Q2 2025 Coty Inc Earnings Call - Pre-Recorded

February 10, 2025

Sue Y. Nabi: Roughly 3% on a like-for-like basis. Adding consumer beauty in the US, the negative impact on total COTY like-for-like sales in Q2 was approximately 3%. As a reminder, China and Asia travel retail continue to be pressured as market demand remains sluggish. Retailers are adjusting order further, and new regulations were enacted in the Asia travel retail corridor. In Australia, which also accounts for a low single-digit percentage of our sales, our prestige business shipments were impacted by substantial working capital reduction at a key retailer. In our US consumer beauty business, retailers have been actively managing their orders and inventory, exacerbated by the significant channel shifts in the market.

Sue Nabi: Roughly 3% on a like-for-like basis. Adding consumer beauty in the US, the negative impact on total COTY like-for-like sales in Q2 was approximately 3%. As a reminder, China and Asia travel retail continue to be pressured as market demand remains sluggish. Retailers are adjusting order further, and new regulations were enacted in the Asia travel retail corridor. In Australia, which also accounts for a low single-digit percentage of our sales, our prestige business shipments were impacted by substantial working capital reduction at a key retailer. In our US consumer beauty business, retailers have been actively managing their orders and inventory, exacerbated by the significant channel shifts in the market.

Well like dishes.

And adding consumer beauty in the U S. The negative impact on total Coty like product sales in Q2 was approximately 3%.

As a reminder, China and Asia travel retail continued to be pressured as market demand remains sluggish.

Tenders are adjusting all the further new regulations were enacted in the Asia travel retail coffee, though.

In Australia, which also accounts for a low single digit percentage of our sales our prestige business shipments were impacted by substantial working capital reduction at a key retailer.

In our U S consumer beauty business retailers have been active in managing their orders and inventory exacerbated by the significant channel shifts in the market.

Sue Y. Nabi: At the time of our Q1 call, we anticipated that the strong start to holiday sales we were seeing at retail would drive solid reorders from our major Prestige retailers in the US and in Europe, which would somewhat offset the pressure in these pockets of the business. While our brands, particularly in Prestige fragrance, saw strong sellout growth in Q2, we did not see replenishment orders at the pace we were expecting. Looking at our revenue performance per segment and region, in Prestige, we reported 4% like-for-like growth in the first half and 1% like-for-like growth in Q2, with higher growth in Q1 reflecting earlier shipments of fragrance gift sets. This 4% like-for-like in the first half is particularly noteworthy as we are lapping extremely high growth last year when our Prestige business grew 18% like-for-like.

Sue Nabi: At the time of our Q1 call, we anticipated that the strong start to holiday sales we were seeing at retail would drive solid reorders from our major Prestige retailers in the US and in Europe, which would somewhat offset the pressure in these pockets of the business. While our brands, particularly in Prestige fragrance, saw strong sellout growth in Q2, we did not see replenishment orders at the pace we were expecting. Looking at our revenue performance per segment and region, in Prestige, we reported 4% like-for-like growth in the first half and 1% like-for-like growth in Q2, with higher growth in Q1 reflecting earlier shipments of fragrance gift sets. This 4% like-for-like in the first half is particularly noteworthy as we are lapping extremely high growth last year when our Prestige business grew 18% like-for-like.

At the time of our Q1 call we anticipated that the strong start to holiday sales, we were seeing at retail would drive solid reorders from our major prestige retailers in the U S and in Europe, which would somewhat offset the pressure in these pockets of the business.

While our brands, particularly in prestige fragrance. So strong set outgrowth in Q2, we did not see replenishment orders at the pace we were expecting.

Looking at our revenue performance by segment and region in prestige, we reported 4% like for like growth in the first half and 1% like for like growth in Q2 with higher growth in Q1, reflecting earlier shipments of fragrance gift sets.

This 4% like for like in the first half is particularly noteworthy as we are lapping extremely high growth last year, when our prestige business grew 18% like for like.

