low to mid 200. Definitely, we are really taking into account some volatility with the retailers. Indeed, we are seeing, you know, retailers now strongly focusing on cash, really either on their inventory management or payment terms management. So this is embedded in our equation and definitely that really we are we are monitoring monitoring. So definitely keep working on all the opportunities for fiscal 25, really optimizing all the labor that we have in our working capital.

Speaker Change #134: Headwinds that will not repeat in fiscal 'twenty right now fiscal 'twenty five indeed, we are guiding to low to mid to.

Speaker Change #136: I mean, first of all, I just want to remind again and again that the leveraging is the number one imperative for the company.

Speaker Change #134: So are you planning more promos in a certain part of the portfolio or are you planning to respond to kind of adjust the value equation for some low-income consumers?

Speaker Change #134: Android definitely we are really taking into account some volatility.

Speaker Change #136: And of course that, you know, we keep targeting, you know, towards the two times end of calendar 25.

Laurent Mercier: Okay, so that's very important. So now, definitely on the last take. So it's really okay. We keep targeting, you know, these digest teacher end of calendar 25. Now, as you know, this is definitely in the hands of the main shoulder, which is a KK so no specific news on on this. And on again, on share, you know, we purchase as I indicated, definitely we confirm our plan really to move towards, you know, 800 million share count really by end of fiscal 27.

Speaker Change #135: With our retailers indeed, we are seeing.

Speaker Change #136: And I want really to insist that these two times is really without any velocity.

Speaker Change #136: Retailers know fully focusing on cash are.

Speaker Change #136: So it's really built by pure organic a big expansion and cash flow generation.

Speaker Change #136: Really either on their inventory management of payment terms management. So this is ambiguous in our equation.

Speaker Change #136: Okay, so that's very important.

Speaker Change #136: If any cleanup.

Speaker Change #136: So now, definitely on the last take.

Speaker Change #136: We are monitoring.

Speaker Change #136: So it's really okay.

Speaker Change #136: So it definitely keep working on all the opportunities for fiscal <unk>.

Speaker Change #136: We keep targeting, you know, these digest teacher end of calendar 25.

Speaker Change #137: Now, as you know, this is definitely in the hands of the main shoulder, which is a KK so no specific news on on this.

Speaker Change #136: 25 video optimizing all the levers that we have in our in our working capital.

Laurent Mercier: And definitely we are building a virtual cycle. So we are absolutely confident cash cycle.

Speaker Change #137: And if nuclear we are building you have you.

Speaker Change #138: And on again, on share, you know, we purchase as I indicated, definitely we confirm our plan really to move towards, you know, 800 million share count really by end of fiscal 27.

Speaker Change #134: Now, fiscal 25, indeed, we are getting low to mid-$400.

Speaker Change #137: Two cycles. So we are absolutely confident.

Speaker Change #134: Definitely, we are really taking into account some volatility with the retailers.

Speaker Change #134: Indeed, we are seeing retailers now strongly focusing on cash, really either on their inventory management or payment terms management.

Speaker Change #137: Cash cycle, where indeed, we are reading a phase where we are.

Laurent Mercier: Indeed, we are really in a phase where we are, I would say, cleaning some elements for fiscal 24, as I explained. And also there were a few positive one-offs, which happened in fiscal 24 that will not recur in fiscal 25. But again, we are very confident, and the year is starting well.

Speaker Change #137: I will say leaning some elements of our fiscal 'twenty four as I explained and as soon as they were.

Speaker Change #137: A few positive one offs, which happened in fiscal 'twenty for that will not recur in fiscal 'twenty, but again, we are very confident and so you're always talking with.

Speaker Change #139: So this agenda is and change, definitely the last take that is teacher will be an opportunity, even you know, to do it faster.

Laurent Mercier: So this agenda is and change, definitely the last take that is teacher will be an opportunity, even you know, to do it faster. This is really what we are taking into account in the algorithm. So, so algorithm is and change and agenda remains the same. Thank you.

Speaker Change #139: This is really what we are taking into account in the algorithm.

Sue Nabi: And in that to answer your question of our nails, which I believe is indeed a very, very interesting category where we hold the fantastic positions, you know, Sally Hansen is the indisputed leader of nail in the bottle in the US with more than 40% of share. Risk came Brazil, which we may globalize at the moment is also doing fantastically well. Number one in the country, above 40% of market share, all our color cosmetics brands except Color Girl are also having fantastic nail offers, benefiting from the technologies of Sally Hansen. You're right, you know; this is a category where innovation is key.

Speaker Change #138: Usually when there's a big technology innovation in the nail category, that's a big driver of category growth. It's been quite a few years, I think, since the big innovation.

Speaker Change #138: And to answer your question around <unk>, which I believe is indeed, a very very interesting category, where we hold the fantastic positions. Sally Hansen is the indisputable leader of needing a better in the U S with more than 40% of share riskier in Brazil, which we may globalize at the moment is also doing fantastically.

Speaker Change #139: So, so algorithm is and change and agenda remains the same.

Speaker Change #139: Thank you.

Speaker Change #139: We will take our next question from Andrea Teixeira with JP Morgan.

Andrea Teixeira: We will take our next question from Andrea Teixeira with JP Morgan. Please go ahead. Hi, good morning. Thank you for taking my question. So I wanted to so you, you, you found the very constant of the launches that you have in the combing. What are you going to call for? Very goddess and in a lot of the launches that we have for the strong holiday season. And obviously, understandably, you have to do the ability right now of the quarter.

Speaker Change #140: Please go ahead.

Speaker Change #141: Hi, good morning.

Speaker Change #142: Thank you for taking my question.

Speaker Change #142: So I wanted to so you, you, you found the very constant of the launches that you have in the combing.

Speaker Change #138: We're number one in the country are above 40% of market share all our color cosmetics brand except cause all girl are also having a fantastic Nate offers benefiting from the technologies of Sally Hansen Youre right. You know this is a category where innovation is key so.

Speaker Change #143: What are you going to call for?

Speaker Change #143: Very goddess and in a lot of the launches that we have for the strong holiday season.

Speaker Change #138: Can you talk if there's anything being worked on there?

Speaker Change #143: And obviously, understandably, you have to do the ability right now of the quarter.

Speaker Change #138: And then my second question has to do with cash flow.

Sue Nabi: So you we haven't seen innovation as big as the one that happened a few years ago, or maybe a decade ago with gel technologies did in professional or in consumer. But still this is an area that we are actively working on to increase the where because it's about the where using non-UV activated solutions. We are also putting a lot of energy and intelligence into how to skinify this category. You know, what's happening in healthcare should happen also in nail. And last but not least, we are also going to be super innovative in terms of what I call special effects. Special effects are also going to bring excitement, the same way it's bringing excitement on the lip category, for instance.

Speaker Change #138: I was curious what if you could quantify the cash flow benefits in FY 24 that won't recur in FY 25?

Speaker Change #138: Haven't seen innovation as big as the one that happened a few years ago or maybe a decade ago with jazz technologies beat in professional or in consumer but still this is an area that we are actively working on to increase the where because it's about the we're using non UV activated solutions.

Speaker Change #143: But can you help us like look through.

Andrea Teixeira: But can you help us like look through. Channel and more of what you have gained in terms of like distribution to give us confidence that you can call that very strong comparison in the holidays last year. And given that how cyclical fragrances have been, I understand all the body oils and fragrances have been a wellness category for pretty much the last four years. But understandably thinking about how the consumer is making tough choices as we go in particular in the key markets that you're in.

Speaker Change #144: Channel and more of what you have gained in terms of like distribution to give us confidence that you can call that very strong comparison in the holidays last year.

Speaker Change #145: And given that how cyclical fragrances have been, I understand all the body oils and fragrances have been a wellness category for pretty much the last four years.

We are also putting a lot of.

Speaker Change #139: Oh, Gee and intelligence into how to Skinny side. This category you know what's happening in health care should happen also in nail and last but not least we are also going to be super innovative in terms of what are called special effects, especially effects are also going to bring excitement the same wage bringing excitement on the <unk>.

Speaker Change #139: Give a number behind that.

Speaker Change #139: And then what is going on with cash flow in early 2025?

Speaker Change #139: You said the retailers are managing something about cash and inventory.

Speaker Change #139: And then also why your receivable seems very, very high.

Speaker Change #139: It seems to be kind of a drain on cash flow.

Speaker Change #146: But understandably thinking about how the consumer is making tough choices as we go in particular in the key markets that you're in.

Speaker Change #146: Understandably, how this is going to unfold and what gives you confidence.

Andrea Teixeira: Understandably, how this is going to unfold and what gives you confidence. And then you're going to reaccelerate in the second half given despite the comps. I mean the comps are the comps are, but I think it's important to see how you're planning the cadence of these of the launches to offset, you know, the tough comps. And also like a clarification, as we build into your guidance, I believe you mentioned giving EBDA of margin of 18% and giving your guidance for EBDA when you back it out, it actually would give you a higher revenue number than what you're implying your guidance.

Lip category for instance, last but not least we are also going into artificial nails. This is also a big focus for the company. We believe that there are really two kind of consumers and we need to talk to both of them and this is an area, where we are working very hard to bring innovation. Because this is the rule of the game.

Speaker Change #139: Last but not least, we are also applying these best practices, be it advocacy marketing, fast beauty, or on the other side, fragrance momentum to mass market with the launch of Adidas Vibes that we believe is a huge mass fragrance opportunity.

Sue Nabi: Last but not least, we are also going into artificial nails. This is also a big focus for the company. We believe that there are really two kinds of consumers, and we need to talk to both of them. And this is an area where we are working very hard to bring innovation because this is the rule of the game.

Speaker Change #146: And then you're going to reaccelerate in the second half given despite the comps.

Speaker Change #147: I mean the comps are the comps are, but I think it's important to see how you're planning the cadence of these of the launches to offset, you know, the tough comps.

Speaker Change #139: Thank you.

Speaker Change #139: So this is embedded in our equation.

Speaker Change #148: And also like a clarification, as we build into your guidance, I believe you mentioned giving EBDA of margin of 18% and giving your guidance for EBDA when you back it out, it actually would give you a higher revenue number than what you're implying your guidance.

Laurent Mercier: Thank you.

Speaker Change #140: Thank you we'll take our next question from Chris Carey with Wells Fargo Securities.

Chris Carey: We'll take our next question from Chris Carey with Wells Fargo Securities. Hi, good morning. I wanted to ask about gross margins in one question on category growth. Regarding gross margins, you're ahead of plan; fantastic. Going into fiscal 25, can you just talk about some of the drivers of gross margin expansion? It sounds like you'll have some wrap around. Pricing, but I'm also conscious you have some paper, billy from manufacturing, I think, grace as well for filings. And so can you just talk about what's going to be driving the expansion and maybe dimensionalize it for fiscal 25, how much.

Chris Carey: You know, good morning Filippo, this is Sue speaking.

Chris Carey: Hello, Linda.

Speaker Change #139: We will take our next question from Filippo Filorini, please go ahead.

Speaker Change #139: And definitely, that's really where we are monitoring tightly.

Chris Carey: Hi, Good morning, I wanted to ask about gross margins and one question on category growth.

Chris Carey: Hi everyone.

Chris Carey: <unk> gross margin year on year ahead of plan fantastic going into fiscal 'twenty. Five can you just talk about some of the drivers of gross margin expansion. It sounds like you'll have wrapped round pricing, but I'm also conscious you have some favorability from manufacturing I think great as well for filing.

Chris Carey: Thanks for taking the question.

Chris Carey: So I wanted to go back to the consumer beauty business.

Speaker Change #149: Understand that perhaps, you know, that number is a fact neutral that would give you close to a mid single digit increase in sales as opposed to, let's say, a 4% increase in sales for fiscal 25, I guess that's a question for around.

Andrea Teixeira: Understand that perhaps, you know, that number is a fact neutral that would give you close to a mid single digit increase in sales as opposed to, let's say, a 4% increase in sales for fiscal 25, I guess that's a question for around. Thank you very much for both.

And so can you just talk about what's going to be driving the expansion and maybe dimensionalize that for fiscal 'twenty five in March.

Speaker Change #149: Thank you very much for both.

Speaker Change #150: Okay, so I mean let me start indeed on the fiscal 24 launches, I need that's really a key question and we explain several times that the strategy we put in place is exactly that we are not, you know, in this trap that we launch a big innovation in your one and then you're still is dropping not at all.

Laurent Mercier: Okay, so I mean let me start indeed on the fiscal 24 launches, I need that's really a key question and we explain several times that the strategy we put in place is exactly that we are not, you know, in this trap that we launch a big innovation in your one and then you're still is dropping not at all. So this is exactly very good as is a perfect example, so indeed it's you know great success, which really contributed to fiscal 24 top line significantly, but we are going to continue in fiscal 25 so it means that very good as we continue to grow and we are doing also very good as intense so which is going to come on top.

Laurent Mercier: And whether you think this mid-tick, these target was just starting point and now you're running ahead of it, maybe you have confidence in going farther specifically as you look to use pricing or premiumize more over time.

Chris Carey: And.

Jeff: And whether you think this mid <unk> target was Jeff.

Speaker Change #143: Starting point and now you are running ahead of that maybe you have confidence in going farther specifically as you look to use pricing or premium is more over time.

Laurent Mercier: And then just connected, if I could, do you have an outlook for category growth for fiscal 25, maybe globally? Certainly we've heard from some of your beauty peers that there's been some deceleration of category growth into force. Still solid, but some sequential deceleration. I wonder if you're seeing that too. Are you expecting stabilization, or would you just expect to outperform category at a higher clip next year? So really, there's two questions there. One on gross margin and one on category growth. Thank you.

Speaker Change #144: And then just connected if I could do you have an outlook for category growth for fiscal 'twenty five maybe globally certainly we've heard from some of your beauty peers that theres been some deceleration.

Speaker Change #151: So this is exactly very good as is a perfect example, so indeed it's you know great success, which really contributed to fiscal 24 top line significantly, but we are going to continue in fiscal 25 so it means that very good as we continue to grow and we are doing also very good as intense so which is going to come on top.

Speaker Change #145: Category growth in Q4 is still solid, but some sequential deceleration I wonder if youre seeing that you are you expecting stabilization or would you just expect to outperform category at a higher clip next year. So really there's two questions. There one on gross margin and one on category growth. Thank you.

Speaker Change #152: Okay, so it's really that, you know, your point about the comp, in fact, we manage this way and then on top is really we are doing this on the other franchise, you know, we are launching indeed.

Laurent Mercier: Okay, so it's really that, you know, your point about the comp, in fact, we manage this way and then on top is really we are doing this on the other franchise, you know, we are launching indeed. It's a good sheet of Laura orchid and this really you know it's part of the floor arrange and here again you know it's really adding a growth in the floor arrange and it's starting very well because it is already the number one that's for a worldwide.

Speaker Change #145: We've done a lot of studies recently to really understand what are the levers to, in a way, support our growth in consumer beauty, which is mainly color cosmetics for Coty in the U.S., to take this example.

