Q1 2025 Coty Inc Earnings Call - Q&A
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Speaker Change: If you need assistance during your conference today, Please press Star zero.
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Speaker Change: Good morning, and good afternoon, everyone.
Angela: Good morning and good afternoon everyone. My name is Angela and I'll be your conference operator today.
Angela: My name is Angela and I'll be your conference operator today.
Angela: At this time I would like to welcome everyone to <unk> first quarter fiscal 'twenty 'twenty five question and answer conference call.
Angela: At this time, I would like to welcome everyone to CODI's first quarter fiscal 2025 question and answer conference call.
Angela: As a reminder, this conference call is being recorded today November 7th 2024 at 10 30, a M eastern time or 430 P M Central European time.
Angela: As a reminder, this conference call is being recorded today, November 7, 2024, at 1030 a.m. Eastern Time or 430 p.m. Central European Time.
Angela: Please note that on November 6th at approximately 430 P M Eastern time.
Angela: Please note that on November 6th at approximately 4.30pm Eastern Time or 10.30pm Central European Time, COTI issued a press release and prepared remarks webcast, which can be found on its Investor Relations website.
Angela: Or 10, 30 P M Central European time, Coty issued a press release and prepared remarks webcast, which can be found on its investor relations website.
Angela: On today's call are Sunobe, Chief Executive Officer, and Laura Mercier, Chief Financial Officer.
Angela: On today's call are Sue Nabi, Chief Executive Officer, and Laurent Mercier, Chief Financial Officer.
Speaker Change: I would like to remind you that many of the comments today may contain forward looking statements.
Angela: I would like to remind you that many of the comments today may contain forward-looking statements.
Angela: Please refer to <unk> earnings release, and the reports filed with the SEC, where the company lists factors that could cause actual results to differ materially.
Angela: Please refer to Cody's earnings release and the reports filed with the SEC, where the company lists factors that could cause actual results to differ materially from the forward-looking statements.
Angela: From the forward looking statements.
Angela: In addition.
Angela: Except where noted.
Angela: The discussion of <unk> financial results and Toadies expectations reflect certain adjustments as specified in the non-GAAP financial measure section.
Angela: All of the Companys release.
Speaker Change: With that we will now open the line for questions.
With that, we will now open the line for questions.
Angela: At this time, if you would like to ask a question. Please press star one on your telephone keypad. Once again that is star one to ask a question.
Angela: At this time, if you would like to ask a question, please press star 1 on your telephone keypad. Once again, that is star 1 to ask a question. We will pause for a moment to allow questions to queue.
Angela: We will pause for a moment to allow questions to queue.
Speaker Change: We'll go first to Ashley Higgins with Jefferies. Please go ahead.
Angela: We'll go first to Ashley Helgens with Jefferies. Please go ahead.
Speaker Change: Hi, This is sidney on for Ashley and thank you for taking our question I was just wondering can you talk about the channel shift and outperformance online do you expect to see a continued shift and do you feel that there is a higher level of trust for consumers to purchase online from platforms like Amazon. Thank you.
Angela: Hi, this is Sydney on for Ashley. Thank you for taking our question. I was just wondering, can you talk about the channel shift and outperformance online? Do you expect to see a continued shift? And do you feel that there's a higher level of trust for consumers to purchase online from platforms like Amazon? Thank you.
Sue Nabi: Andrew This is sue.
Angela: Good morning Sidney, this is Sue. So indeed you're absolutely right to point out who online as one of the outperformers of the company.
Angela: So indeed, you're absolutely right to point out the online as one of the outskirts somewhere else at the company today.
Angela: Today. This is this has become almost the biggest chardonnay for Gucci.
Speaker Change: As a.
Speaker Change: As the Chairman said he could you in the company and this indeed is a huge by retailers just gotten better so by Amazon Com and pure players also are that are acting on the beauty segment. So we believe this is has to do a lot and we had discretion are ready I think.
Angela: as a channel for the Coty Inc. Company and this indeed is fueled by retailers.com but also by amazon.com and pureplayers also that are acting on the beauty segment.
Angela: We believe this has to do a lot, and we had this question already, I think, in a previous earnings call. It has a lot to do with the fact that a lot of Gen Zs, a lot of younger consumers,
Angela: This earnings call. It has a lot to do with the fact that a lot of Gen Z consumers.
Angela: Connecting online with their friends with their communities with their favorite Influencers.
are connecting online with their communities, with their favorite influencers.
Angela: Doctors have advocacy musketoon and therefore, therefore, the conversion online between the advocacy ecosystem on one side on which by the way the company hasn't been doing deep progression now say a few words about pacing it to internet. So the conversion from this ecosystem of advocacy online.
Angela: Hence the importance of advocacy marketing and therefore, therefore, the conversion online between the advocacy ecosystem on one side on which by the way, the company has been doing big progress and a few words about this in two minutes.
So, the conversion from this ecosystem of advocacy online.
Angela: Two our sales online is the most natural and the most obvious impact. So that's the reason why we believe this online China can only grow and by the way. This is one of the regions, but we are also seeing disruptions in the mass channel, but also on all the channels around the world because a lot of consumers today.
Angela: To a sales online is the most natural and the most obvious in fact, so that's the reason why we believe
Angela: This online channel can only grow and by the way, this is one of the regions
Angela: We are also seeing disruptions in the mass channel, but also on other channels around the world because a lot of consumers have been exposed to it.