Sue Y. Nabi: In Prestige, our total global sell-out grew by a mid-single-digit percentage in the first half, with our sell-out for fragrances growing even stronger at a high single-digit level, confirming that our brands continue to resonate strongly with consumers. In Consumer Beauty, our sales declined 2% in the first half and declined 4% like-for-like in Q2. The more significant pullback in Q2 was driven by further mass beauty market deceleration and a couple-of-points gap between sell-in and sell-out, driven by pressures at mass retailers due to ongoing channel shifts and tight inventory management and higher trade investments. Importantly, our mass cosmetics brands continued to outperform most legacy brands. By region in Q2 and in the first half, EMEA continued to grow like-for-like. Americas grew in the first half but declined in Q2, and Asia Pacific was pressured in both periods by declines in China, in travel retail Asia, and in Australia.

Sue Nabi: In Prestige, our total global sell-out grew by a mid-single-digit percentage in the first half, with our sell-out for fragrances growing even stronger at a high single-digit level, confirming that our brands continue to resonate strongly with consumers. In Consumer Beauty, our sales declined 2% in the first half and declined 4% like-for-like in Q2. The more significant pullback in Q2 was driven by further mass beauty market deceleration and a couple-of-points gap between sell-in and sell-out, driven by pressures at mass retailers due to ongoing channel shifts and tight inventory management and higher trade investments. Importantly, our mass cosmetics brands continued to outperform most legacy brands. By region in Q2 and in the first half, EMEA continued to grow like-for-like. Americas grew in the first half but declined in Q2, and Asia Pacific was pressured in both periods by declines in China, in travel retail Asia, and in Australia.

In prestige our total global sellout grew by a mid single digit percentage in the first half with our set out for fragrance is growing even stronger at the high single digit level confirming that our brands continue to resonate strongly with consumers.

In consumer beauty, our sales declined 2% in the first half and declined 4% like for like in Q2.

More significant pullback in Q2 was driven by further mass beauty market deceleration and a couple of points gap between selling and sellout.

Given by pressures at mass retailers due to ongoing channel shifts and tight inventory management and higher trade investments.

Importantly, our mass cosmetics brands continue to outperform most legacy brands by region in Q2 and in the first half EMEA continued to grow our like for like Americas grew in the first half but declined in Q2 in APAC was pressured in both periods.

By declines in China in travel retail Asia and in Australia in both periods. The Americas region included a 3% contribution from Argentina, which experienced it hyper inflation.

Sue Y. Nabi: In both periods, the Americas region included a 3% contribution from Argentina, which experienced hyperinflation. Looking at the picture by volume, price, and mix, while volumes declined moderately on a total company basis driven by color cosmetics, our fragrance volumes grew in both prestige and consumer beauty during the first half. This is a critical element as fragrances account for less than a quarter of our volumes but over 60% of our revenues, given the higher relative price points. Estimated pricing contributed a low- to mid-single-digit benefit, primarily due to carryover from last year. An estimated mix and other was neutral for the quarter. While our sales trends this quarter were below expectations, it's important to put this in the context of our delivery over the last 4 years. In 9 out of the last 14 quarters, we have grown ahead of leading global beauty peers.

Sue Nabi: In both periods, the Americas region included a 3% contribution from Argentina, which experienced hyperinflation. Looking at the picture by volume, price, and mix, while volumes declined moderately on a total company basis driven by color cosmetics, our fragrance volumes grew in both prestige and consumer beauty during the first half. This is a critical element as fragrances account for less than a quarter of our volumes but over 60% of our revenues, given the higher relative price points. Estimated pricing contributed a low- to mid-single-digit benefit, primarily due to carryover from last year. An estimated mix and other was neutral for the quarter. While our sales trends this quarter were below expectations, it's important to put this in the context of our delivery over the last 4 years. In 9 out of the last 14 quarters, we have grown ahead of leading global beauty peers.