Speaker Change #145: Let me start with the cash flow.

Chris Carey: What level of promotional environment have you seen in the U.S. market?

Chris Carey: So definitely, we keep working on other opportunities for fiscal 25, really optimizing all the levers that we have in our working capital.

Speaker Change #145: It's really a little bit of coupon.

Laurent Mercier: Yeah, thank you, Chris.

Speaker Change #146: Yeah. Thank you Chris So let me start with with growth margin, Yeah, you're absolutely right. We all had to you know Youre ahead of plan. So it means that all the actions we put in place I mean.

Laurent Mercier: So let me start with got margin. Yeah, you're absolutely right. We are ahead, you know, your head of plan. So it means that all the actions we put in place. I mean, delivered or even over-delivered.

Speaker Change #145: Clearly we've seen the category being more under pressure, particularly with low-income consumers.

Speaker Change #145: So are you planning more promos in a certain part of the portfolio or are you planning to respond to kind of adjust the value equation for some low-income consumers?

Speaker Change #153: It's a good sheet of Laura orchid and this really you know it's part of the floor arrange and here again you know it's really adding a growth in the floor arrange and it's starting very well because it is already the number one that's for a worldwide.

Speaker Change #147: Did you build or even over deliver so we are going to keep the same <unk>.

Laurent Mercier: So we are going to keep the same recipe into Fiscal 25. So, as I said, I mean, we will keep, you know, doing a targeted price increase. Definitely, in our context where, you know, we see more moderate inflation on our cost of goods, but still, again, we will keep using pricing as a labor to improve our gross margin.

Speaker Change #147: Into fiscal 'twenty five so as I said I mean, we will keep you know doing a targeted price increase.

Speaker Change #154: But this is the same on the bus, this is the same of course on I mean on March Jacob because March Jacob's also in terms of facing Daisy wide we launched in March.

Laurent Mercier: But this is the same on the bus, this is the same of course on I mean on March Jacob because March Jacob's also in terms of facing Daisy wide we launched in March. So in fact, we have the full impact now in Q1 and in Q2 so that's why now we are also facing these launches that if not only you know only one window during the year, but we opened two or three windows so that we can really say and avoid you know this comp element so that's definitely part of our of our strategy to continue.

Speaker Change #147: Definitely in a context, where we see more moderate inflation on our cost of goods, but still again, we will keep using pricing as a labor tool to improve our gross margin. So then of course mix mix is a big driver and I think we gave and we keep giving a lot of examples of premium amortization and we do it too.

Speaker Change #155: So in fact, we have the full impact now in Q1 and in Q2 so that's why now we are also facing these launches that if not only you know only one window during the year, but we opened two or three windows so that we can really say and avoid you know this comp element so that's definitely part of our of our strategy to continue.

Laurent Mercier: So then, of course, mix, mix is a big driver. And I think we gave and we keep giving a lot of examples of premiumization, and we do it across all divisions, all markets, all categories.

Speaker Change #147: All divisions all markets all categories. So this is <unk>.

Laurent Mercier: So this is a must and productivity. We continue, of course, our productivity initiatives. I mean, I shared that we continue to win program. Of course, we have plans next year, you know, for 75 million additional productivity. So it's part of productivity in our factories, and volume, of course, is helping really through accelerators productivity. But it's also with procurement. We are definitely, you know, scaling up the volumes; indeed, it is giving us really some scale and power to negotiate a better price.

Speaker Change #147: Most.

Speaker Change #147: On productivity, we continue of course with DVT initiatives.

Speaker Change #147: <unk> two we continue to win program of course, we have planned next year for $75 million additional productivity. So it's part of productivity in our factories and volume of course is helping really who accelerators.

Speaker Change #156: Really is this expansion that's the same on, definitely on on consumer beauty that we are doing this so on I will answer also your question on on you know the guidance so definitely what we are monitoring so it's really targeting the light for like gross so this is a six to eight percent.

Laurent Mercier: Really is this expansion that's the same on, definitely on on consumer beauty that we are doing this so on I will answer also your question on on you know the guidance so definitely what we are monitoring so it's really targeting the light for like gross so this is a six to eight percent. What's very important is also that our guidance on a bid is really the dollar the dollar value and this is really this is really the guidance that we are giving and I'm done pinned by by margin expansion so and I know this is a modeling you're trying to do of course it's hard to see you know the full year correct impact so I think this is definitely you know some functioning.

Speaker Change #147: But it also with procurement we are definitely scaling up the volumes in these giving us really some scale and by work to negotiate a better price and also we have a specific program to continue to simplify and really to rationalize our portfolio components and again fragrances.

Speaker Change #147: Indeed, as I shared, we are landing our free cash flow fiscal 24 at a level of $370 million.

Speaker Change #147: Definitely, there were some elements that do not repeat.

Laurent Mercier: And also we have a specific program to continue to simplify and really to rationalize our portfolio components. And again, fragrance is a good example when you heard from so that we are also accelerating mass fragrance. Here, of course, we are benefiting from the scale of the prestige fragrance. So it means that we can launch initiatives, which are already at a high high gross margin.

Speaker Change #157: What's very important is also that our guidance on a bid is really the dollar the dollar value and this is really this is really the guidance that we are giving and I'm done pinned by by margin expansion so and I know this is a modeling you're trying to do of course it's hard to see you know the full year correct impact so I think this is definitely you know some functioning.

Suzette: <unk> is a good example, when you held from Suzette, we're also accelerating mass fragrance.

Suzette: Of course, we are benefiting from the scale of the prestige fragrance. So it means that we can launch initiatives, which are already at a high high gross margin. So we have the playbook, we continue and definitely I mean <unk> is not the end game. So we will continue definitely to go beyond the mid <unk>.

Speaker Change #158: I mean indications that we will give you as a year the year is going but to help you also is definitely yes the margin yes the margin growth could be indeed higher versus indeed what we are indicating here.

Laurent Mercier: I mean indications that we will give you as a year the year is going but to help you also is definitely yes the margin yes the margin growth could be indeed higher versus indeed what we are indicating here. Let me just quickly conclude on the middle part of your question about what gave us the confidence of our launchers sustaining other time and continuing to grow one or so the other. I think this is really the main difference between the growth of our time.

Laurent Mercier: So we have the playbook. We continue and, definitely, I mean, the mid 60s is not the end game. So we will continue, definitely to go beyond the mid 60s with the same recipe and mix. Mix will be, of course, a big, big driver for this acceleration.

Suzette: Definitely, this is really a year where we are starting to pay significant cash tax.

Speaker Change #147: And definitely, we are building a virtuous cycle.

Suzette: These are the same recipe and mix mix will be of course with vigor.

Speaker Change #159: Let me just quickly conclude on the middle part of your question about what gave us the confidence of our launchers sustaining other time and continuing to grow one or so the other.

Speaker Change #149: Driver for visa 46 interaction.

Speaker Change #150: So promotionality and prices, pressure on prices, is not what is driving the consumption. Remember what I just said a few minutes ago, we are seeing some consumers trading up from consumer beauty, color cosmetics category to entry prestige category.

Speaker Change #150: This was around $90 million.

Laurent Mercier: And let me take the second part, Laurent, which is around category growth, you know, what we are seeing.

Speaker Change #150: Let me take the second data hall, which is around category growth.

Speaker Change #151: So it's really this that we are seeing.

Speaker Change #151: So I would say it's really driven by the fact that we are increasing and improving in a lot of jurisdictions.

Speaker Change #150: So we are absolutely confident in our cash cycle.

Speaker Change #151: What we're seeing so.

Laurent Mercier: So entering fiscal 25, we have seen that the demand trends are remaining broadly consistent with what we saw in fiscal 24. At the same time, of course, we all have seen that prestige retailers, but also director retailers, close the manage orders and inventory levels, which is resulting in a sellout that is tracking ahead of saline. So we anticipate beauty demand in mature markets to expand in the mid single digits, including prestige fragrance growth above this range and mass beauty growth below this range. All of these supported very, very strong econ, which is growing between two times and more faster than the company.

Speaker Change #150:

Speaker Change #152: Entering fiscal 'twenty side, we have seen that the demand trends are remaining broadly consistent with what we saw in fiscal 'twenty four at the same time of course, we all have seen that prestige retailers. That's also direct storytellers closely manage orders and inventory levels, which is resulting in the sell out that is tracking ahead of sell in.

Speaker Change #159: I think this is really the main difference between the growth of our time.

Speaker Change #152: Second, as I explained, indeed, we had also this year some investment and inventory buildup related to S4M implementation, which, as I explained, we went live mid-July and very successfully.

Speaker Change #151: Indeed, we are really in a phase where we are, I would say, cleaning some elements for fiscal 24, as I explained.

Speaker Change #152: And also, there were a few positive one-offs which happened in fiscal 24 that will not recur in fiscal 25.

Speaker Change #159: That's very important.

Laurent Mercier: That's very important. And every launch we are doing, specifically the big launchers behind the big brands, are really done even only if we have a full confidence, high level of confidence, that this is not going to be something that's going to be high for the first year and then go down. So it's real about addiction. It's about positive addiction, if I may say, to the use of course, to the concept that makes sure that this concept sits with the trends that are not the trends of the moment, but that are structural trends that are here to save for the next decade.

Speaker Change #160: And every launch we are doing, specifically the big launchers behind the big brands, are really done even only if we have a full confidence, high level of confidence, that this is not going to be something that's going to be high for the first year and then go down.

Speaker Change #152: So we anticipate beauty demand in mature markets to expand in the mid single digits, including prestige fragrance growth. Both this range and mass beauty growth below this range. All of this supported very very very strong E com, which is growing between two times and more faster than the <unk>.

Speaker Change #160: So it's real about addiction.

Speaker Change #161: It's about positive addiction, if I may say, to the use of course, to the concept that makes sure that this concept sits with the trends that are not the trends of the moment, but that are structural trends that are here to save for the next decade.

Speaker Change #152: So it's really the job of us and the job of all the players of this industry to put on the market, I would say, prestige-like innovation, if I may call it like this, but at the prices of mass market.

Speaker Change #152: So it's a very strong asset for the company.

Speaker Change #152: But again, we are very confident, and the year is starting well.

Speaker Change #152: And Linda, to answer your question around nails, which I believe is indeed a very, very interesting category where we hold fantastic positions.

Speaker Change #152: Sally Hansen is the indisputed leader of nail-in-the-bottle in the U.S. with more than 40% of share. Riske in Brazil, which we may globalize at the moment, is also doing fantastically well, number one in the country, above 40% of market share.

Speaker Change #152: All our color cosmetics brands, except CoverGirl, are also having fantastic nail offers, benefiting from the technologies of Sally Hansen.

Speaker Change #152: This is the recipe that works.

Speaker Change #152: So, of course, these are headwinds that will not repeat in fiscal 25.

Speaker Change #152: Now, fiscal 25, indeed, we are getting low to mid-$400.

Laurent Mercier: So, within this backdrop for the mature market, we are targeting to perform in line to ahead of the market. And at the same time, we target to do double-digit percentage revenue growth in what we call growth engine market. So I'm thinking about Brazil, the rest of Latin Mexico, Africa, Saudi Arabia to MSU and high growth channels such as travel retail, which all together accounts for approximately a third of coated business.

So within this backdrop for the mature markets, we are targeting to perform in line to ahead of the market at the same time, we start to get to double digit percentage revenue growth in what we call growth engine markets I'm thinking about Brazil.

Speaker Change #152: It's not about cheaper brands.

Speaker Change #152: Definitely, we are really taking into account some volatility with the retailers.

Speaker Change #152: Cheaper brands are not taking the, I would say, the volumes. It's really about this part that is shared between upper mass and entry prestige.

Speaker Change #162: And the second thing is that while we are doing this big blockbuster juices that are now setting trends for the long term instead of catching up, we are also very tactical in a way, positively tactical, playing with the formats, playing with the setting at large, the setting is becoming much larger piano with much more touches than the traditional audio toilet or audio parra.

Laurent Mercier: And the second thing is that while we are doing this big blockbuster juices that are now setting trends for the long term instead of catching up, we are also very tactical in a way, positively tactical, playing with the formats, playing with the setting at large, the setting is becoming much larger piano with much more touches than the traditional audio toilet or audio parra. And we are also activating all the brands that we have not activated recently.

Speaker Change #152: Thank you.

Speaker Change #152: Indeed, we are seeing retailers now strongly focusing on cash, really either on their inventory management or payment terms management.

Speaker Change #152: Latam, Mexico Africa, Saudi Arabia to an MSU and high growth channels, such as travel retail, which all together accounts for approximately a third of Coty business. So all of this will be supported.

Laurent Mercier: So all of this will be support; we'll support, sorry, our fiscal 25 innovation pipeline on top.

Speaker Change #153: Sorry, our fiscal 'twenty five innovation pipeline on deposits.

Speaker Change #162: And we are also activating all the brands that we have not activated recently.

Speaker Change #153: We'll take our next question from Javier Escalante with Evercore.

Speaker Change #153: So this is embedded in our equation.

Speaker Change #152: You're right.

Steve Powers: Thank you. We'll take your next question from Steve Powers with Deutsche Bank. Please go ahead. Thank you very much. Good morning, Sue. Good morning, Laurent. Sue, picking up a little bit, I guess, on the idea of the growth engine market. I wanted to ask about China specifically. Obviously not your largest market, which is an advantage right now, but it has been a growth engine market for you in part of your long-term strategy. There's a couple of questions on that. One is what is your outlook for China this year? How are you planning for it? Two is given what I assume is a softer outlook on China.

Speaker Change #163: You know, the beauty of the city portfolio is that we have a lot of brands and some of these brands are going to be activated quite strongly, specifically the brands that are positioned on entry prestige.

Laurent Mercier: You know, the beauty of the city portfolio is that we have a lot of brands and some of these brands are going to be activated quite strongly, specifically the brands that are positioned on entry prestige. So all together, together with the fact that penetration is still not the level of Brazil that I was quoting just a few minutes ago. So we believe we have room not only in the US, but also as well to continue to grow our fragrance business. Thank you.

Speaker Change #154: Thank you we'll take our next question from Steve Powers with Deutsche Bank. Please go ahead.

Steve Powers: Please go ahead.

Steve Powers: And definitely, that's really where we are monitoring tightly.

Speaker Change #153: You know, good morning Filippo, this is Sue speaking.

Speaker Change #153: You know, this is a category where innovation is key.

Steve Powers: Thank you very much good morning, Sue good morning, Laura.

Speaker Change #154: Hum.

Speaker Change #163: So all together, together with the fact that penetration is still not the level of Brazil that I was quoting just a few minutes ago.

Speaker Change #156: So you're picking up a little bit I guess.

Steve Powers: On the idea of the growth engine markets I wanted to ask.

Speaker Change #157: About China specifically.

Speaker Change #163: So we believe we have room not only in the US, but also as well to continue to grow our fragrance business.