Angela: Using the committee the conveniences salary of shopping online.
Speaker Change: Today I'm using the convenience of shopping online. Coming now to Coty, you've seen that we've been working hard since two years and a half now to put in place a playbook which we started to implement behind Remail and CoverGirl.
Speaker Change: Now to could you you've seen that.
Speaker Change: We have been working hard since the two years and the highest now to put in place a playbook, which we started to implement behind our remit uncovered girl.
Speaker Change: With results that you have seen in our.
Speaker Change: with results that you have seen in our prepared remark presentation that are outstanding. Number four for both brands, 40% of growth for Rimmel, 80% of growth for CoverGirl. And this is exactly what we were working on. So remember, repositioning the brands.
Speaker Change: Prepared remarks presentation that the outstanding than before for both brands, 40% of growth for email, 80% of them North real cut again and this is exactly what we were working on so remember repositioning the brands.
Speaker Change: <unk> predicts that has the ability to realize.
creating products that have the ability to viralize.
Speaker Change: In place an ecosystem that surround advocacy marketing retail marketing the retail marketing sorry, and this explains our hotel settlements and the outperformance of the online channel in the U S, but not only in the U S. It's happening all around the world.
Speaker Change: putting in place an ecosystem that surrounds advocacy marketing, retail marketing, retail.com marketing, sorry. This explains our outperformance and the outperformance at large of the online channel in the U.S., but not only in the U.S., it's happening all around the world.
Speaker Change: Yes.
Thank you. Thank you.
Speaker Change: We'll go next to Robert <unk> with Evercore ISI.
We'll go next to Robert Ottenstein with Evercore ISI.
Speaker Change: Great. Thank you very much I'm I'm picking up through some of the emails I'm getting from investors that there may be some confusion.
Speaker Change: Great, thank you very much. I'm picking up through some of the emails I'm getting from investors.
Speaker Change: that there may be some confusion in some of your commentary.
Speaker Change: And in some of your commentary.
Speaker Change: About the medium term outlook that somehow maybe it's changed the algorithm has changed either.
Speaker Change: about the medium-term outlook, that somehow maybe it's changed or the algorithm has changed.
Speaker Change: either explicitly or implicitly. So there's just some confusion there. So I was wondering if maybe you could just kind of, you know, reinforce what is the message, what is the outlook? Is there any real change that's going on here? Thank you very much.
Speaker Change: You're implicitly so there's just some confusion there. So I was wondering if maybe you could just kind of reinforce what is the message. What is the outlook is is there any real change thats going on here.
Speaker Change: You very much.
Speaker Change: Thank you very much for your for your for your question. So in fact, the reality is that we are continued to stay and see that the beauty market medium term growth will be around 3% to 5%. We continue to see Gucci outperforming these levels of growth for the beauty market.
Speaker Change: Thank you very much for your question. So, in fact, the reality is that we continue to say and see that the beauty market medium-term growth would be around 3 to 5 percent.
Speaker Change: We continue to see Coty outperforming these levels of growth for the beauty market.
Speaker Change: And we continue to see a steady growth for our gross margin for our EBITDA margin and our EPS growth. So this is really to say it again and again. This is really what we are seeing and we believe this fiscal 'twenty four is a transition year, mainly due to all the change is mainly channel.
Speaker Change: and we continue to see a steady growth for our growth margin, for our EBITDA margin and our EPS growth.
Speaker Change: This is really to say it again and again, this is really what we are seeing, and we believe this fiscal 24 is a transition year.
Speaker Change: <unk> and changes that are happening in consumers' shopping behaviors, including you know the question that just had recently on the online performance and by the way where could she is gaining market share in both divisions. So this year, we believe he's a transition year, but once this transition and the different blocks will be in place.
Speaker Change: and changes that are happening in consumers shopping behaviors including you know the question I just had recently on the online performance and by the way where coach is gaining market share in both divisions so.
Speaker Change: This year, we believe, is a transition year, but once this transition and the different blocks will be in place all around the world, but also in the U.S.
Speaker Change: Around the world, but also in the U S. The 3% to 5% medium term vision for the beauty market, which we believe is going to continue to be the most resilient.
Speaker Change: The 3-5% medium-term vision for the beauty market, which we believe is going to continue to be the most resilient.
Speaker Change: Our market among all industries are going to give us this ability to have the full confidence in our fiscal 'twenty size profit delivery and free cash flow and therefore looking at shareholder returns and of course continue with deleveraging of the company.
Speaker Change: All this is kind of in 26 26 and beyond the growth drivers such as you know new licenses. We are we are about to announce a new signature in the coming weeks or months as a skin care is a new category new regions and we were very wise to not bet on one country.
Speaker Change: To open the scope to many different regions, namely you know our what we call growth engines regions. All these together plus fragrances, which is the number one growth driver of the company and now extending to a premium or we have a huge amount of white space, but also to mass fragrance says what we have also as.
Speaker Change: With a huge amount of white space, including in terms of renewal.
Speaker Change: Renewed profitability for the consumer Beauty Division. This is what gives us this confidence.
Speaker Change: We are going to continue to deliver on our commitments now or maybe you want to add something that's.
Speaker Change: No I'm, absolutely also we need to build on nonsense commence or a different number one.
Speaker Change: I mean, the sneaky full confidence.
Speaker Change: <unk> did well.