Looking at the picture by volume price and mix, while volumes declined moderately on a total company basis, driven by color cosmetics, our fragrance volumes grew in both prestige and consumer beauty. During the first half. This is a critical element as fragrances.

<unk> for less than a quarter of our volumes, but over 60% of our revenues given the higher relative price points.

Estimated pricing contribute to the low to mid single digit benefit primarily due to carryover from last year.

An estimated mix and other was neutral for the quarter.

While our sales trends this quarter were below expectations. It is important to put this in the context of our delivery over the last four years in nine out of the last 14 quarters. We have grown ahead of leading global beauty peers our.

Sue Y. Nabi: Our Like-for-Like sales this quarter are also shaping up to be in the middle of our peer group. With that, let me turn it over to Laurent.

Sue Nabi: Our Like-for-Like sales this quarter are also shaping up to be in the middle of our peer group. With that, let me turn it over to Laurent.

Like for like sales. This quarter are also shaping up to be in the middle of our peer group with that let me turn it over to the home.

Laurent Mercier: Thank you, Sue. Fiscal 2025 is indeed a transition year for beauty and for Coty. Category growth is moderating in tandem with lower pricing benefits, and pressure in certain pockets of the beauty market is exacerbated by retailers tightly managing orders and inventory. While this is impacting our sales trends in the near term, our financial equation is now stronger than it has been in the last four years, and we will see outsized benefit from our healthier debt levels and cash generation. With our EBITDA margin for the year on track to reach around 19%, even as we maintain strong investment behind our brands and lower debt is now translating to steady declines in interest expense, we expect our fiscal year 2025 EPS to grow in the low double digits after adjusting for the discrete tax benefit last year.

Thank you assume fiscal 'twenty five is indeed, a transition year for beauty and for cooking.

Category growth is moderating in tandem with lower pricing benefits and pressure in certain pockets of the beauty market is exacerbated by retailers tightly managing orders and inventory.

While this is impacting our sales trends in the near term our financial equation is now stronger than it has been in the last four years, and we will see outsized benefits from our hedge our debt levels and cash generation.

With our EBITDA margin for the year on track to reach around 19%, even as we maintain strong investment behind our brands and lower depth is now translating to steady declines in each rate interest expense, we expect our fiscal year 'twenty five EPS to grow in the low double digits.

After adjusting for the discrete tax benefit last year.

Laurent Mercier: This coupled with our leverage now below 3x confirms that COTY is on significantly healthier footing, which will fuel double-digit EPS growth and strong TSR in the coming years, particularly once sales growth begins to accelerate. Our first half net revenues grew +2% like-for-like. While we expected some phasing impacts due to earlier shipments of fragrance gift sets from Q2 to Q1, our Q2 like-for-like sales of -1% were lower than anticipated as the combined impact from China, travel retail, Asia, Australia, and Consumer Beauty US worsened sequentially to a -3% impact on our sales. At the same time, the +2% like-for-like growth in first half 2025 was achieved despite quite elevated comparisons in the prior year of +14% like-for-like growth. While we saw sales headwinds this quarter, we remained focused on fueling healthy gross margin expansion.

These coupled with our leverage now below three times confirms that Coty is on significantly healthier footing, which will fuel double digit EPS growth and strong DSR in the coming years, particularly once sales growth begins to accelerate.

Our first half net revenues grew 2% like for like while we expected some phasing impact due to earlier shipments of fragrance deep sets from Q2 to Q1 or Q2 like for like sales of minus 1% were lower than anticipated as a combined impact.

From China travel retail Asia.

<unk> and <unk>.

Consumer beauty U S Wilson sequentially too.

3% impact on our sales.

At the same time, so 2% like for like growth in first half 'twenty five was achieved despite quite elevated copper reasons in the prior year of 14% like for like growth.

While we saw sales headwinds this quarter, we remained focused on fueling healthy gross margin expansion in.