Obviously, not your largest market.

Speaker Change #158: Which is an advantage right now, but it has been.

Speaker Change #159: Growth engine market, who are you part of your long term strategy.

Speaker Change #163: Thank you.

Speaker Change #164: We'll take our next question from Olivia Tongue with Raymond James.

Olivia Tongue: We'll take our next question from Olivia Tongue with Raymond James. Please go ahead. Great.

Speaker Change #160: Just a couple of questions on that one is what is your outlook for China. This year and how you're planning for it to us.

Speaker Change #165: Please go ahead.

Speaker Change #165: Great.

Olivia Tongue: Good morning.

Sue Nabi: Good morning. Thank you so much. I wanted to sort of build on what you just said around fragrances and why you think fragrances seem to be transitioning from what, you know, historically has been more of a discretionary category within beauty to one that is clearly less discretionary, but also seeing a willingness by consumers at the low end to trade in even though they haven't historically participated in the category. It's pretty much no price discovery at the ultra prestige and so, you know, clearly it sounds like there are significant momentum in prestige fragrances. Are you assuming a similar level contribution fiscal 25 is in fiscal 24. And what are you incorporating into far as concerns about more volatile macro? Thanks.

Speaker Change #167: Thank you so much.

Speaker Change #168: I wanted to sort of build on what you just said around fragrances and why you think fragrances seem to be transitioning from what, you know, historically has been more of a discretionary category within beauty to one that is clearly less discretionary, but also seeing a willingness by consumers at the low end to trade in even though they haven't historically participated in the category.

Speaker Change #161: Given what I assume is a softer outlook on China are there specific growth engine market. As you just mentioned a few but are there specific ones.

Sue Nabi: Are there specific growth engine markets? You just mentioned a few, but are there specific ones that you're reallocating investment dollars? Two, where you hope to make up some of the gap there. And then, is anything you're seeing now in China altering your medium- to long-term views on what that market represents in terms of a future opportunity? Thank you so much. Thank you, Steve. Good morning.

Speaker Change #162: Youre reallocating investment dollars to where you want to make up some of the.

Speaker Change #163: Some of the gap.

Speaker Change #164: There and then.

Speaker Change #165: Is there anything youre seeing now in China.

Speaker Change #166: During your medium to long term views on what that what that market represents in terms of.

Speaker Change #169: It's pretty much no price discovery at the ultra prestige and so, you know, clearly it sounds like there are significant momentum in prestige fragrances.

Speaker Change #166: Future opportunity. Thank you so much.

Speaker Change #167: Hi.

Speaker Change #167: So definitely, we keep working on other opportunities for fiscal 25, really optimizing all the levers that we have in our working capital.

Steve Powers: We've done a lot of studies recently to really understand what are the levers to, in a way, support our growth in consumer beauty, which is mainly color cosmetics for Coty in the U.S., to take this example.

Steve Powers: So we haven't seen innovation as big as the one that happened a few years ago or maybe a decade ago with gel technologies, be it in professional or in consumer.

Speaker Change #167: Thank you. Thank you, Steve and good morning so.

Speaker Change #168: And definitely, we are building a virtuous cycle.

Speaker Change #167: But still, this is an area that we are actively working on to increase the wear, because it's about the wear, using non-UV activated solutions.

Speaker Change #168: So we are absolutely confident in our cash cycle.

Speaker Change #168: We are also putting a lot of energy and intelligence into how to skinify this category.

Speaker Change #170: Are you assuming a similar level contribution fiscal 25 is in fiscal 24.

Sue Nabi: So first to answer the question around China, clearly we believe that fundamentally China is or will be one of the biggest, if not the biggest beauty market in the mid to the long term. So this is really something structural. And this really has to do a lot with the prestige market, I would say, that is going to continue to grow because this is culturally rooted in this country. Now what we are seeing now at the moment is that the negative growth trends specifically in skincare in China will continue probably in the coming quarters. Prestige fragrances is really the bright spot in this country, and I'll tell you a few words about the performance of the company.

Speaker Change #168: You know, what's happening in hair care should happen also in nail.

Speaker Change #168: First to answer the question around China, clearly, we believe that fundamentally China is or will be one of the biggest if not the biggest beauty market in the mid to the long term. So this is really something structural and this is really has to do a lot with prestige market I would say that is going to continue to grow because.

Speaker Change #171: And what are you incorporating into far as concerns about more volatile macro?

Speaker Change #171: Thanks.

Speaker Change #172: Morning, Olivia.

Sue Nabi: Morning, Olivia. Thank you for the question. So let me try to answer. Again, you know, I hear some people saying fragrance is a discretionary category. Some other people saying that this is a cyclical category. First, it was not a cyclical category. It has always been a category that was growing more or less at the low single digits prior to covid. And then something happened at the covid moment where suddenly a full industry that has been reinventing itself for the decade before was put in front of a younger generation of consumers who are both genders, younger, from diverse backgrounds, from diverse ethnicities, specifically Hispanic community in the US.

Speaker Change #173: Thank you for the question.

Speaker Change #174: So let me try to answer.

Speaker Change #168: It's really a little bit of coupon.

Speaker Change #168: And last but not least, we are also going to be super innovative in terms of what I call special effects.

Speaker Change #168: So promotionality and prices, pressure on prices, is not what is driving the consumption. Remember what I just said a few minutes ago, we are seeing some consumers trading up from consumer beauty, color cosmetics category to entry prestige category.

Speaker Change #168: Special effects are also going to bring excitement the same way it's bringing excitement on the lip category, for instance.

Speaker Change #175: Again, you know, I hear some people saying fragrance is a discretionary category.

Speaker Change #168: Last but not least, we are also going into artificial nails.

Speaker Change #175: Some other people saying that this is a cyclical category.

Speaker Change #176: First, it was not a cyclical category.

Speaker Change #168: Is culturally rooted in this country now what we are seeing now at the moment is that the negative growth trends specifically in skin care in China will continue.

Speaker Change #177: It has always been a category that was growing more or less at the low single digits prior to covid. And then something happened at the covid moment where suddenly a full industry that has been reinventing itself for the decade before was put in front of a younger generation of consumers who are both genders, younger, from diverse backgrounds, from diverse ethnicities, specifically Hispanic community in the US.

Speaker Change #168: So it's really this that we are seeing.

Speaker Change #168: So it's really the job of us and the job of all the players of this industry to put on the market, I would say, prestige-like innovation, if I may call it like this, but at the prices of mass market.

Speaker Change #177: And suddenly you have really the encounter of two destinies, the encounter of a category that reinvented itself with more quality, more creativity, multiple layers.

Speaker Change #168: In the coming quarters.

Speaker Change #168: This is the recipe that works.

Speaker Change #168: This is also a big focus for the company.

Speaker Change #169: Uh huh.

Speaker Change #168: We believe that there are really two kinds of consumers and we need to talk to both of them.

Speaker Change #169: Prestige fragrances is really the bright spot in this country and I'll tell you a few words about the performance of the company.

Speaker Change #168: And this is an area where we are working very hard to bring innovation because this is the rule of the game.

Sue Nabi: But let me just remember, remind everyone that the business of cutting China is still small, you know, it's around 3% of the revenues in fiscal 24. And at the same time, we are playing with two legs. So we are playing with the leg of prestige fragrances, which are really doing better than any other category, and the adoption curve of Chinese consumers in terms of premium entry, premium or niche fragrances is continuing to be at play. And we have the right brands recently, the very Chloe or Kelvin Klein has been doing great on this market and at the same time, we are also pushing preparing for the skincare, I would say, growth that will inevitably be back in this country, starting with Lancaster. Lancaster has been doing a fantastic relaunch in China.

Speaker Change #168: It's not about cheaper brands.

Speaker Change #168: Thank you.

Speaker Change #169: But let me just remember remind everyone that the business is good in China is still small it's around 3% of the revenues and she's got 24 and at the same time, we are playing with two legs. So we are playing with a leg of prestige fragrances, which are really doing better than any other category and.

Speaker Change #168: Cheaper brands are not taking the, I would say, the volumes. It's really about this part that is shared between upper mass and entry prestige.

Speaker Change #177: This was not just about entry prestige.

Speaker Change #168: Thank you.

Speaker Change #178: It was all premium ultra premium exclusive collections, et cetera.

Speaker Change #169: The adoption curve of Chinese consumers in terms of premium entry premium or niche fragrances is continuing to be at play and we have the right brands recently, the elderly clearly or scalping line has been doing great on this market and at the same time, we are also pushing preparing.

Speaker Change #179: Concentration technology, you know, the latest launch of cutie and cinema cutie uses for the first time, a patented molecule that extends the longevity of a fragrance.

Speaker Change #168: We'll take our next question from Javier Escalante with Evercore.

Speaker Change #179: So you know, at the end of the day when an offer becomes much more qualitative, much more performant.

Speaker Change #169: For the skin care I would say our growth that will inevitably be back in this country.

Speaker Change #179: It's not anymore discretionary buying or a cyclical buying.

Sue Nabi: It's not anymore discretionary buying or a cyclical buying. It becomes part of your life and we believe that fragrances are becoming structurally part of the life of millions of people around the world, specifically the youngest as connection builders, you know, people ask each other what you were, et cetera. And that's a fantastic advertising campaign, some I say people are also using fragrances as mood boosters, as a scapism tools, et cetera. So we moved from something that was seen as a gift, if you think about the US gift item into something I buy for myself because it makes me feel better.

Speaker Change #180: It becomes part of your life and we believe that fragrances are becoming structurally part of the life of millions of people around the world, specifically the youngest as connection builders, you know, people ask each other what you were, et cetera.

Speaker Change #169: Starting with Lancaster noncash debt has been doing a fantastic relaunched in China, we have seen great results.

Speaker Change #168: Please go ahead.

Sue Nabi: We have seen great results. Lancaster is the fastest growing skincare brand in both the June quarter, with almost doubling the size of the brand and also in calendar 24 with the growth that is a triple digit growth, gaining 4 points of market share in year to day calendar year 24. June was a very strong month; Lancaster ranked number 4 brand at Sephora, right after brands such as Drunk Elephant and that. And Lancaster ranks number eight on doing so the very unique positioning of Lancaster that is not a traditional skin care brand that's not the usual DNA and stem cells and your unique acid, blah, blah, blah, etc.

Speaker Change #168: Hi.

Speaker Change #169: Non cash that he is the fastest growing skincare brand in both the June quarter with almost doubling the size of the brand and also in calendar 'twenty four with the growth that is a triple digit growth gaining four points of market share and yesterday calendar year 'twenty for June was very strong months noncash that ranked number four brand at.

Speaker Change #180: And that's a fantastic advertising campaign, some I say people are also using fragrances as mood boosters, as a scapism tools, et cetera.

Speaker Change #181: So we moved from something that was seen as a gift, if you think about the US gift item into something I buy for myself because it makes me feel better.

Sephora right after brands, such as drunk elephant and Thatcher and noncash that ranks number eight on doing so the very unique positioning of noncash there that is not a traditional skincare brand that's not the usual D&A and stem cells and you know when you guys at.

Speaker Change #182: It makes me connect with others and the quality and the intensity of choice is ever bigger than it used to be in the past.

Sue Nabi: It makes me connect with others and the quality and the intensity of choice is ever bigger than it used to be in the past. So that's the reason why I believe it's not a discretionary category. It's not a cyclical category and beauty is not a consumer views goods industry leader. So it's very, very important that I restate this at the occasion of your question. Thank you.

Speaker Change #182: So that's the reason why I believe it's not a discretionary category.

Sue Nabi: It's all about photo protection and photo aging is clearly strongly resonating in China, and you may see that this is becoming also a global phenomenon. So to really summarize on what we are seeing in China is that we are going to continue to override our fragrances because this is where growth is coming from, and we are reading our brands, Lancaster and also Orveda, for when the skincare market will be back on track, and we believe this will happen at a moment or another. Now are we shifting are we shifting resources from one market to the other.

Speaker Change #170: All about what the protection and photo aging is clearly strongly originating in China and you may see that this is becoming a global phenomenon. So to really summarize on what we're seeing in China is that we are going to continue to overdrive. Our fragrances. Because this is where growth is coming from and we are.

Speaker Change #182: It's not a cyclical category and beauty is not a consumer views goods industry leader.

Speaker Change #182: So it's very, very important that I restate this at the occasion of your question.

Speaker Change #182: Thank you.

Speaker Change #182: We'll take our next question.

Linda Bolton: We'll take our next question. And to Bolton, why is there with the A.

Speaker Change #182: And to Bolton, why is there with the A.

Speaker Change #183: Davidson, please go ahead.

Linda Bolton: Davidson, please go ahead. Yes, thank you. I was just curious about when you talk about innovation and consumer beauty. Usually when there's a big technology innovation in the nail category, that's a big driver of category growth. It's been quite a few years, I think, since a big innovation. Can you talk if there's anything worked on there?

Speaker Change #171: <unk>, our brands Lancaster and also of EDA for when the skincare market will be back on track and we believe this will happen at the moment or another now are we shifting shifting resources from one market to the other we are constantly putting these success and a NCP and money.

Speaker Change #183: Yes, thank you.

Speaker Change #184: I was just curious about when you talk about innovation and consumer beauty.

Speaker Change #185: Usually when there's a big technology innovation in the nail category, that's a big driver of category growth. It's been quite a few years, I think, since a big innovation.

Sue Nabi: We are constantly putting resources and ANCP and money where there is growth; you know, and so of course there is growth behind the prestige fragrances in China. So we are investing over there, but there is also growth behind prestige fragrances in the US, and we are also investing heavily in this area in the Middle East and other regions where the company is seeing, I would say, a moment. Thank you.

Speaker Change #170: Where there is growth.

Speaker Change #185: Can you talk if there's anything worked on there?

Speaker Change #172: Now of course, there is growth behind the prestige fragrances in China. So we are investing over there, but there is also growth behind prestige fragrances in the U S. And we are also investing heavily in this area in the middle East in other regions, where the company is seeing I would say a momentum.

Speaker Change #185: And then my second question has to do with cash flow.

Laurent Mercier: And then my second question has to do with cash flow. I was curious, what if you could quantify the cash flow benefits in FY 24 that won't recur in FY 25, give a number behind that. And then what is going on with cash flow in early 2025? You said the retailers are managing something about cash and inventory. And then also why you're receivable seems very, very high. It seems to be kind of a drain and cash flow.

Speaker Change #185: I was curious, what if you could quantify the cash flow benefits in FY 24 that won't recur in FY 25, give a number behind that.

Speaker Change #172: Good morning, everyone.

Speaker Change #168: Good morning, everyone.

Speaker Change #168: We'll take our next question from Chris Carey with Wells Fargo Securities.

Speaker Change #186: And then what is going on with cash flow in early 2025?

Speaker Change #172: Okay.

Speaker Change #173: Thank you we'll take our next question from Ashley Hogan with Jefferies. Please go ahead.