Speaker Change: And question is could <unk> be the number one and Disney T that we improved our EBITDA margin. This year close to 100 basis point, he's going to bring our EBITDA margin close to 19%. So it means that teams over last three four years. In fact, we are growing our EBITDA margin will go.
Speaker Change: 250 basis points and indeed looking ahead.
Speaker Change: We continue to perform as of yet.
Speaker Change: Market and we continue to improve our gross margin and EBITDA margin.
Speaker Change: The actions that we are we are putting in place some difficulty or delivers in terms of gross margin as we have deployed.
Speaker Change: And over the last year now we are above 65% and we're gonna continue thanks to all the actions in terms of productivity mix pricing and also we are working definitely on to continue to optimize our G&A and he's exactly what type of shell hearings are quarters that we are accelerating.
Speaker Change: Oh productivity initiatives, we have already a lot of actions in pipe and we are doing.
Speaker Change: Some new initiatives and as usual I mean.
Speaker Change: Could he is demonstrating.
Speaker Change: <unk> teams, we need it.
Speaker Change: We exceeded our Rockies.
Speaker Change: So indeed, it means that we just couldn't coincidence the algorithm on all metrics.
Speaker Change: P&L and balance sheet.
Speaker Change: Yeah.
Speaker Change: And by the way should add that we are continuing to outsource some.
Speaker Change: All of our.
Speaker Change: Comparative peers, you've seen this in the last nine out of the last 13 quarters.
Speaker Change: This is really what we intend to continue to do.
Speaker Change: We'll go next to Corinne will fire with Piper Sandler.
Speaker Change: Hey, good morning, Thanks for taking my question.
Speaker Change: To hear a little bit about some of the early signals that you've seen here in fiscal Q2 from a style perspective.
Speaker Change: Both mass and prestige any color you can give.
Speaker Change: What youre seeing between sell in versus sell out differentially.
Speaker Change: How youre thinking about that for the remainder of the year.
Speaker Change: Additionally, as we talk about as you think about your partners.
Speaker Change: Various retail partnerships.
Speaker Change: Are you viewing the rescue.
Speaker Change: As we head into.
Speaker Change: To the back half of the year.
Speaker Change: Ashley.
Speaker Change: Some of them are right sizing their store fleet.
Speaker Change: Thanks.
Speaker Change: Yeah. Thank you. Thank you for calling for a follow up question. So I mean first of all let me remind medium.
Speaker Change: Q1.
Speaker Change: So indeed, I mean, we indicated a few weeks ago that we would be between four and 5%. So what's very important to number one is as you can see I mean, we are over performing most of our peers. So I mean again, it's a clear demonstration that even in a volatile environment Cookie continues.
Speaker Change: So that's really a very important number two which I really want to highlight is also on the high days from last year.
Speaker Change: Remember last year I mean, we are growing at 18% when eight and prestige was ranked 22%. So so it shows again, what we ship to see what Tammy is that last year, we had any significant gross things to go days, but we are able really to bring some incremental growth.
Speaker Change: On these high base. So as you see very important again to at least in mind. So now you can go a little deeper we indicated indeed that too in Q1 and some of our peers also indicated that some retailers are indeed the oh.
Speaker Change: TCP keeps some oh fragrance gift sets all during so indeed, so easily.
Speaker Change: And so driving some acceleration in the.
Speaker Change: In prestige and Ucs at prestige growing.
Speaker Change: 7% prestige fragrance grew by 9% in Q1. So there is different T. Now moving from Q1 to Q2 is.
Speaker Change: This phasing impact on <unk>. So just in terms of why we are indicating an inkjet held steady on fragrance Institute wood.
Speaker Change: It would be low awareness is a sellout the diff Nicky on the H one each.
Speaker Change: Mutual.
Speaker Change: If you keep a decent lithium prestige and <unk> category remains very healthy we have very strong initiatives, we've taught them at different.
Speaker Change: Speed.
Speaker Change:
Speaker Change: Nissan.
Speaker Change: The acceleration.
Speaker Change: Additionally, these every year head C D.
Speaker Change: The equation on prestige consumer beauty Sneaky, we see Q2 same pattern as Q1.
Speaker Change: All the headwinds that we described seeing some retailers that are either.
Speaker Change: King.
Speaker Change: Be very tight.
Speaker Change: On the inventory and cash management, we see pattern continuing definitely in Q2.
Speaker Change: Is that.
Speaker Change: Watson providing no.
Speaker Change: A question for.
Speaker Change: Q2.
Speaker Change: And definitely we have seen young ones very importantly that we are we are not very exposed to a major retailer channel.
Speaker Change: So we are seeing a low single digit to mid single digits in U S. Low single digits in U S Department stores, and low single digit percentage for both China and travel retail.
Speaker Change: So we will bring <unk> to the same level of growth as we have the next one.
Speaker Change: Okay.
Speaker Change: We'll go next to Ana <unk> with Bank of America.
Speaker Change: Hi, good morning, and thank you so much for the question I was wondering if you could talk a bit about the broader vision for Coty at this point where are you at now in terms of executing on your six strategic initiatives that you outlined about three years ago and just how would you rank your progress on each at this point and then also with the lower.
Speaker Change: Expected growth going forward or more normalized growth are you still expect it to be.
Speaker Change: Track here with your deleveraging goals. Thank you.
Speaker Change: I'm going to start the answer and maybe the only you can complement on the deleveraging path.