Laurent Mercier: In Q2, we delivered very strong adjusted gross margin expansion of 170 basis points, following the 200 basis points of expansion generated in Q1. The significant margin expansion was fueled by strong supply chain savings, including procurement savings and productivity gains, coupled with improvement in excess and obsolescence, and the net benefit from pricing. It is worth also noting that the strong gross margin expansion also reflected our efforts to maintain discipline this holiday season in the face of quite significant discounting from many of our peers. In total, our first half gross margins reached 66.1%. While we expect absolute gross margins in the second half to be seasonally lower than the first half based on usual business seasonality, our strong delivery in the first half should support another year of steady gross margin expansion in fiscal year 2025.

In Q2, we delivered very strong adjusted gross margin expansion of 170 basis points. Following the 200 basis points of expansion generated in Q1. So.

So significant margin expansion was fueled by strong supply chain savings, including procurement savings and productivity gains coupled with improvement in excess and obsolescence and the net benefit from pricing.

It is worth also noting that the strong gross margin expansion also reflected our efforts to maintain disciplined this holiday season in the face of quite significant discounting from many of our peers.

In total our first half gross margins reached 66, 1%.

While we expect absolute gross margins in the second half to be seasonally lower than the first half base unusual business seasonality our strong delivery in the first half should support another year of steady gross margin expansion in fiscal year 2005.

Laurent Mercier: As part of our focus on maintaining a healthy business equation and supporting our strategy over the short and long term, we continue to invest behind our brands and initiatives. We maintained a high 20s ANCP percentage in Q2, up year-over-year. The combination of strong gross margin expansion, sustained marketing support, short-term cost initiatives, and very tight fixed cost control fueled 7% growth in our Q2 EBITDA. As a result, we delivered 220 basis points of EBITDA margin expansion in Q2, with margin expansion in both divisions. For the first half, our EBITDA expanded 3%, resulting in an EBITDA margin of 22.5%, which was up a strong 90 basis points year-over-year. While some of the strong EBITDA growth, despite moderately lower reported sales, was a result of shorter-term cost controls, a sizable portion also came from cost reductions as part of our All-in-to-in Program.

As part of our focus on maintaining a healthy business equation and supporting our strategy over the short and long term, we continue to invest behind our brands and initiatives we.

We maintained a high twenty's against <unk> percentage in Q2 up year on year.

The combination of strong gross margin expansion sustaining sustained marketing support short term cost initiatives and very tight fixed cost control showed 7% growth in our Q2 EBITDA.

As a result, we delivered 220 basis points of EBITDA margin expansion in Q2 with margin expansion in both divisions.

For the first half our EBITDA expanded 3%, resulting in an EBITDA margin of 22, 5%, which was up 290 basis points year over year.

While some of the strong EBITDA growth. Despite moderately lower reported sales was a result of short term cost controls. The sizeable portion also came from cost reductions as part of our all in to win program.

Laurent Mercier: In Q2, we delivered savings of approximately $35 million, up from approximately $20 million in Q1, with most of the savings in gross margin-related areas. We continue to expect these savings to further step up in the second half. In total, we continue to target savings of over $120 million in fiscal year 2025. And the plans we are putting in place should support strong savings delivery in fiscal year 2026 and beyond as we are evaluating the organization and new optimization opportunities. Last quarter, we detailed some of the work streams supporting the $120 million savings target. These include: first, establishing centers of excellence for key processes, including an AI-powered demand planning solution and the consolidation of demand planning into one hub. Second, adapting our commercial organization to the increasingly omnichannel world with the assessment underway. Third, accelerating our speed to market.

In Q2, we delivered savings of approximately $55 million.

Up from approximately $20 million in Q1 with most of the savings in gross margin related areas.

We continue to expect these savings to further step up in the second half.

In total we continue to target savings of over $120 million in fiscal year 2000 sites.

And the plans we are putting in place should support strong savings delivery in fiscal year 'twenty six and beyond as we are evaluating the organization a new optimization opportunities.