Ashley Helgans: We'll take our next question from Ashley Helgans with Jeffries. Please go ahead. Hey, good morning, and thanks for taking our question. So you mentioned your innovation center and, you know, being able to get products not more quickly.

Speaker Change #187: You said the retailers are managing something about cash and inventory.

Ashley Hogan: My question is about Brazil.

Speaker Change #172: My question is about Brazil.

Speaker Change #172: Hi, good morning.

Ashley Hogan: Hey, good morning, and thanks for taking our question. So you mentioned your innovation center and being able to get product out more quickly can you remind us how fast you can get ideas onto shelf today, and then what they call. It in the future and then anything you can tell us about the promotional environment and kind of expectations on the promotional environment. That's ahead of the holiday.

Speaker Change #188: And then also why you're receivable seems very, very high.

Speaker Change #189: It seems to be kind of a drain and cash flow.

Ashley Helgans: Can you remind us how fast you can get ideas onto shelf today, and then what the goal is in the future? And then anything you can tell us about the promotional environment, kind of expectations on the promotional environment as ahead of the holiday. Thanks. Yeah, good morning, Ashley. Thank you for the question. Indeed, you know, three years ago, maybe four years ago, and I joined the company. Launchers could take up to 18 to 18 months as to two years, which is very, really too long for, you know, the world we're living, we were already living four years ago.

Speaker Change #189: Thank you.

Speaker Change #190: Yeah, so let me hello, Linda, let me start with the cash flow.

Laurent Mercier: Thank you. Yeah, so let me hello, Linda, let me start with the cash flow. So indeed, as you know, I shared we are lending our free cash flow fiscal 24th level of 370 million, but definitely there were some elements that do not repeat. I mean, definitely this is really a year where we are starting to say, you know, significant cash tax. So this was around 90 million. So I would say it's really driven by, you know, that we are increasing and improving in a lot of jurisdictions.

Speaker Change #191: So indeed, as you know, I shared we are lending our free cash flow fiscal 24th level of 370 million, but definitely there were some elements that do not repeat.

Laurent Mercier: Second, as I explained, indeed, we are also this year some investments and inventory, but related to S for an implementation, which as I explained is, you know, we went live mid July and very successful. So it's a very strong asset for the company. So of course, these are headwinds that will not repeat in FY 25. Now, if it's called 25, indeed, we are getting, you know, low to mid 200, definitely we are really taking into account some volatility with with the retailers.

Speaker Change #175: On your prepared remarks, you mentioned that it could use very high double digits, gross margins increased 400 basis points.

Ashley Hogan: On your prepared remarks, you mentioned that it could use very high double digits, gross margins increased 400 basis points.

Ashley Hogan: I wanted to ask about gross margins and one question on category growth.

Speaker Change #175: Regarding gross margin, you're a year ahead of plan.

Ashley Hogan: Thanks.

Speaker Change #175: Yeah. Good morning, guys. Thank you for the question. Indeed, you know three years ago, maybe four years ago and that joined the company.

Speaker Change #175: So how do you accomplish so much in just one year?

Speaker Change #175: Indeed, we are really in a phase where we are, I would say, cleaning some elements for fiscal 24, as I explained.

Speaker Change #175: So how do you accomplish so much in just one year?

Speaker Change #175: Fantastic.

Speaker Change #175: And also, there were a few positive one-offs which happened in fiscal 24 that will not recur in fiscal 25.

Speaker Change #175: Going into fiscal 25, can you just talk about some of the drivers of gross margin expansion?

Speaker Change #175: It sounds like you'll have some wraparound pricing, but I'm also conscious you have some favorability from manufacturing, I think freight as well for filings.

Speaker Change #175: And so can you just talk about what's going to be driving the expansion and maybe dimensionalize it for fiscal 25?

Speaker Change #192: I mean, definitely this is really a year where we are starting to say, you know, significant cash tax.

Speaker Change #176: What is the role of Brazil in year two driving consumer profit margins?

Speaker Change #176: But again, we are very confident, and the year is starting well.

Speaker Change #175: What is the role of Brazil in year two driving consumer profit margins?

Speaker Change #175: How much?

Speaker Change #176: Lunches could take up to 18 to 18 months to two years, which is very really too long for you know the world. We're living in we were already living in four years ago today, and we started to do with already so it's something that could take between six to nine months is one that burn the mascara. The latest success from <unk> took us nine months.

Speaker Change #193: So this was around 90 million.

Speaker Change #176: And I have a follow-up.

Speaker Change #176: And Linda, to answer your question around nails, which I believe is indeed a very, very interesting category where we hold fantastic positions.

Speaker Change #176: And I have a follow-up.

Speaker Change #176: And whether you think this mid-60s target was just a starting point and now you're running ahead of it, maybe you have confidence in going farther specifically as you look to use pricing or premiumize more over time.

Speaker Change #176: Sally Hansen is the indisputed leader of nail-in-the-bottle in the U.S. with more than 40% of share. Riske in Brazil, which we may globalize at the moment, is also doing fantastically well, number one in the country, above 40% of market share.

Speaker Change #193: So I would say it's really driven by, you know, that we are increasing and improving in a lot of jurisdictions.

Speaker Change #176: All our color cosmetics brands, except CoverGirl, are also having fantastic nail offers, benefiting from the technologies of Sally Hansen.

Sue Nabi: Today, and we started to do it already. So it's something that could take between six to nine months. Wonderburn and mascara, the latest success from Email took us nine months. The launch of Yomigloss from Cover Girl, it took us as quickly as six months. If I'm not wrong, including the platforming of this innovation on other brands. So the question is not to go faster because six months is already super, super fast because we need to fit also with retailers' resetting of their shelves. And this is really something that is a kind of imperative that we need to fit in.

Speaker Change #176: Okay, Javier, let me start with the first part.

Speaker Change #176: You're right.

Speaker Change #176: Okay, Javier, let me start with the first part.

Speaker Change #176: And then just connected if I could, do you have an outlook for category growth for fiscal 25, maybe globally?

Speaker Change #176: And thank you very much for giving me and giving us the opportunity to highlight the fantastic, I would say, growth trajectory of the Brazilian market and the Brazilian Coty teams.

Speaker Change #194: Second, as I explained, indeed, we are also this year some investments and inventory, but related to S for an implementation, which as I explained is, you know, we went live mid July and very successful.

Speaker Change #176: So let me maybe update you on this market.

Speaker Change #176: You know, this is a category where innovation is key.

Speaker Change #176: So let me maybe update you on this market.

Speaker Change #176: Certainly we've heard from some of your beauty peers that there's been some deceleration of category growth in Q4, still solid, but some sequential deceleration.

Speaker Change #176: So the Brazilian business has been growing very rapidly. It's more or less 20% of growth that we have seen on this market in fiscal 24.

Speaker Change #175: <unk>.

Speaker Change #177: The launch of Yummy get us from Covergirl It took us as quickly as six months is if I'm not wrong, including the platforming of this innovation on other brands. So the question is not to go faster because six months says he's already super Super fast because we need to see it also with retailers resetting of their shelf and this is really something that.

Speaker Change #177: We are already a leader in many categories.

Speaker Change #177: So we haven't seen innovation as big as the one that happened a few years ago or maybe a decade ago with gel technologies, be it in professional or in consumer.

Speaker Change #176: We are already a leader in many categories.

Speaker Change #176: I wonder if you're seeing that too.

Speaker Change #177: We are the leader of the nail category with a brand called Risque.

Speaker Change #177: Are you expecting stabilization or would you just expect to outperform category at a higher clip next year?

Speaker Change #194: So it's a very strong asset for the company.

Speaker Change #194: So of course, these are headwinds that will not repeat in FY 25.

Speaker Change #194: Now, if it's called 25, indeed, we are getting, you know, low to mid 200, definitely we are really taking into account some volatility with with the retailers.

Speaker Change #178: Is that a kind of a.

Speaker Change #178: Imperative that we need to fit in that six months is very very fast there is to do more launches in six months. So we already know how to do it now we are going to industrialize, if I may call. It like this our ability to put on the market launches in six months.

Sue Nabi: But six months is very, very fast. The idea is to do more launchers in six months. So we already know how to do it. Now we are going to industrialize, if I may call it like this, our ability to put on the market launchers in six months. And usually we are going to focus on areas that are not the traditional cutie. R&D areas, you know, cutie R&D is doing a lot in color cosmetics. But there are areas that are very, very technologically specific. And these are the areas that we intend to overdrive in the coming months and quarters so that we can have both, you know, speed.

Speaker Change #194: Indeed, we are seeing, you know, retailers now strongly focusing on cash really either on their inventory management or payment terms management.

Laurent Mercier: Indeed, we are seeing, you know, retailers now strongly focusing on cash really either on their inventory management or payment terms management. So this is embedded in our equation and definitely that really we are we are monitoring monitoring. So definitely keep working on all the opportunities for fiscal fiscal 25, really optimizing all the labor that we have in our working capital. And definitely we are building a virtual cycle. So we are absolutely confident cash cycle.

Speaker Change #178: And Coty has very strong positions in body care as we are the number one in scented body oils, which are becoming a global phenomenon, by the way.

Speaker Change #178: But still, this is an area that we are actively working on to increase the wear, because it's about the wear, using non-UV activated solutions.

Speaker Change #177: And Coty has very strong positions in body care as we are the number one in scented body oils, which are becoming a global phenomenon, by the way.

Speaker Change #177: So really there's two questions there, one on gross margin and one on category growth.

Speaker Change #178: And number two in body lotions with a brand called Monange.

Speaker Change #194: So this is embedded in our equation and definitely that really we are we are monitoring monitoring.

Speaker Change #178: And usually we are going to focus on areas that are not the traditional coty R&D areas.

Speaker Change #178: We are also putting a lot of energy and intelligence into how to skinify this category.

Speaker Change #178: Thank you.

Speaker Change #178: You know, what's happening in hair care should happen also in nail.

Speaker Change #178: And last but not least, we are also going to be super innovative in terms of what I call special effects.

Speaker Change #195: So definitely keep working on all the opportunities for fiscal fiscal 25, really optimizing all the labor that we have in our working capital.

Speaker Change #178: Special effects are also going to bring excitement the same way it's bringing excitement on the lip category, for instance.

Speaker Change #178: Last but not least, we are also going into artificial nails.

Speaker Change #178: R&D is doing a lot in color cosmetics, but there are areas that are very very technologically specific and these are the areas that we intend to overdrive in the coming months and quarters. So that we can have both a you know a speed, but also the quantity. It's a war of attention. So you need to win this war of attention.

Speaker Change #178: This is also a big focus for the company.

Speaker Change #195: And definitely we are building a virtual cycle.

Sue Nabi: But also the quantity. It's a war of attention. So you need to win this war of attention with the right, surprising, exciting, innovative, and efficient products.

Speaker Change #195: So we are absolutely confident cash cycle.

Speaker Change #195: Indeed, we are really in a phase where we are, I would say, cleaning some elements for fiscal 24 as I explained.

Laurent Mercier: Indeed, we are really in a phase where we are, I would say, cleaning some elements for fiscal 24 as I explained. And also there were a few positive one offs, which happened in fiscal 24 that we not recur in fiscal 25. But again, we are very confident and the year is starting well.

Speaker Change #178: We are now unlocking the substantial fragrance opportunity in this country.

Speaker Change #178: With the Reits surprising exciting innovative and efficient products.

Speaker Change #195: And also there were a few positive one offs, which happened in fiscal 24 that we not recur in fiscal 25.

Speaker Change #179: A little bit of context, the Brazilian market is a very big market, as you said it. It's over a $2 billion market.

Speaker Change #178: A little bit of context, the Brazilian market is a very big market, as you said it. It's over a $2 billion market.

Speaker Change #178: Yeah, thank you, Chris.

Mark Astrochan: Thank you. We'll take our next question from Mark Astroshan with Steve. Please go ahead. Yeah, thanks. And morning afternoon everyone. A couple of clarification questions.

Speaker Change #179: Thank you we'll take our next question from Mark Astrachan, Sean with Stifel. Please go ahead.

Speaker Change #195: But again, we are very confident and the year is starting well.

Mark Astrachan: And the penetration of fragrance usage or scenting items usage is close to 70%. So you can imagine this is paradise for a company like Coty.

Mark Astrachan: We believe that there are really two kinds of consumers and we need to talk to both of them.

Speaker Change #179: And the penetration of fragrance usage or scenting items usage is close to 70%. So you can imagine this is paradise for a company like Coty.

Speaker Change #179: So let me start with growth margin.

Mark Astrachan: Yeah, Thanks, and good morning afternoon, everyone.

Speaker Change #196: And in that to answer your question of our nails, which I believe is indeed a very, very interesting category where we hold the fantastic positions, you know, Sally Hansen is the indisputed leader of nail in the bottle in the US with more than 40% of share.

Sue Nabi: And in that to answer your question of our nails, which I believe is indeed a very, very interesting category where we hold the fantastic positions, you know, Sally Hansen is the indisputed leader of nail in the bottle in the US with more than 40% of share. Risk came Brazil, which we may globalize at the moment is also doing fantastically well. Number one in the country, above 40% of market share, all our color cosmetics brand except color girl are also having fantastic nail offers, benefiting from the technologies of Sally Hansen.

Mark Astrachan: A couple of clarification question. So the the retailer reordering commentary it sounds more like it was on the color cosmetic.

Laurent Mercier: So the retailer reordering commentary sounds more like it was on the color cosmetics. Is that correct?

Mark Astrachan: So while direct selling, particularly door to door, has been historically big in this country, the retail channel has been growing very strongly and very quickly in both mass and prestige recently.

Mark Astrachan: Is that correct and I guess, if it is how do you think about our channel inventories are from fragrance standpoint thinking more on the prestige side.

Laurent Mercier: And I guess if it is, how do you think about what channel inventories are from a fragrance standpoint, thinking more on the prestige side.

Speaker Change #196: Risk came Brazil, which we may globalize at the moment is also doing fantastically well.

Laurent Mercier: And how do you think about the puts and takes of what in demand looks like, and how does that factor into the high and low end of your guidance for fiscal 25? And then just also clarification. What's baked in from an Argentina hyperinflation standpoint for the revenue growth for fiscal 25. Yeah, so definitely to answer you on, you know, a retailer or the management. Yes, I mean, the point is mainly cosmetics. I mean, the prestige category fragrance category remains very dynamic. I mean, you saw the last numbers. I mean prestige fragrance category in the US is going by 10% in July.

Mark Astrachan: And how you think about.

Speaker Change #197: Number one in the country, above 40% of market share, all our color cosmetics brand except color girl are also having fantastic nail offers, benefiting from the technologies of Sally Hansen.

The puts and takes of.

Speaker Change #181: What end demand looks like and how does that factor into the high and low end of your guidance for fiscal 'twenty five and then just also a clarification.

Speaker Change #197: You're right, you know, this is a category where innovation is key.