Speaker Change: Again, the vision is unchanged each division we have presented to all of you are in.
Speaker Change: In 2021 for 2021, which was about number one at that time, it was about to stabilizing and growing the consumer beauty division, which we are doing I can tell you that the color cosmetics results were hiding behind our key brands such as cut out again.
Speaker Change: Very very good in fact, if you look at what's happening in the U S market.
Speaker Change: You've seen it in the slides of the presentation is the only brand among traditional heritage brand that.
Speaker Change: Is almost stable on an omnichannel basis versus a.
Speaker Change: As to name them.
Speaker Change: We have.
Speaker Change: If we zoom in and this was done by a bell curve I think recently on that.
Speaker Change: Did that that's a numerator the two on the brands that are growing at Amazon and target are indeed ends and cut off again and all the others are losing and some of them are losing quite big so the contract that I shared with you two years ago, which is to say we are going to six these brands, we are going to put them back to growth after stability.
Speaker Change: He is exactly what is happening right now and you can expect an acceleration because we are not only implementing this playbook in bigger.
Speaker Change: We mastered the way to do it now we are going to put the news behind it but also we are plugging in agile beauty, which is something new that we've been working on since 18 months is now testing here and there on different brands had to make it happen to allow us to really be set the level of innovation from this division.
Speaker Change: Specifically behind color cosmetics second thing Steve on the number one priority, which is around diversifying the division into other categories and this is happening behind mass fragrances, which are growing double digits in 'twenty four and 'twenty five.
Speaker Change: Expect it to grow in 'twenty five double digit interest with any type of course. So that's the number one point number two point is around prestige, where we have explained that we will not only accelerate with diversify our prestige fragrance business. We have done it I have to say in an outstanding way putting on the market for blood.
Speaker Change: Busters and the last fiscal year goodness.
Speaker Change: Katy Cosmic Marc Jacobs, Daisy Wild Hugo boss at Ixia, and many more to come in the coming quarters I have to say without revealing anything to our competitors. So this was done and we started this first steps into niche fragrances.
Speaker Change: <unk> with the creation of an in house brand name on Kochi Parry, who stop is very very good number two adding two other legs to this prestige division. The first one is part of cosmetics, which is I would say around 3% to 4% of the net revenues of the company and this is thanks to of course.
Speaker Change: Can you make up the other he makeup KD cosmetics, but we are also preparing a big launch behind Marc Jacobs beauty, that's going to give us this ability to have a could you have slashed indie brand positioning inside our portfolio and number three skincare and we are continuing to play on the marathon of skincare electric.
Speaker Change: With the three brands that are all progressing.
Speaker Change: In the right direction changes happen in the meantime, because China that was supposed to be the growth engine behind these skincare brands is not anymore. The growth engine. It used to be that changes here and there we are adapting our strategy to make at the company very resilient, so but skincare brands, we are playing with the positioning of the brands.
Speaker Change: The productivity, we're seeing behind each and every brand is increasing and this is exactly what we were looking for so the strategy around the two divisions. He's ceded about still delivering results and that's what we have seen us doing this cluster in an.
Speaker Change: He may have been the two grants that which is the most with a stable market share in their homelands answer on consumer beauty, but also as the offset it's a continued growth of our prestige fragrance business, 9% of growth on top of a 22% of growth last year. This I have to say is an outstanding result.
Speaker Change: At least it's chandos he come I've commented on E com at the very beginning of the Q&A I've commented, we haven't commented yet on travel retail, which has been growing very very fast in the last I would say two years today. There is a disruption happening mainly in Korea and in China in the Asian countries.
Speaker Change: The two other centers of how retail is doing very very well. So what are all these on top of the geographic diversification. So with the normalization of the growth are we still on track with the deleveraging path and then give the answer to it all.
Speaker Change: Absolutely so let's be very key I'll daily Virginia agenda.
Speaker Change: I'll keep repeating of repeated many times at <unk>.
Speaker Change: Number one therapies easily deleveraging the company and where we are on track as usual end of Q1 I mean, we are you know the old terms below.
Speaker Change: Sure. So as you can.
Speaker Change: Okay.
Speaker Change: So great progress and indeed, even unit.
Speaker Change: Tight inventory management that we with shell by retailers, which is adding some oh, if we're lucky.
Speaker Change: For timing I mean, we are absolutely on track to achieve calendar year 'twenty four leverage below three times and we continue to target leverage close to two five times exiting calendar 2000, and then second we absolutely confirm.
Speaker Change: Moving towards two times leverage ratio end of calendar 'twenty five so again, we have quarterly reviews, all the actions in place and <unk> is not.
Speaker Change: Continuum, Amy <unk> divestiture.
Speaker Change: So it means that now.
Speaker Change: 12 months I mean, as a company will be with the leverage ratio at two times and <unk>. What you saw from the rating agencies with CMS.
Speaker Change: He will then.
Speaker Change: Consequently.
Speaker Change: Great translating that Jason so indeed, absolutely on track for the delivery.
Speaker Change: We'll go next to Oliver Chen with TD Cowen. Please go ahead.
Oliver Chen: Hi, Sue and Laura holiday remains key to second half how are you planning this year versus prior years and what do you expect for the holiday given a lot of the dynamics you've spoken to.
Oliver Chen: And I know you had a lot of great comments on what's happening in prestige fragrance earlier, but what are your thoughts on the moderation in the normalization and you know as you do anniversary Fairbury goddess.