Last quarter, we detailed some of the work streams supporting the one of the 20 million savings targets.

These include.

First establishing centers of excellence for key processes.

Clothing, and bio world demand planning solution and the consolidation of demand planning into one.

Second adapting our commercial organization to the increasingly omni channel world with the assessments underway.

Accelerating our speed to market.

Laurent Mercier: Fourth, maximizing the benefits of emerging tech and AI, including our successful migration to S/4HANA over the summer. And finally, regional footprint redesign as we focus on reallocating resources from the least to the most attractive opportunities. All of these are supplemented by our ongoing productivity efforts, which were key contributors this quarter, including in manufacturing and warehousing, and high levels of material savings through material value analysis and commercial negotiation. Let me also take a minute to address the tariff topic, which we know is top of mind. As is evident in the last few weeks, the global geopolitical and tariff situations remain quite fluid, further adding to the broader uncertainty. Having said that, our teams have been planning for several different scenarios with action plans to minimize the potential impact on Coty. For context, our sourcing from China, Canada, and Mexico into the US is fairly minimal.

Fourth maximizing the benefits of emerging tech and AI, including our successful migration to asphalt over the summer and.

And finally regional footprint redesign as we focus on reallocating resources from the least to the most attractive opportunities.

All of these are supplemented by our ongoing productivity efforts, which were key contributors this quarter, including in manufacturing and warehousing and high levels of material savings through material value analysis and commercial negotiation.

Let me also take a minute to authorize the tariff topic, which we know is top of mind.

As is evident.

In the last few weeks, the global geopolitical and tariff situations remains quite fluid further adding to the broader uncertainty.

Having said that our team has been planning for several different scenarios with action plans to minimize the potential impact on cookies.

For context, our sourcing from China, Canada, and Mexico into the U S is fairly minimal.

Laurent Mercier: As we contemplate a potential 10% tariff on finished goods shipped from Europe into the US, or potential retaliatory tariffs in North America, together this could represent a few points of impact to our annualized EBITDA. In the meantime, we are already making adjustments in our product flows and sourcing, including having some extra inventory on hand in the US and shifting more of our mass fragrance production to our North Carolina plant. And of course, pricing remains an additional lever, particularly in the relatively price-inelastic prestige beauty market. The strong progress we have made in significantly reducing our debt by over $4.5 billion since fiscal year 2020, including the $300 million debt repayment in Q2, is now also bearing fruit.

As we contemplate a potential 10% tariff on finished goods shipped from Europe into the U S.

Put onshore retaliatory tariffs in North America together this could represent a few points of impact.

Annualized EBITDA.

In the meantime, we are already making adjustments in our product flows in sourcing, including having some extra inventory on hand in the U S and shifting more of our mass fragrance production to our North Carolina outcome.

And of course pricing remains an additional labor particular liens are relatively price inelastic prestige beauty market.

The strong progress we have made in significantly reducing our debt by over $4 5 billion since fiscal year 'twenty.

<unk> is a 300 million debt repayment in Q2 is now also bearing fruit.

Laurent Mercier: In the first half of fiscal 2025, our interest expense declined by $14 million year on year to $116 million, reflecting the lower debt balance and the lower cost of debt. We expect our interest expense to decrease further in the second half to below $100 million. In total, we expect interest expense to decrease by over $14 million in fiscal year 2025 to approximately $210 million, fueling about 8% of EPS accretion in this year alone. Based on the trajectory of our deleveraging and the current interest rate backdrop, we expect interest expense to decline further in fiscal year 2026, driving further EPS accretion. The combination of our operating income growth, lower interest expense, and a lower tax rate resulted in strong EPS growth. Our Q2 EPS, excluding the equity swap, grew 16% to $0.22, and our first half EPS grew 21% to $0.41.

As the first half of fiscal 2005, our interest expense declined by $14 million year on year to $116 million.

Afflicting, so lower debt balance and a lower cost of debt.