Sue Nabi: You're right, you know, this is a category where innovation is key. So you we haven't seen innovation as big as the one that happened a few years ago, or maybe a decade ago with gel technologies did in professional or in consumer. But still this is an area that we are actively working on to increase the where because it's about the where using non UV activated solutions. We are also putting a lot of energy and intelligence into how to skinify this category, you know, what's happening in healthcare should happen also in nail.

Speaker Change #182: What's baked in from an Argentina hyperinflation standpoint for the revenue growth for fiscal 'twenty five.

Speaker Change #198: So you we haven't seen innovation as big as the one that happened a few years ago, or maybe a decade ago with gel technologies did in professional or in consumer.

Sue Nabi: And last but not least, we are also going to be super innovative in terms of what I call special effects, special effects are also going to bring excitement, the same way it's bringing excitement on the lip category for instance. Last but not least, we are also going into artificial nails. This is also a big focus for the company. We believe that there are really two kind of consumers and we need to talk to both of them. And this is an area where we are working very hard to bring innovation because this is the rule of the game.

Speaker Change #181: And this is an area where we are working very hard to bring innovation because this is the rule of the game.

Mark Astrachan: Yeah, you're absolutely right.

Speaker Change #181: Yes.

Speaker Change #183: Definitely to answer you on retailer order management, yes, I mean, the point is is mainly cosmetics that means a prestige category programs category remains very dynamic I mean users are less numbers I mean prestige fragrance category in the U S is growing by 10% in July so definitely.

Speaker Change #183: And here, as you can imagine, our company is very well positioned to win as we are leveraging our global portfolio of mass, but also prestige fragrance brands.

Speaker Change #183: Thank you.

Speaker Change #181: And here, as you can imagine, our company is very well positioned to win as we are leveraging our global portfolio of mass, but also prestige fragrance brands.

Speaker Change #183: We are leveraging our leading fragrance capabilities, our extensive distribution in this country, as well as the fact that we have a big factory where we can manufacture locally. So only one year after launching a few of our mass fragrance brands in the Brazilian retail channel, we reached already the number six rank in this country with over 4% of market share.

Speaker Change #199: But still this is an area that we are actively working on to increase the where because it's about the where using non UV activated solutions.

Unknown Executive: Thank you.

Speaker Change #183: Of course, we will continue to drive this through additional brand introduction, improve productivity, and we are going to accelerate the expansion as a step two.

Speaker Change #183: But it's also the story of prestige fragrances, where we took over the business from distributors a few years ago, and we are now reaching almost 10% market share, up almost 200 basis points versus fiscal 21.

Speaker Change #183: And this is led by brands such as Calvin Klein and Hugo Boss.

Speaker Change #183: So you can imagine that for us, this is really a land of opportunities, and it's just the beginning of the story.

Speaker Change #183: Laurent, maybe you can compliment on the profitability part expected for fiscal 21.

Speaker Change #183: We'll take our next question from Chris Carey with Wells Fargo Securities.

Speaker Change #183: Laurent, maybe you can compliment on the profitability part expected for fiscal 21.

Speaker Change #183: Yeah, absolutely.

Speaker Change #183: Hi, good morning.

Speaker Change #183: Yeah, absolutely.

Speaker Change #183: So, indeed, the agenda for Brazil was, of course, that it's a strong growth engine, but was really to make it in a very profitable manner.

Speaker Change #183: So this was definitely the mandate.

Speaker Change #183: And indeed, you see from the numbers that it's even over-delivered.

Speaker Change #183: So starting with gross margin, a lot of initiatives.

Speaker Change #199: We are also putting a lot of energy and intelligence into how to skinify this category, you know, what's happening in healthcare should happen also in nail.

Speaker Change #183: I would start first with pricing.

Speaker Change #183: I wanted to ask about gross margins and one question on category growth.

Speaker Change #183: I would start first with pricing.

Speaker Change #183: Regarding gross margin, you're a year ahead of plan.

Speaker Change #183: Fantastic.

Laurent Mercier: So definitely. And you know that US fragrance category is 70% bigger versus versus pre COVID. So definitely, it's very healthy, very dynamic. And we are bringing again, you know, strong innovations, and which resonate very well in the US.

Speaker Change #183: Going into fiscal 25, can you just talk about some of the drivers of gross margin expansion?

Speaker Change #183: It sounds like you'll have some wraparound pricing, but I'm also conscious you have some favorability from manufacturing, I think freight as well for filings.

Speaker Change #183: And you'll notice that U S fragrance category is 70% bigger theyre susa versus pre COVID-19. So if in Italy is very healthy very dynamic and we are bringing again.

Speaker Change #183: And so can you just talk about what's going to be driving the expansion and maybe dimensionalize it for fiscal 25?

Speaker Change #183: Definitely, we implemented a significant price increase because there was inflation, number one, but also because really the pricing power was there.

Speaker Change #183: How much?

Speaker Change #183: Definitely, we implemented a significant price increase because there was inflation, number one, but also because really the pricing power was there.

Speaker Change #183: We are ahead, you know, you're ahead of plan, so it means that all the actions we put in place, I mean, delivered or even over-delivered.

Speaker Change #183: And again, the innovation, the strength of the brands was really allowing to do this.

Speaker Change #183: And whether you think this mid-60s target was just a starting point and now you're running ahead of it, maybe you have confidence in going farther specifically as you look to use pricing or premiumize more over time.

Speaker Change #183: And again, the innovation, the strength of the brands was really allowing to do this.

Speaker Change #183: So we are going to keep the same recipe into fiscal 25. So as I said, I mean, we will keep, you know, doing a targeted price increase, definitely in a context where, you know, we see more moderate inflation on our cost of goods.

Speaker Change #183: And there was really a deep review of the portfolio.

Speaker Change #183: And then just connected if I could, do you have an outlook for category growth for fiscal 25, maybe globally?

Speaker Change #183: And there was really a deep review of the portfolio.

Speaker Change #183: But still, again, we keep using pricing as a lever to improve our gross margin.

Speaker Change #199: And last but not least, we are also going to be super innovative in terms of what I call special effects, special effects are also going to bring excitement, the same way it's bringing excitement on the lip category for instance.

Speaker Change #183: I was talking strategy revenue management is really a fantastic case.

Speaker Change #183: Certainly we've heard from some of your beauty peers that there's been some deceleration of category growth in Q4, still solid, but some sequential deceleration.

Speaker Change #183: I was talking strategy revenue management is really a fantastic case.

Speaker Change #183: So then, of course, mix is a big driver.

Speaker Change #183: When you open the Risque brand, the Monarch brand, all these brands, I mean, and you apply the playbook, then we were really able to unlock a lot of opportunities.

Speaker Change #183: I wonder if you're seeing that too.

Speaker Change #183: When you open the Risque brand, the Monarch brand, all these brands, I mean, and you apply the playbook, then we were really able to unlock a lot of opportunities.

Speaker Change #183: And I think we gave and we keep giving a lot of examples of premiumization and we do it across all divisions, all markets, all categories.

Speaker Change #183: So, indeed, this was really pricing.

Speaker Change #183: Keep in mind also that in Brazil, we have also our own R&D.

Speaker Change #183: We have our own factory. So we were really able with these additional volumes really to gain fixed cost absorption and also to gain significant improvement on procurement. So this was really boosting the gross margin.

Speaker Change #183: We're able really to invest in the new opportunities.

Speaker Change #183: So this is a must.

Speaker Change #183: And then that's really the virtuous circle that we explained many times.

Speaker Change #183: So it means that for Fiscal 25, in fact, Brazil is a creative for the equation.

Speaker Change #183: And productivity, we continue, of course, our productivity initiatives.

Speaker Change #183: Innovations and which resonates very well in the in the U S.

Speaker Change #183: Because the additional basis point that they are gaining, in fact, is moving even faster than the company.

Speaker Change #183: I mean, I shared that we continue the All-in-to-Win program, of course.

Speaker Change #183: So it shows that our growth engines market, they bring growth, but they bring profit because we have the right platform.

Speaker Change #183: We have plans next year, you know, for 75 million additional productivities.

Speaker Change #183: Thank you.

Speaker Change #183: So it's part of productivity in our factories.

Speaker Change #183: We'll take our next question from Anna Lizzul with Bank of America.

Speaker Change #183: And volume, of course, is helping really to accelerate this productivity.

Laurent Mercier: For on Argentina, indeed, I indicated in fiscal 24 that indeed due to hyperinflation, we really implemented significant price increase. Now we are really modeling for fiscal 25 more, you know, some stabilization. Okay, so there will be some impact, but not at the same level as we face in fiscal 24.

Speaker Change #183: Please go, ahead.

Speaker Change #183: But it's also with, procurement.

Speaker Change #183: Please go, ahead.

Speaker Change #183: So it means that we can launch initiatives which are already at a high gross margin.

Or on the Argentina, Indeed are indicated in the fiscal 'twenty four.

Speaker Change #183: Hi, good morning.

Speaker Change #183: We are definitely, you know, scaling up the volumes.

Speaker Change #183: Hi, good morning.

Speaker Change #183: So we have the playbook.

Speaker Change #183: Thank you so much for the question.

Speaker Change #183: Indeed, it's giving us really some scale and power to negotiate a better price.

Speaker Change #183: I wanted to go back to the consumer, beauty topic.

Speaker Change #183: And also we have a specific program to continue to simplify and really to rationalize our portfolio components.

Speaker Change #199: Last but not least, we are also going into artificial nails.

Speaker Change #183: You mentioned you're diving into innovation, doubling in the next couple of years.

Speaker Change #183: And again, fragrance is a good example when you heard from Sue that we are also accelerating mass fragrance.

Speaker Change #183: Just given the strength of certain competitors in the space, do you now view the mass beauty side as expanding and therefore more of a growth opportunity?

Speaker Change #183: Here, of course, we are benefiting here from the scale of the prestige fragrance.

Speaker Change #183: And you mentioned trading up, which is very interesting, you know, from the mass space to entry-level proceeds.

Speaker Change #183: Indeed, due to hyperinflation, we really implemented significant price increases.

Speaker Change #183: Are you seeing any benefit here in consumer beauty, though, from trade-down in a more, challenging consumer environment?

Speaker Change #199: This is also a big focus for the company.

Speaker Change #183: Thanks.

Speaker Change #183: Thank you so much for the question.

Speaker Change #183: We continue.

Speaker Change #183: So good morning, Anna.

Speaker Change #199: We believe that there are really two kind of consumers and we need to talk to both of them.

Speaker Change #183: I wanted to go back to the consumer, beauty topic.

Speaker Change #183: And definitely, I mean, the mid-60s is not the endgame.

Speaker Change #183: You mentioned you're diving into innovation, doubling in the next couple of years.

Speaker Change #183: So we will continue definitely to go, beyond the mid-60s with the same recipe.

Speaker Change #183: Just given the strength of certain competitors in the space, do you now view the mass beauty side as expanding and therefore more of a growth opportunity?

Speaker Change #183: And mix will be, of course, a big driver for this acceleration.

Speaker Change #184: No we're really modeling for fiscal 'twenty fives more you know some stabilization. Okay. So there will be some impact but not at the same level as we faced in fiscal 'twenty four.

Speaker Change #183: And you mentioned trading up, which is very interesting, you know, from the mass space to entry-level proceeds.

Speaker Change #183: And let me take the second part, Laurent, which is around category growth, you know, what we are seeing.

Speaker Change #183: Are you seeing any benefit here in consumer beauty, though, from trade-down in a more, challenging consumer environment?

Speaker Change #183: So entering fiscal 25, we have seen that the demand trends are remaining broadly consistent with what we saw in fiscal 24.

Speaker Change #199: And this is an area where we are working very hard to bring innovation because this is the rule of the game.

Speaker Change #183: Thanks.

Speaker Change #183: At the same time, of course, we all have seen that prestige retailers, but also drugstore retailers, closely manage orders and inventory levels, which is resulting in a sellout that is tracking ahead of Celine.

Speaker Change #184: Are you expecting stabilization or would you just expect to outperform category at a higher clip next year?

Speaker Change #183: So good morning, Anna.

Speaker Change #183: We'll take our next question from Steve Powers with Deutsche Bank.

Speaker Change #184: So we anticipate beauty demand in mature markets to expand in the mid-single digits, including prestige fragrance growth above this range and mass beauty growth below this range.

Speaker Change #184: So really there's two questions there, one on gross margin and one on category growth.

Speaker Change #184: This is Sue.

Speaker Change #184: Please, go ahead.

Speaker Change #184: All of these supported by very, very strong econ, which is growing between two times, and more faster than the company.

Speaker Change #184: Thank you.

Speaker Change #184: So within this backdrop for the mature market, we are targeting to perform in line to ahead of the market.

Speaker Change #184: Yeah, thank you, Chris.

Speaker Change #184: And at the same time, we target to do double digit percentage revenue growth in what we call growth engine markets. I'm thinking about Brazil, the rest of Latin, Mexico, Africa, Saudi Arabia to name a few, and high growth channels such as travel retail, which all together account for approximately a third of business.

Speaker Change #184: So let me start with growth margin.

Speaker Change #184: So all of this will be support will support our fiscal 25 innovation pipeline on top.

Speaker Change #184: Yeah, you're absolutely right.

Speaker Change #184: Thank you.

Speaker Change #184: We are ahead, you know, you're ahead of plan, so it means that all the actions we put in place, I mean, delivered or even over-delivered.

Speaker Change #183: Thank you very much.

Speaker Change #184: So if I understand what the question is about, let, me just read it again because someone is typing at the same time.

Speaker Change #184: Thank you very much.

Speaker Change #183: Good morning, Sue.

Speaker Change #183: Do we see mass beauty as more of a growth opportunity?

Speaker Change #183: Good morning, Sue.

Speaker Change #199: Thank you.

Speaker Change #185: But still, again, we keep using pricing as a lever to improve our gross margin.

Speaker Change #185: Good morning, Laurent.

Speaker Change #185: Yes, of course, we see this as a growth opportunity.

Speaker Change #185: Good morning, Laurent.

Speaker Change #200: We'll take our next question from Chris Carey with Wells Fargo Securities.

Chris Carey: We'll take our next question from Chris Carey with Wells Fargo Securities.

Speaker Change #185: So then, of course, mix is a big driver.

Speaker Change #183: Yes.

Speaker Change #185: Sue, picking up a little bit, I guess, on the idea of the growth engine markets, I wanted to ask about China specifically. Obviously, not your largest market, which is an advantage right now, but it has been a growth engine market for you in part of your long-term strategy.

Speaker Change #185: Mass beauty is not just the U.S. market where we are doing, I would say, a fantastic job that we have been doing for the last three or four years.

Speaker Change #185: And I think we gave and we keep giving a lot of examples of premiumization and we do it across all divisions, all markets, all categories.

Speaker Change #186: A couple of questions on that.

Speaker Change #185: You've seen probably in the most recent scanners, plus, you know, Omnichild and Vision, that CoverGirl is one of the heritage brand that is resisting the best to, you know, not only the slowdown on one side, but also in front of some very, very nimble competitors.