Oliver Chen: Some of your your main innovation catalysts, there and finally and third the demand planning program sounds very good just what's ahead with that and also the opportunity and managing the risk as you implement that program as well.
Oliver Chen: Yeah.
Speaker Change: Yeah, absolutely. Thank you Oliver so definitely I mean, we indicated and use those are numbers that means a prestige category remains very healthy and very dynamic I mean really we are in.
Speaker Change: You see the market category and the category has grown by 10%. So it is.
Oliver Chen: He is very very important that we see.
Oliver Chen: These are the fragrance category as we speak so the fragrance Invega <unk> credit so many times.
Oliver Chen: Please so decently what we are seeing is the reason that we are very confident.
Oliver Chen: This season.
Oliver Chen: And we are again very stronger munitions, you, so <unk> sort of been barely grew by 17%.
Oliver Chen: Q1, so it means that if he keeps the momentum that we are on good very good days now.
Oliver Chen: During today's intense there he will.
Oliver Chen: And in the homeland.
Oliver Chen: <unk> is really up to speed and we have very strong plans on clearly really strong innovation, which is really off to a very very good start we accelerate also the innovation that we launched last year and see comparison.
Oliver Chen: <unk> wild.
Oliver Chen: Eco sneaks exclusives, there is really no.
Oliver Chen: A long list of innovations, which are used to copied and at <unk>, where there is no very good.
Oliver Chen: Positive momentum from the from the retailers and to consumers.
Oliver Chen: So.
Oliver Chen: You mentioned that some of which are key to pursue.
Oliver Chen: Number one I'd say for now.
Oliver Chen: We are expanding to food distribution.
Oliver Chen: So again very very important to see that.
Oliver Chen: And we keep growing in penetration.
Oliver Chen: And we are also we are doing some new.
Oliver Chen: New markets I mean, our growth engines market also accelerating.
Oliver Chen: On price discounts, but as usual so we had some loans from selection or it can be done in the consumer beauty segment of these physicians also differently.
Oliver Chen: So that's really today with the SEC.
Oliver Chen: We are seeing.
Oliver Chen: Category and are set out on an.
Oliver Chen: Indeed in Q2.
Oliver Chen: Second question, which is the.
Oliver Chen: Our new demand planning program. So absolutely I mean, this is a program that.
Oliver Chen: We stopped keeping a while ago and we are currently in.
Oliver Chen: Full implementation so.
Oliver Chen: As I indicated is really that we.
Oliver Chen: Two hubs into one global lending hub, which is there.
Oliver Chen: Based in industrial.
Speaker Change: Can't tell you that she knows there are a lot of benefits by doing this.
Speaker Change: Number one is different is that we are using technology.
Speaker Change: We improved significantly our forecast and our systems.
Speaker Change: <unk> knowledge technology, leveraging AI in one other.
Speaker Change: In <unk>, we have a clear control tower on planning and this will bring significant savings in terms of cost number one but also when we are improving forecast accuracy.
Oliver Chen: Immediately state from what we described several times, which we're calling excess and obsolescence excess and obsolescence really win.
Speaker Change: You have.
Speaker Change: You mentioned centuri, because you build too much inventory on the Skus and slide two which are well over forecasted is becoming yourselves in terms of cash.
Oliver Chen: So you see a reduced significantly but arguably the hampden.
Oliver Chen: Also to make sure that when we are.
Speaker Change: Great innovation great start.
Speaker Change: So, including Seleucidan kiosk service level and by doing this is going to optimize our net revenue and also comment on gross margin and also improves our collaboration with our retailers as a result, <unk> dimension is that by doing this we are also now improving.
Speaker Change: CMS relation with with retailers. So we will keep you posted on that progress, but you wouldn't see a promoted a decent increase this is a beginning but there will be a lot of the knock on effect positive effect from the new approach a new way of working.
Speaker Change: We'll go next to Andrea Teixeira with J P. Morgan.
Speaker Change: Yeah.
Speaker Change: Hi, This is Sean <unk> on for Andrea Thank you for taking our question.
Speaker Change: We wanted to ask you about can you. Please.
Speaker Change: Can you. Please proceed out how much of your three corporate center telecom growth in the second half with from actual underlying.
Speaker Change: Presentations.
Speaker Change: Q2 easier comps as compared to the club.
Speaker Change: And how much confidence do you have any update on outlook for second half given that it's really become so much a factor slide retailer.
Speaker Change: Retailer inventory levels exiting the holidays.
Speaker Change: No.
Speaker Change:
Speaker Change: We are assuming that fiscal third quarter may have more sales as consumers hunkered down.
Speaker Change: During the holidays.
Speaker Change: And of course.
Speaker Change: Consumers have been challenged for some time okay.
Andreas: Yes, Thank you Andreas.
Andreas: Q.
Speaker Change: Two were in mind on H two.
Speaker Change: The ones that in terms of pricing.
Speaker Change: Definitely key each one is benefiting from a pricing effect, which is carryover.
Speaker Change: From the Muslim price increase we implemented last year.
Speaker Change: As Gary yogurt, and he's going to fade away niche so it accounts for about two points each.
Speaker Change: You want to compare <unk> <unk> to two <unk>. One so that's number one number two I want also to remind that last year, especially in prestige I mean, we made some big launches.
Speaker Change: Q3, and Q4 I refer to reach you Luisa Disneyworld and Bruce Okay in cosmic, which we're really.