We expect our interest expense to decrease further in the second half to below $100 million.

In total we expect interest expense to decrease by over $40 million in fiscal year 'twenty five to approximately 210 million shooting about 8% of EPS accretion in this year alone.

And based on the trajectory, although de leveraging and the current interest rate backdrop, we expect interest expense to decline further in fiscal year 2000 and.

Driving further EPS accretion.

Okay.

The combination of our operating income growth lower interest expense and a lower tax rate resulted in strong EPS growth.

Q2, EPS, excluding the equity swap grew 16% to 22.

And our first half EPS grew 21% to 41.

Laurent Mercier: Our first half EPS growth benefited from a discrete tax hurt in the prior year, totaling $0.03, which did not repeat this year. While tight order and cash flow management by retailers weighed on our free cash flow in the first half, we did deliver very strong free cash flow in Q2 of $419 million, an increase of $56 million over the prior year. Our teams have remained nimble in this uncertain environment, which has allowed us to lower inventory levels and improve our working capital performance in Q2. This resulted in solid free cash flow generation in the first half of $411 million. Based on our expectations for free cash flow in the second half to be roughly neutral, we expect fiscal year 2025 free cash flow of roughly $400 million.

Our first half EPS growth benefited from a discrete tax hurricanes of prior year totaling <unk>, which did not repeat this year.

While tight order and cash flow management by retailers weighed on our free cash flow in the first half we did deliver very strong free cash flow in Q2 of $119 million, an increase of $56 million over the prior year.

Our teams have remained nimble in this uncertain environment, which has allowed us to lower inventory levels and improve our working capital performance in Q2.

This resulted in solid free cash flow generation in the first half of $411 million and.

And based on our expectations for free cash flow in the second half to be roughly neutral we expect fiscal year 'twenty five free cash flow of roughly $400 million.

Laurent Mercier: Our disciplined approach to profit expansion, cash generation, and debt paydown have fueled a steady reduction in our leverage over the past 4 years. We ended calendar year 2024 with leverage of 2.9 times, consistent with recent guidance to end calendar year 2024 with leverage below 3 times. This reflects a reduction in our leverage ratio of 0.4 turns from the end of fiscal 2024 and 0.2 turns year-on-year. Let me now share some context on our outlook. With normalizing but still growing beauty category growth, pockets of disruption, and uncertain retailer behavior driving sell-in tracking below sell-out, we prudently see fiscal 2025 as a transition year in terms of sales performance. Still, we remain on track to deliver solid profit, EPS, and free cash flow expansion.

Our disciplined approach to profit expansion cash generation and debt Paydown has fueled a steady reduction in our leverage over the past four years.

We ended calendar year 'twenty four with leverage of two nine times consistent with recent guidance to end calendar year 'twenty four with leverage below three times.

This reflects a reduction in our leverage ratio of 0.4 turns from the end of fiscal 2004, and Europe two terms year on year.

Okay.

Let me now share some context on our outlook.

With normalizing, but still growing beauty category growth pockets of disruption and uncertainty retailer behavior driving selling tracking below sellout, we prudently fiscal 'twenty side as a transition year in terms of sales performance.

Still we remain on track to deliver a solid profit EPS and free cash flow expansion.

Laurent Mercier: As we enter calendar year 2025, we expect the global beauty market in terms of consumer demand to grow in the low to mid-single digits, consistent with historical levels. At the same time, the pressure in the China ecosystem and the continued tight order and inventory management by retailers, which we expect to continue for several more quarters, would likely result in beauty sell-in tracking below sell-out in the near term. Based on these factors, we anticipate our like-for-like sales trend in the second half to be broadly consistent with our Q2 like-for-like sales trend at -1% to -2%, with flattish prestige and lower consumer beauty, largely consistent with what we saw in Q2.

As we enter calendar year 2005, we expect a global beauty market in terms of consumer demand to grow in the low to mid single digits consistent with historical levels.