Speaker Change #185: A couple of questions on that.

Speaker Change #185: Thank you.

Speaker Change #186: So this is a must.

Speaker Change #186: One is, what is your outlook for China this year?

Speaker Change #186: But we are learning quickly.

Speaker Change #186: One is, what is your outlook for China this year?

Speaker Change #186: This is Sue.

Speaker Change #186: And there are no further questions at this time.

Speaker Change #186: And productivity, we continue, of course, our productivity initiatives.

Speaker Change #186: How are you planning for it?

Speaker Change #186: We are putting in place what needs to be put in place quickly.

Speaker Change #186: How are you planning for it?

Unknown Executive: And there are no further questions at this time.

Speaker Change #186: I'll turn the call back to Sue Nabi for any closing remarks.

Speaker Change #186: I mean, I shared that we continue the All-in-to-Win program, of course.

Speaker Change #186: And there are no further questions at this time I will turn the call back to soon will be for any closing remarks.

Speaker Change #186: Two is, given what I assume is a softer outlook on China, are there specific growth engine markets?

Speaker Change #186: As you heard it, we have been doubling down on advocacy marketing and the full marketing, that goes with it.

Speaker Change #186: Two is, given what I assume is a softer outlook on China, are there specific growth engine markets?

Speaker Change #186: We have plans next year, you know, for 75 million additional productivities.

Speaker Change #186: You just mentioned a few, but are there specific ones that you're reallocating investment dollars to where you hope to make up some of the gap there?

Speaker Change #186: And this is really changing the destiny of our brands that are suddenly visible with the right light, with the right innovation, towards the right consumers who are making the growth of this market.

Speaker Change #186: You just mentioned a few, but are there specific ones that you're reallocating investment dollars to where you hope to make up some of the gap there?

Speaker Change #201: Hi, good morning.

Laurent Mercier: Hi, good morning. I wanted to ask about gross margins in one question on category growth. Regarding gross margins, you're ahead of plan, fantastic. Going into fiscal 25, can you just talk about some of the drivers of gross margin expansion? It sounds like you'll have some wrap around. Pricing, but I'm also conscious you have some paper billy from manufacturing, I think, grace as well for filings. And so can you just talk about what's going to be driving the expansion and maybe dimensionalize it for fiscal 25, how much.

Speaker Change #186: So it's part of productivity in our factories.

Ashley: I'll turn the call back to Soon. I'll be for any closing remarks. Thank you very much. So looking forward to talk to you at the end of Q1. Thank you.

Speaker Change #186: And then, is anything you're seeing now in China altering your medium to long-term views on what that market represents in terms of a future opportunity?

Speaker Change #186: But now we are adding a second leg, which is this agile beauty startup inside Coty.

Speaker Change #186: And then, is anything you're seeing now in China altering your medium to long-term views on what that market represents in terms of a future opportunity?

Speaker Change #202: I wanted to ask about gross margins in one question on category growth.

Speaker Change #186: And volume, of course, is helping really to accelerate this productivity.

Speaker Change #186: Thank you so much.

Speaker Change #186: It already was active.

Speaker Change #186: Thank you so much.

Speaker Change #186: But it's also with, procurement.

Speaker Change #186: Thank you.

Speaker Change #186: Now it's becoming something very, I would say, specialized, team, multi, competency system.

Speaker Change #186: Thank you.

Speaker Change #186: We are definitely, you know, scaling up the volumes.

Speaker Change #186: Thank you, Steve.

Speaker Change #186: Sorry, that's the word I was looking for.

Speaker Change #186: Thank you, Steve.

Speaker Change #186: So if I understand what the question is about, let, me just read it again because someone is typing at the same time.

Speaker Change #186: Thank you very much.

Speaker Change #186: As you remember, last year, there was very strong phasing. Our Q1 was plus 18%, our Q2 was 11%, and then Q3, 10, and then, you know, landing the year at 11%.

Speaker Change #186: Thank you very much.

Speaker Change #186: Indeed, it's giving us really some scale and power to negotiate a better price.

Speaker Change #186: Good morning.

Speaker Change #186: So you can imagine that when you couple these two together, even in a market that is pressured, mainly in drugstore chains, because in e-com, the brands that we are having are booming, in fact.

Speaker Change #186: Good morning.

Speaker Change #186: Do we see mass beauty as more of a growth opportunity?

Speaker Change #186: So looking forward to talk to you at the end of Q1.

Speaker Change #186: So of course, we have high comps, and we are taking this into account in our algorithm.

Speaker Change #186: So looking forward to talk to you at the end of Q1.

Speaker Change #186: And also we have a specific program to continue to simplify and really to rationalize our portfolio components.

Thank you very much so looking forward to talk to you at the end of Q1.

Speaker Change #203: Regarding gross margins, you're ahead of plan, fantastic.

Speaker Change #186: So, first, to answer the question around China, clearly, we believe that fundamentally China is or will be one of the biggest, if not the biggest, beauty market in the mid to the long term.

Speaker Change #186: So it's not about mass beauty that is pressured.

Speaker Change #186: Yes, of course, we see this as a growth opportunity.

Speaker Change #186: So comps are easier in the H2.

Speaker Change #186: And again, fragrance is a good example when you heard from Sue that we are also accelerating mass fragrance.

Speaker Change #186: So, this is really something structural, and this really has to do a lot with prestige market, I would say, that is going to continue to grow because this is culturally rooted in this country.

Speaker Change #186: It's mass beauty in certain channels that explains the slowdown that we are seeing in some, I would say, retailer orders, etc.

Speaker Change #186: Mass beauty is not just the U.S. market where we are doing, I would say, a fantastic job that we have been doing for the last three or four years.

Speaker Change #186: Then definitely, we are modeling that our sellout should be aligned with our selling in the H2.

Speaker Change #186: Here, of course, we are benefiting here from the scale of the prestige fragrance.

Speaker Change #186: Now, what we are seeing now at the moment is that the negative growth trends, specifically in skincare in China, will continue probably in the coming quarters.

Speaker Change #186: So I believe that mass beauty continues to have a future, assuming that we are as nimble as innovative with a look and feel of prestige.

Speaker Change #186: Now, what we are seeing now at the moment is that the negative growth trends, specifically in skincare in China, will continue probably in the coming quarters.

Speaker Change #186: You've seen probably in the most recent scanners, plus, you know, Omnichild and Vision, that CoverGirl is one of the heritage brand that is resisting the best to, you know, not only the slowdown on one side, but also in front of some very, very nimble competitors.

Speaker Change #186: And of course, I mean, this is supported by all the innovations that, you know, we are piping in starting now, but we will continue in H2, both on prestige and on consumer beauty.

Speaker Change #186: So it means that we can launch initiatives which are already at a high gross margin.

Speaker Change #186: Prestige fragrances is really the bright spot in this country, and I'll tell you a few words about the performance of the company.

Speaker Change #186: So this is number one.

Speaker Change #186: Prestige fragrances is really the bright spot in this country, and I'll tell you a few words about the performance of the company.

Speaker Change #186: But we are learning quickly.

Speaker Change #186: So indeed, there are all these elements drivers, which are really captured in the sequencing of these growth algorithms.

Speaker Change #186: So we have the playbook.

Speaker Change #186: But let me just remind everyone that the business of Coty in China is still small. You know, it's around 3% of the revenues in fiscal 24.

Speaker Change #186: Number two, this U.S. market is one market among others in our equation, and we are really growing this division worldwide.

Speaker Change #186: But let me just remind everyone that the business of Coty in China is still small. You know, it's around 3% of the revenues in fiscal 24.

Speaker Change #187: We are putting in place what needs to be put in place quickly.

Speaker Change #186: Then on your second part on capital allocation, I mean, first of all, I just want to remind again and again that deleveraging is the number one imperative for the company.

Speaker Change #187: We continue.

Speaker Change #187: And at the same time, we are playing with two legs.

Speaker Change #187: Rimmel has been gaining market share for the last two quarters globally, and we are accelerating, the same playbook behind Rimmel.

Speaker Change #187: And at the same time, we are playing with two legs.

Speaker Change #204: Going into fiscal 25, can you just talk about some of the drivers of gross margin expansion?

Speaker Change #187: As you heard it, we have been doubling down on advocacy marketing and the full marketing, that goes with it.

Speaker Change #187: Thank you.

Speaker Change #187: And of course, that, you know, we keep targeting, you know, towards the two times end of calendar 25.

Speaker Change #187: Thank you.

Speaker Change #187: And definitely, I mean, the mid-60s is not the endgame.

Speaker Change #187: So, we are playing with a leg of prestige fragrances, which are really doing better than any other category.

Speaker Change #187: And on top of this, when I move away from this color cosmetics category, we are also accelerating in mass fragrances. This is expected to be the fastest growing category of the division in the fiscal 25.

Speaker Change #187: So, we are playing with a leg of prestige fragrances, which are really doing better than any other category.

Speaker Change #187: And this is really changing the destiny of our brands that are suddenly visible with the right light, with the right innovation, towards the right consumers who are making the growth of this market.

Speaker Change #187: This does conclude today's program.

Speaker Change #187: And I want really to insist that these two times is really without any Velastake divestiture.

Speaker Change #187: This does conclude today's program.

Speaker Change #187: So we will continue definitely to go, beyond the mid-60s with the same recipe.

Speaker Change #187: And the adoption curve of Chinese consumers in terms of premium, entry premium, or niche fragrances is continuing to be at play, and we have the right brands.

Speaker Change #187: We are accelerating in nails, specifically in artificial nails, and we are accelerating in what we call elevated body care, because there is a huge increase of penetration in body care all around the world.

Speaker Change #187: And the adoption curve of Chinese consumers in terms of premium, entry premium, or niche fragrances is continuing to be at play, and we have the right brands.

Speaker Change #187: Thank you. This does conclude today's program. Thank you for your participation you may disconnect at any time.

Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time. Thank you very much.

Speaker Change #187: But now we are adding a second leg, which is this agile beauty startup inside Coty.

Speaker Change #187: So it's really built by pure organic EBITDA expansion and cash flow generation.

Speaker Change #187: And mix will be, of course, a big driver for this acceleration.

Speaker Change #187: Recently, Burberry, Chloé, or Calvin Klein have been doing great on this market.

Speaker Change #187: So in a way or another, we will continue to grow the division because we are doing what, is the right things to be done on the market that is highly competitive and under pressure like the U.S. one.

Speaker Change #187: Recently, Burberry, Chloé, or Calvin Klein have been doing great on this market.

Speaker Change #187: It already was active.

Speaker Change #187: Okay, so that's very important.

Speaker Change #187: And let me take the second part, Laurent, which is around category growth, you know, what we are seeing.

Speaker Change #187: And at the same time, we are also pushing, preparing for the skincare, I would say, growth that will inevitably be back in this country, starting with Lancaster.

Speaker Change #187: But we also have massive other areas of oxygen in the coming year, and should I say in the coming years.

Speaker Change #187: And at the same time, we are also pushing, preparing for the skincare, I would say, growth that will inevitably be back in this country, starting with Lancaster.

Speaker Change #187: Now it's becoming something very, I would say, specialized, team, multi, competency system.

Speaker Change #187: So now definitely on Velastake, so it's really okay, we keep targeting, you know, these divestiture end of calendar 25.

Speaker Change #187: So entering fiscal 25, we have seen that the demand trends are remaining broadly consistent with what we saw in fiscal 24.

Speaker Change #187: Lancaster has been doing a fantastic relaunch in China. We have seen great results. Lancaster is the fastest-growing skincare brand in both the June quarter, with almost doubling the size of the brand, and also in calendar 24, with a growth that is a triple-digit growth, gaining four points of market share in year-to-day calendar year 24.

Speaker Change #187: Thank you.

Speaker Change #187: Sorry, that's the word I was looking for.

Speaker Change #187: Now, as you know, this is definitely in the hands of the main shareholder, which is KKR.

Speaker Change #187: At the same time, of course, we all have seen that prestige retailers, but also drugstore retailers, closely manage orders and inventory levels, which is resulting in a sellout that is tracking ahead of Celine.

Speaker Change #205: It sounds like you'll have some wrap around.

Speaker Change #187: June was a very strong month.

Speaker Change #187: We'll take our next question from Korinne Wolfmeyer with Piper Sandler.

Speaker Change #187: June was a very strong month.

Speaker Change #187: So you can imagine that when you couple these two together, even in a market that is pressured, mainly in drugstore chains, because in e-com, the brands that we are having are booming, in fact.

Speaker Change #187: So no specific news on this.

Speaker Change #187: So we anticipate beauty demand in mature markets to expand in the mid-single digits, including prestige fragrance growth above this range and mass beauty growth below this range.

Speaker Change #187: Lancaster ranked number four brand at Sephora, right after brands such as Drunk Elephant and Tatcha, and Lancaster ranks number eight on Douyin.

Speaker Change #187: Please, go ahead.

Speaker Change #187: Lancaster ranked number four brand at Sephora, right after brands such as Drunk Elephant and Tatcha, and Lancaster ranks number eight on Douyin.

Speaker Change #187: So it's not about mass beauty that is pressured.

Speaker Change #187: And again, on share, you know, repurchase, as I indicated, definitely we confirm our plan really to move towards, you know, 800 million share count really by end of fiscal 27.

Speaker Change #187: All of these supported by very, very strong econ, which is growing between two times, and more faster than the company.

Speaker Change #187: So the very unique positioning of Lancaster that is not a traditional skincare brand, that's not the usual DNA and stem cells and hyaluronic acid, blah, blah, blah, et cetera, it's all about photo protection and photo aging, is clearly strongly resonating in China.

Speaker Change #187: Hey.

Speaker Change #206: Pricing, but I'm also conscious you have some paper billy from manufacturing, I think, grace as well for filings.

Speaker Change #187: It's mass beauty in certain channels that explains the slowdown that we are seeing in some, I would say, retailer orders, etc.

Speaker Change #187: So this agenda is unchanged.

Speaker Change #187: So within this backdrop for the mature market, we are targeting to perform in line to ahead of the market.

Speaker Change #187: And you may see that this is becoming also a global phenomenon.

Speaker Change #187: Good morning, team.

Speaker Change #187: And you may see that this is becoming also a global phenomenon.

Speaker Change #187: So I believe that mass beauty continues to have a future, assuming that we are as nimble as innovative with a look and feel of prestige.

Speaker Change #187: Definitely, Velastake divestiture will be an opportunity even, you know, to do it faster.

Speaker Change #187: And at the same time, we target to do double digit percentage revenue growth in what we call growth engine markets. I'm thinking about Brazil, the rest of Latin, Mexico, Africa, Saudi Arabia to name a few, and high growth channels such as travel retail, which all together account for approximately a third of business.

Speaker Change #187: So to really summarize on what we are seeing in China is that we are going to continue to overdrive our fragrances, because this is where growth is coming from.

Speaker Change #187: Thanks for taking the question.