Speaker Change: Rates will approach really to launch great teacher is not at the holiday season, but putting silicon types. So we are also ease of.
Speaker Change: How ya com symptoms of prestige, but nowadays in key when we are taking all the elements and youre rides up and so although having easier comps niche too.
Speaker Change: Giving us really full confidence.
Speaker Change: Key to each to our growth algorithm and we made it really realistic that also I would say.
Speaker Change: Pronounced manner.
Speaker Change: Because at the same time we.
Speaker Change: But we have a new initiatives, which are going to come in <unk>, we have a strong.
Speaker Change: Pipeline on innovation.
Speaker Change: For example, our refill too.
Speaker Change: Mass fragrance differently, we have a strong pipeline on innovation and this is going to accelerate big time in <unk> II and <unk> refill. Indeed, we are seeing is each one of them.
Speaker Change: He knows he's a.
Speaker Change: Normalization are you know retailer inventory.
Speaker Change: Meant and recently, we are considering that <unk> is going to be.
Speaker Change: Stable from the Congress so.
Speaker Change: We really build these are exclusive to <unk>.
Speaker Change: Some <unk>, but we are very confident on this algorithm.
Speaker Change: We will go next to Olivia Tong with Raymond James. Please go ahead.
Speaker Change: Great. Thank you just two questions around your sales growth outlook, both medium and long term and for the long term.
Speaker Change: A bit of clarification Robert's question earlier, but your target for mid single digit growth in fiscal 2006 for fiscal 'twenty and beyond that you would just yesterday.
Speaker Change: Can you talk about what's driving that deceleration versus.
Speaker Change: Long term target you provided in the past and then more.
Speaker Change: Or more closely if you could provide some detail around the gap between sell in and sell through and much reflecting in your expectation for the Q2 slowdown and an acceleration into the second half basically why why do you expect such a substantial.
Speaker Change: Second half snapback.
Speaker Change: For this year. Thank you.
Speaker Change: So maybe I can start.
Speaker Change: With the second half which is <unk>.
Speaker Change: Again, I can say again is definitely that.
Speaker Change: In between the Q1 and Q2, there is different and impact that.
Speaker Change: There is anticipation notes.
Speaker Change: That's right runs district, and this was really required us to move from retailers and the anticipated Dcs orders.
Speaker Change: Q1, <unk> recently, what's driving most leads of phasing between Q1 and Q2. So this is.
Speaker Change: Is a key element of <unk>.
Speaker Change: Elements I would say stay more or less the same iser on retailers' behaviors assumes the U S. But also in China travel retail in Asia travel retail and <unk>.
Speaker Change: So what we shared about Australia, where we have really one when retailer.
Speaker Change: <unk>, which is also adjusting.
Speaker Change: Inventory now, but it's too deep.
Speaker Change: Awesome.
Speaker Change: I just explained we are now on the easier comps.
Speaker Change: The new <unk> initiative.
Speaker Change: Initiatives and these nuclear again, what's really giving a full confidence on on <unk> on.
Speaker Change: On which to plan.
Speaker Change: And on the second part of your question regarding the.
Speaker Change: You know what's driving as you are you see is there an implied deceleration in the growth of mid single digit to high single digit versus the 6% to 8% higher I agree and I think the answer is quite simple this depends on where.
Speaker Change: In the 3% to 5% range the beauty market will land and this is something that we don't know and of course any further channel disruption like we see this year, specifically in the Asian region, where for the moment the visibility is quite low so that's the way I would answer it very very simply.
Speaker Change: Okay.
Speaker Change: We will go.
Speaker Change: Next to Charles <unk> with Kepler.
Speaker Change: Yes.
Speaker Change: Good day good afternoon, good morning.
Speaker Change: Thank you for taking my questions I have three.
Speaker Change: The first one could you give us some details about your market share online versus offline and whether this channel shift.
Speaker Change: The 800, adding impact on your overall gross market share.
Speaker Change: Secondly.
Speaker Change: Can you please give us more Carlos on your growth in <unk> in China and travel retail Asia.
Speaker Change: In Q1.
Speaker Change: As you were you know Fannie and they are indexed and quite immune to the turmoil so far.
Speaker Change: It seems to be no longer the case and find that E. Chuck a question to and what are you seeing COVID-19 impact of the potential 10%, 20% tax on the imported to the U S. As I guess and most of the prestige pretty Tom made in Europe and is there any plan to move predictions.
Speaker Change: Your two U S. A bridging young facilities. Thank you.
Speaker Change: Yes. Thank you. Thank you Charles.
Speaker Change: So on the online to offline.
Speaker Change: <unk> explains at termination fee, we are accelerating each time moving on nine so we are gaining market share.
Speaker Change: But 20%.
Speaker Change: Of all of our business.
Speaker Change: Differently with the above 20% in prestige low double digit in consumer beauty distinctly strong acceleration.
Speaker Change: And equally a very strong team.
Speaker Change: With really a whole playbook and working hand in hand with the commercial team. So now we are really different is the omnichannel approach.
Speaker Change: Which is really at full speed and economy is accelerating we are seeing we E. Tailers we are as.
Speaker Change: These wells, the Omnichannel, where keys videos.
Speaker Change: Speed, let them so we as a pure play yours as well.
Speaker Change: We are leasing team, we have very strong gross from partnership I mean, we refilled to Amazon differently imagine easy is accelerating and as you know we were REIT pioneering.
Speaker Change: These partnerships. So we have very strong position and it is a case in prestige, but also in consumer beauty so differently.
Speaker Change: Does that mean, there is a very strong potential for for Coty and we worked on this always in this omnichannel approach. Okay. So we're making sure that our online and offline I mean really speak together and our recently completed <unk>. So indeed very very very good dynamic that we're going to continue.
Speaker Change: On your second question on travel retail Asia, we shared during the quarters that indeed.
Speaker Change: These are <unk>.
Speaker Change: Declining into Q1, why travel retail Europe and America are really really.
Speaker Change: Still early days.
Speaker Change: Yeah, it's really part of.
Speaker Change: China ecosystem.
Speaker Change: Which is indeed.
Speaker Change: Currently under tension.
Speaker Change: But in China, It indeed slightly negative.
Speaker Change: Even though the current pension, but as you know and I need to keep again, China is only 3% of our niche revenue. So I would say despite these current Jo Malone I mean, we have limited exposure.
Speaker Change: Certain statements contained in <unk> so the.
Speaker Change: The same for travel retail Asia.
Speaker Change: But we are working on our initiatives and as you know what's accelerating in China is really high and backgrounds, and where we have very strong positions and we have great initiatives in skincare. So I keep repeating current TWC extension.
Speaker Change: He knows impactful could easily okay. There is an impact but limited.
Speaker Change: And if we keep we keep seeing some some throughput I'm sure.
Speaker Change: So there's a failed them your first question on tariffs.
Speaker Change: Absolutely something that we have anticipated and that we have been.
Speaker Change: Working for us.
Speaker Change: But what is very important.
Speaker Change: Number one in terms of components.
Speaker Change: We source you know they have a yearly immediate components from China, we need to be there is very very limited.
Speaker Change: Exposure, no, but Europe and U S.
Speaker Change: Strength of quickie and we keep repeating is really these global footprint. So we have factories in Europe, but we are also a factor readings of U S.
Speaker Change: <unk> beauty and also some programs. So these are exactly the kind of hedging that we can create in terms of localizing. Some oh some production either in terms of finished goods, but also in some of the components, where we are.
Speaker Change: Dual sourcing so definitely I mean, not printed helping at.
Speaker Change: At the same time, indeed <unk> term.
Speaker Change: <unk> may be more exposed we.
Speaker Change: We may do you know.
Speaker Change: It may imply some small price increase.
Speaker Change: To mitigate and we need to keep PD question impact.
Speaker Change: Complementary to answer that.
Speaker Change: It's very important to say it again and again, we are the least.
Speaker Change: Exposed company to China travel retail Asia.
Speaker Change: Importantly, among the comparable peers.
Steve: Steve today.
Speaker Change: We'll go next to Philip <unk> with Citi. Please go ahead.
Speaker Change: I had one on.
Speaker Change: Margins you guys have delivered very strong performance, both on gross and EBITDA margins and you raised the target on cost savings 120 Malian.
Speaker Change: Over 110 million can you talk a bit about like what are the incremental cost saving initiatives.
Speaker Change: <unk> founding are you finding that in the P&L and you talked about having momentum into fiscal 'twenty. Six. So maybe you can also give some color on what is going to continue and what's your pipeline on cost savings going forward. Thank you.
Speaker Change: Yes, Thank you CD pool.
Speaker Change: So margin is a is really a key focus for the company. So I mean, we are delivering.
Speaker Change: 200 basis point gross margin expansion.
Speaker Change: In Q1, so I really want to highlight this because it shows the fluke is that all the actions that we're putting in place are strongly deliver so it's really a combination as I indicated the pricing, whereas there is really strong carryover on pricing there is more moderate inflation. Indeed, we are improving Sidney.
Speaker Change: As you can see the level of excess and obsolescence I was referring to before you know visa planning hub implementation and.
Speaker Change: Procurement and supply chain keep working on the very strong productivity initiatives, we shared many times and we continue all the work we are doing on platforming.
Speaker Change: We are reviewing all the products all the formula and Indy, creating some.
Speaker Change: Unrealized synergies, which is helping and also helping our suppliers. So decently strong partnership with our suppliers with very strong initiatives and this is going to continue so gross margin in dte's differently as a key driver we are now above 65%.
Speaker Change: This is what we had indicated three years ago. We are done we were below 60%. So differently. We we continue now looking ahead.
Speaker Change: In the current volatile environment, we had no long list of initiatives.
Speaker Change: Pipeline, so some already in motion and we are accelerating.
Speaker Change: Exactly what they explained your budget planning hub implementation and how we are going to significantly improve.
Speaker Change: Our planning and in our forecast model, which will bring savings, but also really improve our top line in relation with our retailers which are absolutely.
Speaker Change: <unk>.
Speaker Change: Damon I can bring to you and.
Speaker Change: We refer to eat Windsor was the question but.
Speaker Change: E Commerce online and offline channel recently, we are seeing that knows the landscape is really moving to these omnichannel.
Speaker Change: World indefinitely.
Speaker Change: We have a single system retailer centralization see differently.
Speaker Change: So which is blurring of Suez is offline online. So we're I'd say senior sewer.
Speaker Change: <unk> cost structure.
Speaker Change: How to adapt to this and we need to create some synergies and we need to gain to gain some efficiency.