Speaker Change #187: So to really summarize on what we are seeing in China is that we are going to continue to overdrive our fragrances, because this is where growth is coming from.

Speaker Change #187: So this is number one.

Speaker Change #187: This is really what we are taking into account in the algorithm.

Speaker Change #187: So all of this will be support will support our fiscal 25 innovation pipeline on top.

Speaker Change #187: And we are readying our brands, Lancaster and also Orveda, for when the skincare market will be back on track, and we believe this will happen at a moment or another.

Speaker Change #187: I'd like to touch on the guidance, for the year and the cadence you've alluded to.

Speaker Change #187: And we are readying our brands, Lancaster and also Orveda, for when the skincare market will be back on track, and we believe this will happen at a moment or another.

[music].

Speaker Change #187: Number two, this U.S. market is one market among others in our equation, and we are really growing this division worldwide.

Speaker Change #187: So, so algorithm is unchanged and agenda remains the same.

Speaker Change #187: Thank you.

Speaker Change #187: Now, are we shifting resources from one market to the other?

Speaker Change #187: It seems like the back half is going to be fairly strong, and I would love to understand the level of visibility you believe you have into the back half of this fiscal year and what gives you confidence in those targets.

Speaker Change #187: Now, are we shifting resources from one market to the other?

Speaker Change #187: Rimmel has been gaining market share for the last two quarters globally, and we are accelerating, the same playbook behind Rimmel.

Speaker Change #187: We'll take our next question from Steve Powers with Deutsche Bank.

Speaker Change #187: We are constantly putting resources and ANCP and money where there is growth, you know.

Speaker Change #187: And then additionally, on the well estate, if there's any color you can provide on progress, there, any updates on conversations you've had with potential suitors to sell it off to, and then I believe you talked a little bit about share repurchases in the group prepared remarks.

Speaker Change #187: We are constantly putting resources and ANCP and money where there is growth, you know.

Speaker Change #187: Please, go ahead.

Speaker Change #187: And so, of course, there is growth behind prestige fragrances in China, so we are investing over there.

Speaker Change #187: So any commentary on updated thinking around share repurchases and capital allocation would be great.

Speaker Change #187: And so, of course, there is growth behind prestige fragrances in China, so we are investing over there.

Speaker Change #187: But there is also growth behind prestige fragrances in the US, and we are also investing heavily in this area, in the Middle East, in other regions where the company is seeing, I would say, a momentum.

Speaker Change #187: Thank you.

Speaker Change #206: And so can you just talk about what's going to be driving the expansion and maybe dimensionalize it for fiscal 25, how much.

Speaker Change #187: Thank you.

Speaker Change #187: Okay.

Speaker Change #187: Thank you.

Speaker Change #187: But we also have massive other areas of oxygen in the coming year, and should I say in the coming years.

Speaker Change #187: We'll take our next question from Ashley Helgans with Jeffrey's.

Speaker Change #187: Thank you, Korinne.

Speaker Change #187: We'll take our next question from Ashley Helgans with Jeffrey's.

Speaker Change #187: Please go ahead.

Speaker Change #187: So first on the guidance, so I mean, first of all, indeed, so we are, you know, confirming our midterm algorithm for fiscal 25, which is 6 to 8%. We are indicating as we flag during the last earnings call that, you know, sequential improvement, in Q1, which is around 6%, and then indeed, you know, moving to the 6 to 8% algorithm in H1 and then in H2.

Speaker Change #187: Please go ahead.

Speaker Change #187: Hey, good morning, and thanks for taking our question.

Speaker Change #187: I mean, the key reason, you know, about these sequences is also about comps.

Speaker Change #187: Hey, good morning, and thanks for taking our question.

Speaker Change #187: So you mentioned your Innovation, Center and being able to get products out more quickly.

Speaker Change #187: Can you remind us how fast you can get ideas onto shelf today and then what the goal is in the future?

Speaker Change #187: And then anything you can tell us about the promotional environment and kind of expectations on the promotional environment as we head into the holiday.

Speaker Change #187: Thanks.

Speaker Change #187: Yeah, good morning, Ashley.

Speaker Change #187: Thank you for the question.

Speaker Change #207: And whether you think this mid-tick these target was just starting point and now you're running ahead of it, maybe you have confidence in going farther specifically as you look to use pricing or premiumize more over time.

Laurent Mercier: And whether you think this mid-tick these target was just starting point and now you're running ahead of it, maybe you have confidence in going farther specifically as you look to use pricing or premiumize more over time. And then just connected, if I could, do you have an outlook for category growth for fiscal 25, maybe globally? Certainly we've heard from some of your beauty peers that there's been some deceleration of category growth into force.

Speaker Change #187: Indeed, you know, three years ago, maybe four years ago, when I joined the company, launches could take up to 18 months to two years, which is very, really too long for, you know, the world we're living in.

Speaker Change #187: We were already living in four years ago.

Speaker Change #187: Today, and we started to do it already.

Speaker Change #187: So it's something that could take between six to nine months.

Speaker Change #187: Wonderbone Mascara, the latest success from Rimmel, took us nine months.

Speaker Change #187: The launch of, Yummy Gloss from CoverGirl, it took us as quickly as six months, if I'm not wrong, including the platforming of this innovation on other brands.

Hum.

Speaker Change #187: So the question is not to go faster because six months is already super, super fast, because we need to fit also with retailers resetting of their shelves.

Speaker Change #187: And this is really something that is a kind of imperative that we need to fit in.

Speaker Change #187: But six months is very, very fast.

Speaker Change #187: [music].

Speaker Change #187: The idea is to do more launches in six months.

Speaker Change #187: So we already know how to do it.

Speaker Change #187: Now we are going to industrialize, if I may call it like this, our ability to put on the market launches in six months.

Speaker Change #187: And usually we are going to focus on areas that are not the traditional Coty R&D areas.

Speaker Change #187: Coty R&D is doing a lot in color cosmetics, but there are areas that are very, very technologically specific.

Speaker Change #187: And these are the areas that we intend to overdrive in the coming months and quarters so that we can have both speed, but also the quantity.

Speaker Change #207: And then just connected, if I could, do you have an outlook for category growth for fiscal 25, maybe globally?

Speaker Change #187: It's a war of attention. So you need to win this war of attention with the right surprising, exciting, innovative, and efficient products.

Speaker Change #187: Hum.

Speaker Change #187: Thank you.

Speaker Change #187: We'll take our next question from Mark Astrachan with Stiefel.

Speaker Change #187: Please go ahead.

Speaker Change #187: Yeah, thanks.

Speaker Change #187: And morning, afternoon, everyone.

Speaker Change #187: A couple of clarification questions.

Speaker Change #187: Okay.

Speaker Change #187: So, the retailer reordering commentary sounds more like it was on the color cosmetics.

Speaker Change #208: Certainly we've heard from some of your beauty peers that there's been some deceleration of category growth into force.

Speaker Change #187: Is that correct?

Speaker Change #187: And I guess if it is, how do you think about where channel inventories are from, a fragrance standpoint, thinking more on the prestige side and how you think about the puts and takes of what in-demand looks like and how does that factor into the high end and low end of your guidance for Fiscal 25?

Speaker Change #187: And then just also clarification, what's baked in from an, Argentina hyperinflation standpoint for the revenue growth for Fiscal 25?

Speaker Change #187: Hmm.

Speaker Change #187: Yeah.

Speaker Change #187: So definitely to answer, yeah, on, you know, retailer order management, yes.

Speaker Change #187: I mean, the point is mainly cosmetics.

Speaker Change #187: [music].

Speaker Change #187: I mean, the prestige category, fragrance category remains very dynamic.

Speaker Change #209: Still solid, but some sequential deceleration.

Laurent Mercier: Still solid, but some sequential deceleration. I wonder if you're seeing that too. Are you expecting stabilization or would you just expect to outperform category at a higher clip next year? So really, there's two questions there. One on gross margin and one on category growth. Thank you. Yeah, thank you Chris. So let me start with with got margin. Yeah, you're absolutely right. We are ahead, you know, your head of plan. So it means that all the actions we put in place.

Speaker Change #187: I mean, you saw the last numbers.

Speaker Change #187: I mean, prestige fragrance category in the U.S, is growing by 10% in July.

Speaker Change #210: I wonder if you're seeing that too.

Speaker Change #187: So definitely.

Speaker Change #187: And you know that U.S. fragrance category is 70% bigger versus pre-COVID.

Speaker Change #211: Are you expecting stabilization or would you just expect to outperform category at a higher clip next year?

Speaker Change #187: So definitely it's very healthy, very dynamic.

Speaker Change #187: And we are bringing again, you know, strong innovations and which resonates very well in the U.S. On Argentina, indeed, I indicated in Fiscal 24 that indeed due to hyperinflation, we really, implemented significant price increase.

Speaker Change #187: Now we are really modeling for Fiscal 25 more, you know, some stabilization.

Speaker Change #187: Uh huh.

Speaker Change #187: Okay.

Speaker Change #187: So there will be some impact, but not at the same level as we face in, Fiscal 24.

Speaker Change #187: Thank you.

Speaker Change #211: So really, there's two questions there.

Speaker Change #211: One on gross margin and one on category growth.

Speaker Change #187: Uh-huh.

Speaker Change #211: Thank you.

Speaker Change #211: Yeah, thank you Chris.

Speaker Change #212: So let me start with with got margin.

Laurent Mercier: I mean, delivered or even over delivered. So we are going to keep the same recipe into fiscal 25. So as I said, I mean, we will keep you know doing a targeted price increase. Definitely in our context where, you know, we see more moderate inflation on our cost of goods, but still again, we will keep using pricing as a labor to improve our gross margin. So then of course, mix, mix is a big driver.

Speaker Change #212: Yeah, you're absolutely right.

Speaker Change #213: We are ahead, you know, your head of plan.

Mhm.

Speaker Change #213: So it means that all the actions we put in place.

Speaker Change #187: [music].

Speaker Change #213: I mean, delivered or even over delivered.

Speaker Change #213: So we are going to keep the same recipe into fiscal 25.

Speaker Change #213: So as I said, I mean, we will keep you know doing a targeted price increase.

Speaker Change #187: Sure.

Speaker Change #187:

Speaker Change #214: Definitely in our context where, you know, we see more moderate inflation on our cost of goods, but still again, we will keep using pricing as a labor to improve our gross margin.

Speaker Change #187: Okay.

Speaker Change #187: [music].

Speaker Change #187: Okay.

Speaker Change #214: So then of course, mix, mix is a big driver.

Speaker Change #214: And I think we gave and we keep giving a lot of examples of premiumization and we do it across all divisions, all markets, all categories.

Laurent Mercier: And I think we gave and we keep giving a lot of examples of premiumization and we do it across all divisions, all markets, all categories. So this is a must and productivity. We continue, of course, our productivity initiatives. I mean, I shared that we continue to win program. Of course, we have plans next year, you know, for 75 million additional productivity. So it's part of productivity in our factories and volume, of course, is helping really through accelerators productivity.

Speaker Change #187: Okay.

Speaker Change #187: [music].

Speaker Change #187: Hum.

Speaker Change #187: [music].

Speaker Change #214: So this is a must and productivity.

Speaker Change #215: We continue, of course, our productivity initiatives.

Speaker Change #215: I mean, I shared that we continue to win program.

Speaker Change #187: Okay.

Speaker Change #215: Of course, we have plans next year, you know, for 75 million additional productivity.

Speaker Change #187: Hum.

Speaker Change #215: So it's part of productivity in our factories and volume, of course, is helping really through accelerators productivity.

Speaker Change #215: But it's also with procurement.

Laurent Mercier: But it's also with procurement. We are definitely, you know, scaling up the volumes indeed is giving us really some scale and power to negotiate a better price. And also we have a specific program to continue to simplify and really to rationalize our portfolio components. And again, fragrance is a good example when you heard from so that we are also accelerating mass fragrance. Here, of course, we are benefiting here from the scale of the prestige fragrance.

Speaker Change #215: We are definitely, you know, scaling up the volumes indeed is giving us really some scale and power to negotiate a better price.

Speaker Change #187: [music].

Speaker Change #215: And also we have a specific program to continue to simplify and really to rationalize our portfolio components.

Speaker Change #187: Yes.

Speaker Change #187: No.

Yes.

Speaker Change #187: Sure.

Speaker Change #216: And again, fragrance is a good example when you heard from so that we are also accelerating mass fragrance.

Speaker Change #216: Here, of course, we are benefiting here from the scale of the prestige fragrance.

Speaker Change #216: So it means that we can launch initiatives, which are already at a high high gross margin.

Laurent Mercier: So it means that we can launch initiatives, which are already at a high high gross margin. So we have the playbook. We continue and and definitely, I mean, the mid 60s is not the end game. So we will continue, definitely to go beyond the mid 60s with the same recipe and mix mix will be, of course, a big, big driver for this acceleration.

Speaker Change #216: So we have the playbook.

Speaker Change #216: We continue and and definitely, I mean, the mid 60s is not the end game.

Speaker Change #216: So we will continue, definitely to go beyond the mid 60s with the same recipe and mix mix will be, of course, a big, big driver for this acceleration.

Speaker Change #217: And let me take the second part, Laurent, which is around category growth, you know, what we are seeing.

Laurent Mercier: And let me take the second part, Laurent, which is around category growth, you know, what we are seeing. So entering fiscal 25, we have seen that the demand trends are remaining broadly consistent with what we saw in fiscal 24. At the same time, of course, we all have seen that prestige retailers, but also director retailers close the manage orders and inventory levels, which is resulting in a sellout that is tracking ahead of saline.

Speaker Change #218: So entering fiscal 25, we have seen that the demand trends are remaining broadly consistent with what we saw in fiscal 24.

Speaker Change #219: At the same time, of course, we all have seen that prestige retailers, but also director retailers close the manage orders and inventory levels, which is resulting in a sellout that is tracking ahead of saline.

Speaker Change #219: So we anticipate beauty demand in mature markets to expand in the mid single digits, including prestige fragrance growth above this range and mass beauty growth below this range.

Laurent Mercier: So we anticipate beauty demand in mature markets to expand in the mid single digits, including prestige fragrance growth above this range and mass beauty growth below this range. All of these supported very, very strong econ, which is growing between two times and more faster than the company. So within this backdrop for the mature market, we are targeting to perform in line to ahead of the market. And at the same time, we target to do double digit percentage revenue growth in what we call growth engine market.

Speaker Change #219: All of these supported very, very strong econ, which is growing between two times and more faster than the company.

Speaker Change #219: So within this backdrop for the mature market, we are targeting to perform in line to ahead of the market.

Speaker Change #220: And at the same time, we target to do double digit percentage revenue growth in what we call growth engine market. So I'm thinking about Brazil, the rest of Latin Mexico, Africa, Saudi Arabia to MSU and high growth channels such as travel retail, which all together accounts for approximately a third of coated business.

Laurent Mercier: So I'm thinking about Brazil, the rest of Latin Mexico, Africa, Saudi Arabia to MSU and high growth channels such as travel retail, which all together accounts for approximately a third of coated business. So all of this will be support, we'll support, sorry, our fiscal 25 innovation pipeline on top. Thank you.

Speaker Change #220: So all of this will be support, we'll support, sorry, our fiscal 25 innovation pipeline on top.

Speaker Change #220: Thank you.

Speaker Change #220: We'll take your next question from Steve Powers with Deutsche Bank.

Steve Powers: We'll take your next question from Steve Powers with Deutsche Bank. Please go ahead. Thank you very much. Good morning, Sue. Good morning, Laurent. Sue, picking up a little bit, I guess, on the idea of the growth engine market. I wanted to ask about China specifically. Obviously not your largest market, which is an advantage right now, but it has been a growth engine market for you in part of your long-term strategy. There's a couple of questions on that.

Speaker Change #221: Please go ahead.

Speaker Change #221: Thank you very much.

Speaker Change #222: Good morning, Sue.

Speaker Change #223: Good morning, Laurent.

Speaker Change #224: Sue, picking up a little bit, I guess, on the idea of the growth engine market.

Speaker Change #224: I wanted to ask about China specifically.

Steve Powers: One is what is your outlook for China this year? How are you planning for it? Two is given what I assume is a softer outlook on China. Are there specific growth engine markets? You just mentioned a few, but are there specific ones that you're reallocating investment dollars? Two, where you hope to make up some of the gap there. And then is anything you're seeing now in China altering your medium to long-term views on what that market represents in terms of a future opportunity? Thank you so much. Thank you, Steve. Good morning.

Speaker Change #225: Obviously not your largest market, which is an advantage right now, but it has been a growth engine market for you in part of your long-term strategy.

Speaker Change #225: There's a couple of questions on that.

Speaker Change #226: One is what is your outlook for China this year?

Speaker Change #226: How are you planning for it?

Speaker Change #226: Two is given what I assume is a softer outlook on China.

Sue Nabi: So first to answer the question around China, clearly we believe that fundamentally China is or will be one of the biggest, if not the biggest beauty market in the mid to the long term. So this is really something structural. And this is really has to do a lot with prestige market, I would say, that is going to continue to grow because this is culturally rooted in this country. Now what we are seeing now at the moment is that the negative growth trends specifically in skincare in China will continue probably in the coming quarters.

Speaker Change #226: Are there specific growth engine markets?

Speaker Change #226: You just mentioned a few, but are there specific ones that you're reallocating investment dollars?

Speaker Change #226: Two, where you hope to make up some of the gap there.

Speaker Change #226: And then is anything you're seeing now in China altering your medium to long-term views on what that market represents in terms of a future opportunity?

Sue Nabi: Prestige fragrances is really the bright spot in this country and I'll tell you a few words about the performance of the company. But let me just remember, remind everyone that the business of cutting China is still small, you know, it's around 3% of the revenues in fiscal 24. And at the same time, we are playing with two legs. So we are playing with the leg of prestige fragrances, which are really doing better than any other category and the adoption curve of Chinese consumers in terms of premium entry premium or niche fragrances is continuing to be at play.

Speaker Change #226: Thank you so much.

Speaker Change #226: Thank you, Steve.

Speaker Change #226: Good morning.

Speaker Change #227: So first to answer the question around China, clearly we believe that fundamentally China is or will be one of the biggest, if not the biggest beauty market in the mid to the long term.

Sue Nabi: And we have the right brands recently, the very Chloe or Kelvin Klein has been doing great on this market and at the same time, we are also pushing preparing for the skincare, I would say, growth that will inevitably be back in this country, starting with Lancaster, Lancaster has been doing a fantastic relaunch in China. We have seen great results. Lancaster is the fastest growing skincare brand in both the June quarter, with almost doubling the size of the brand and also in calendar 24 with the growth that is a triple digit growth, gaining 4 points of market share in year to day calendar year 24 June was very strong month, Lancaster ranked number 4 brand at Sephora, right after brand such as drunk elephant and that.

Speaker Change #227: So this is really something structural.

Speaker Change #227: And this is really has to do a lot with prestige market, I would say, that is going to continue to grow because this is culturally rooted in this country.

Sue Nabi: And Lancaster ranks number eight on doing so the very unique positioning of Lancaster that is not a traditional skin care brand that's not the usual DNA and stem cells and your unique acid, blah, blah, blah, etc. It's all about photo protection and photo aging is clearly strongly resonating in China and you may see that this is becoming also global phenomenon. So to really summarize on what we are seeing in China is that we are going to continue to override our fragrances because this is where growth is coming from and we are reading our brands, Lancaster and also Orveda for when the skincare market will be back on track and we believe this will happen at a moment or another.

Speaker Change #227: Now what we are seeing now at the moment is that the negative growth trends specifically in skincare in China will continue probably in the coming quarters.

Sue Nabi: Now are we shifting are we shifting resources from one market to the other. We are constantly putting resources and ANCP and money where there is growth you know and so of course there is growth behind the prestige fragrances in China. So we are investing over there, but there is also growth behind prestige fragrances in the US and we are also investing heavily in this area in the Middle East in other regions where the company is seeing I would say a moment.

Speaker Change #228: Prestige fragrances is really the bright spot in this country and I'll tell you a few words about the performance of the company.

Ashley Helgans: Thank you.

Speaker Change #229: But let me just remember, remind everyone that the business of cutting China is still small, you know, it's around 3% of the revenues in fiscal 24.

Speaker Change #229: And at the same time, we are playing with two legs.

Ashley Helgans: We'll take our next question from Ashley Helgans with Jeffries, please go ahead. Hey, good morning, and thanks for taking our question. So you mentioned your innovation center and, you know, being able to get products not more quickly.

Speaker Change #230: So we are playing with the leg of prestige fragrances, which are really doing better than any other category and the adoption curve of Chinese consumers in terms of premium entry premium or niche fragrances is continuing to be at play.

Ashley Helgans: Can you remind us how fast you can get ideas onto shelf today, and then what the goal is in the future? And then anything you can tell us about the promotional environment kind of expectations on the promotional environment as ahead of the holiday. Thanks. Yeah, good morning, Ashley. Thank you for the question. Indeed, you know, three years ago, maybe four years ago, and I joined the company. Launchers could take up to 18 to 18 months as to two years, which is very, really too long for, you know, the world we're living, we were already living four years ago.

Speaker Change #231: And we have the right brands recently, the very Chloe or Kelvin Klein has been doing great on this market and at the same time, we are also pushing preparing for the skincare, I would say, growth that will inevitably be back in this country, starting with Lancaster, Lancaster has been doing a fantastic relaunch in China.

Speaker Change #231: We have seen great results.

Speaker Change #232: Lancaster is the fastest growing skincare brand in both the June quarter, with almost doubling the size of the brand and also in calendar 24 with the growth that is a triple digit growth, gaining 4 points of market share in year to day calendar year 24 June was very strong month, Lancaster ranked number 4 brand at Sephora, right after brand such as drunk elephant and that.

Ashley Helgans: Today, and we started to do it already. So it's something that could take between six to nine months. Wonderburn and mascara, the latest success from email took us nine months. The launch of Yomigloss from cover girl, it took us as quickly as six months. If I'm not wrong, including the platforming of this innovation on other brands. So the question is not to go faster because six months is already super, super fast because we need to fit also with retailers resetting of their shelves.

Speaker Change #233: And Lancaster ranks number eight on doing so the very unique positioning of Lancaster that is not a traditional skin care brand that's not the usual DNA and stem cells and your unique acid, blah, blah, blah, etc.

Speaker Change #234: It's all about photo protection and photo aging is clearly strongly resonating in China and you may see that this is becoming also global phenomenon.

Speaker Change #235: So to really summarize on what we are seeing in China is that we are going to continue to override our fragrances because this is where growth is coming from and we are reading our brands, Lancaster and also Orveda for when the skincare market will be back on track and we believe this will happen at a moment or another.

Speaker Change #235: Now are we shifting are we shifting resources from one market to the other.

Speaker Change #235: We are constantly putting resources and ANCP and money where there is growth you know and so of course there is growth behind the prestige fragrances in China.

Speaker Change #235: So we are investing over there, but there is also growth behind prestige fragrances in the US and we are also investing heavily in this area in the Middle East in other regions where the company is seeing I would say a moment.

Ashley Helgans: And this is really something that is a kind of imperative that we need to fit in. But six months is very, very fast. The idea is to do more launchers in six months. So we already know how to do it. Now we are going to industrialize, if I may call it like this, our ability to put on the market launchers in six months. And usually we are going to focus on areas that are not the traditional cutie, R&D areas, you know, cutie R&D is doing a lot in color cosmetics.

Speaker Change #235: Thank you.

Speaker Change #236: We'll take our next question from Ashley Helgans with Jeffries, please go ahead.

Speaker Change #237: Hey, good morning, and thanks for taking our question.

Speaker Change #238: So you mentioned your innovation center and, you know, being able to get products not more quickly.

Speaker Change #239: Can you remind us how fast you can get ideas onto shelf today, and then what the goal is in the future?

Speaker Change #239: And then anything you can tell us about the promotional environment kind of expectations on the promotional environment as ahead of the holiday.

Ashley Helgans: But there are areas that are very, very technologically specific. And these are the areas that we intend to over drive in the coming months and quarters so that we can have both, you know, speed. But also the quantity. It's a war of attention. So you need to win this war of attention with the right surprising, exciting, innovative, and efficient products. Thank you.

Speaker Change #239: Thanks.

Speaker Change #240: Yeah, good morning, Ashley.

Speaker Change #240: Thank you for the question.

Mark Astrachan: We'll take our next question from Mark Astroshan with Steve. Please go ahead. Yeah, thanks. And morning afternoon everyone. A couple of clarification questions. So the retailer reordering commentary sounds more like it was on the color cosmetics. Is that correct? And I guess if it is, how do you think about what channel inventories are from a fragrance standpoint, thinking more on the prestige side. And how do you think about the puts and takes of what in demand looks like and how does that factor into the high and low end of your guidance for fiscal 25 and then just also clarification.

Speaker Change #240: Indeed, you know, three years ago, maybe four years ago, and I joined the company.

Speaker Change #241: Launchers could take up to 18 to 18 months as to two years, which is very, really too long for, you know, the world we're living, we were already living four years ago.

Speaker Change #241: Today, and we started to do it already.

Speaker Change #242: So it's something that could take between six to nine months.

Mark Astrachan: What's baked in from an Argentina hyperinflation standpoint for the revenue growth for fiscal 25. Yeah, so definitely to answer you on, you know, a retailer or the management. Yes, I mean, the point is is mainly cosmetics. I mean, the prestige category fragrance category remains very dynamic. I mean, you saw the last numbers. I mean prestige fragrance category in the US is going by 10% in July. So definitely. And you know that US fragrance category is 70% bigger versus versus pre COVID.

Speaker Change #242: Wonderburn and mascara, the latest success from email took us nine months.

Speaker Change #243: The launch of Yomigloss from cover girl, it took us as quickly as six months. If I'm not wrong, including the platforming of this innovation on other brands.

Speaker Change #243: So the question is not to go faster because six months is already super, super fast because we need to fit also with retailers resetting of their shelves.

Speaker Change #243: And this is really something that is a kind of imperative that we need to fit in.

Speaker Change #244: But six months is very, very fast.

Speaker Change #244: The idea is to do more launchers in six months.

Speaker Change #244: So we already know how to do it.

Mark Astrachan: So definitely it's very healthy, very dynamic. And we are bringing again, you know, strong innovations and which resonate very well in in the US. For on Argentina, indeed, I indicated in fiscal 24 that indeed due to hyperinflation, we really implemented significant price increase. Now we are really modeling for fiscal 25 more, you know, some stabilization. Okay, so they will be some impact, but not at the same level as we face in fiscal 24.

Speaker Change #245: Now we are going to industrialize, if I may call it like this, our ability to put on the market launchers in six months.

Speaker Change #245: And usually we are going to focus on areas that are not the traditional cutie, R&D areas, you know, cutie R&D is doing a lot in color cosmetics.

Speaker Change #245: But there are areas that are very, very technologically specific.

Speaker Change #245: And these are the areas that we intend to over drive in the coming months and quarters so that we can have both, you know, speed. But also the quantity.

Speaker Change #245: It's a war of attention. So you need to win this war of attention with the right surprising, exciting, innovative, and efficient products.

Speaker Change #245: Thank you.

Unknown Executive: And there are no further questions at this time. I'll turn the call back to soon. I'll be for any closing remarks. Thank you very much. So looking forward to talk to you at the end of Q1. Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time. Thank you very much.

Speaker Change #246: We'll take our next question from Mark Astroshan with Steve.

Speaker Change #246: Please go ahead.

Speaker Change #246: Yeah, thanks.

Speaker Change #246: And morning afternoon everyone.

Speaker Change #247: A couple of clarification questions.

Speaker Change #248: So the retailer reordering commentary sounds more like it was on the color cosmetics.

Speaker Change #249: Is that correct?

Speaker Change #250: And I guess if it is, how do you think about what channel inventories are from a fragrance standpoint, thinking more on the prestige side.

Speaker Change #250: And how do you think about the puts and takes of what in demand looks like and how does that factor into the high and low end of your guidance for fiscal 25 and then just also clarification.

Speaker Change #251: What's baked in from an Argentina hyperinflation standpoint for the revenue growth for fiscal 25.

Speaker Change #251: Yeah, so definitely to answer you on, you know, a retailer or the management.

Speaker Change #251: Yes, I mean, the point is is mainly cosmetics.

Speaker Change #251: I mean, the prestige category fragrance category remains very dynamic.

Speaker Change #251: I mean, you saw the last numbers.

Speaker Change #251: I mean prestige fragrance category in the US is going by 10% in July.

Speaker Change #251: So definitely.

Speaker Change #251: And you know that US fragrance category is 70% bigger versus versus pre COVID.

Speaker Change #251: So definitely it's very healthy, very dynamic.

Speaker Change #251: And we are bringing again, you know, strong innovations and which resonate very well in in the US.

Speaker Change #251: For on Argentina, indeed, I indicated in fiscal 24 that indeed due to hyperinflation, we really implemented significant price increase.

Speaker Change #251: Now we are really modeling for fiscal 25 more, you know, some stabilization.

Speaker Change #251: Okay, so they will be some impact, but not at the same level as we face in fiscal 24.

Speaker Change #251: And there are no further questions at this time.

Speaker Change #252: I'll turn the call back to soon.

Speaker Change #253: I'll be for any closing remarks.

Speaker Change #253: Thank you very much.

Speaker Change #254: So looking forward to talk to you at the end of Q1.

Speaker Change #254: Thank you.

Speaker Change #255: This does conclude today's program.

Speaker Change #255: Thank you for your participation.

Speaker Change #255: You may disconnect at any time.

Speaker Change #255: Thank you very much.

Q4 2024 Coty Inc Earnings Call - Q&A

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