Speaker Change: So super expensive or times, our new modelo that speak to market. The <unk> beauty is also here to bring some.
Speaker Change: Savings under absorbed acceleration and less treatment, which I want to insist on is on technology.
Speaker Change: As explained in the in July that we are successfully.
Speaker Change: Implementation now we are leveraging this technology differently, where we can find a very very strong savings.
Speaker Change: And improving your sue on the support to a function of how we can work on it so you see there.
Speaker Change: All these initiatives that are in the pipe that we are accelerating they are all connected.
Speaker Change: And it's definitely keep half doses.
Speaker Change: All in to win programs that we initiated so thats, indeed, what's giving us confidence to continue to improve our.
Speaker Change: EBITDA margin.
Speaker Change: So your second point, which is now looking ahead for fiscal 'twenty six.
Speaker Change: Indeed, we have a strong pipeline of growth initiatives.
Speaker Change: So we have fragrance launches across price points.
Speaker Change: As we explained in the suites several families of course strong innovations in the fragrance prestige, but we are also now stronger initiatives in in the mass fragrance. So we're covering the full price spectrum.
Speaker Change: <unk> is definitely a great opportunity for us. So skincare, we are accelerating geographic expansion definitely with the growth engines, which are really accelerating in user numbers and music grew double digits with a gross clusters in the metro market and last but not least <unk>.
Speaker Change: Beauty initiatives East coast boutique.
Speaker Change: Will really bring some additional initiatives. So again in a growing market dynamic we have again lots of initiatives in the pipeline to grow faster.
Speaker Change: Yeah.
Speaker Change: We'll go next to Chris Carey with Wells Fargo Securities. Please go ahead.
Speaker Change: Hi, everyone. So there has been.
Speaker Change: A few questions.
Speaker Change: The algorithm.
Speaker Change: I wont go there on the on the top line per se, but I think what I'm hearing is basically.
Speaker Change: Previously it was six to eight but now we have to be mindful that the category growth.
Speaker Change: As a key foundation to be able to deliver that outcome and if in fact that category growth is lower than.
Speaker Change: That outcome could be lower which by the way I think makes sense.
Speaker Change: But correct me, if you've heard anything there, which does it make sense to you said another way the category, we will do what it does and youll gain share on top of category.
Speaker Change: And then connected to that.
Speaker Change: The 9% to 11% EBITDA growth.
Speaker Change: We see this year you have a pretty substantial step up in back half EBITDA.
Speaker Change: Say in that range.
Speaker Change: But over time.
Speaker Change: Like how should we be thinking about how sturdy nine to 11 I mean, it should yes.
Speaker Change: EBITDA growth range, all also fluctuate somewhat depending on category or do you view that as as.
Speaker Change: It really firm because perhaps it's more connected to your leverage targets. Thanks.
Speaker Change: Thank you for entertaining any of that and responding.
Speaker Change: You bet. Thanks.
Speaker Change: Maybe I'll start with a sore spots around the growth of the company I think you understood that indeed, we are playing in markets and the level of growth at the beauty market will be a part of how we are going to build our growth ourselves, but we are in wholesale business. You know in beauty is one of the most resilient if not the most resilient businesses and.
Speaker Change: <unk> has been outperforming this market since now four years almost so it's really a it's really a combination of both how the market will be and indeed, our medium term outlook is to see the market between three and 5%, which is also going to be a question of how fast we are going to accelerate with our.
Speaker Change: New growth engines, which regions.
Speaker Change: Reis don't forget the new licenses at Trop, Miami, Marc Jacobs beauty of new license to be announcing soon and we are continuing to work on this topic. So all these elements together are going to give us the right number when it comes to the ability to be exactly in the aggregate and that we did three years ago.
Speaker Change: Or close to this I go in and depending on all these elements have together on the second part maybe the all you can complement on the EBIDTA Yeah, absolutely Chris I mean, so first of all I want to remind upturn over the last three years I mean, we are constantly and over deliver visa these 9% to 11% EBITDA growth case, so thats really a two.
Speaker Change: To date, we are ahead of our initial plan indeed, as I indicated leverage ratio I mean, we will get where were.
Speaker Change: We explained a few a few years ago now definitely looking ahead.
Speaker Change: So number one focus at EBITDA will continue to deliver.
Speaker Change: Significantly in terms of top line growth. So this is a this is a no brainer and all the savings initiatives that I. Just explained in fact, they are going to even accelerate in fiscal 2000 seats. So it will give us difficulties the ammunition to fuel all the great initiatives that we have but also of course to keep growing your EBITDA.
Speaker Change: Much faster than the network, new and continuing to expand.
Speaker Change: EBITDA margin.
Speaker Change: You inspect our EBITDA margin is going to lose 200 basis pumps. So we will be close to 19% EBITDA margin and then starting from these days, yes, we will continue to expand significantly our EBITDA margin. So I want to make it very clear that I.
Speaker Change: I mean, even if we are reaching a two times leverage ratio. We are going to continue all this work to significantly expand our EBITDA margin.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: This does conclude today's question and answer period, I will now turn the call back over to our presenters for any additional or closing remarks.
Speaker Change: No no closing remarks, thank you very much for your questions again, and see you next quarter.
Speaker Change: This does conclude today's first quarter fiscal 2025 question and answer conference call. Thank you for your participation.
Speaker Change: May disconnect at any time.
Speaker Change: Yeah.
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].