At the same time, so pressure in the China ecosystem and continued tight order and inventory management by retailers, which we expect to continue for several more quarters would likely result in beauty setting tracking below sellout in the near term.

Based on these factors, we anticipate our like for like sales trend in the second half to be broadly consistent with our Q2 like for like sales trend at minus one to minus 2% with.

With flattish prestige and lower consumer beauty, largely consistent with what we saw in Q2.

Laurent Mercier: The significant strengthening of the US dollar is expected to drive a more material forex headwind in H2 2025 of approximately 3 to 4%, resulting in second-half reported sales declining in the mid-single-digit percentage. We expect gross margin to be slightly lower year-on-year off the quite elevated level last year and reflecting approximately 100 basis points of expansion versus two years ago. Supported by stronger fixed cost reduction in the second half, we expect the second-half adjusted EBITDA margin to expand 70 to 90 basis points, implying low single-digit adjusted EBITDA growth, which includes a mid-single-digit percentage headwind from forex. Due to the phasing of initiatives and spending this year, we expect the absolute sales and EBITDA dollars to be pretty equal between Q3 and Q4, which reflects somewhat different phasing from last year when Q3 was higher than Q4 on both metrics.

So a significant strengthening of the U S. Dollar is expected to derive a more material forex headwind in <unk> to 25% of approximately 3% to 4%, resulting in second half reported sales declining in the mid single digit percentage.

We expect gross margin to be slightly lower year on year.

The quite elevated level last year, and reflecting approximately 100 basis points of expansion versus two years ago.

Supported by stronger fixed cost reduction in the second half.

We expect our second half adjusted EBITDA margin to expand 70 to 90 basis points, implying low single digit adjusted EBITDA growth, which includes a mid single digit percentage headwind from Forex.

Due to the phasing of initiatives and spending this year, we expect the absolute sales and EBITDA.

To be Pricky cord between Q3, and Q4, which reflect somewhat different phasing from last year. When Q3 was higher in Q4 on both metrics.

Laurent Mercier: We estimate the adjusted effective tax rate to be in the mid- to high 20s%. This is expected to translate to EPS in the second half of $0.09 to $0.11. Altogether, this translates to fiscal 2025 like-for-like sales, which are flattish year-on-year. Contemplating worsening forex headwinds and the 1% headwind in the first half from the divestiture of the Lacoste license, reported revenues are expected to decline in the low single digits. We continue to expect solid gross margin expansion in fiscal year 2025, fueled by the strong gross margin improvement delivered in H1 2025. This gross margin expansion, coupled with our strong cost savings, will support ongoing strong investments behind our brands, with ANCP expected to remain in the high 20s%.

We estimate.

Adjusted effective tax rate to be in the mid to high twenties.

This is expected to translate to EPS in the second half of nine to 11.

Altogether.

This translates to fiscal 'twenty five like for like sales, which are flattish year on year.

Contemplating worsening forex headwinds and a 1% headwind in the first half from the divestiture of the <unk> license.

Reported revenues are expected to decline in the low single digits.

We continue to expect solid gross margin expansion in fiscal year 'twenty five.

And by the strong gross margin improvement delivered in H $1 25.

This gross margin expansion, coupled with our strong cost savings will support ongoing strong investments behind our brands.

With <unk> expected to remain in the high <unk> percentage.

Laurent Mercier: Through the combination of gross margin expansion, ongoing brand support, short-term cost containment efforts, and structural cost savings programs, we are targeting adjusted EBITDA margin expansion of 70 to 90 basis points both in H2 2025 and fiscal year 2025, an acceleration from the 30 basis points adjusted EBITDA margin expansion in fiscal year 2025. This implies adjusted EBITDA growing in the low single digits to $1.115 billion to $1.125 billion, which includes a low to mid-single digit headwind from forex. Our steady debt reduction is now translating to an anticipated sizable reduction in the fiscal year 2025 interest expense to the low $200 million. The adjusted effective tax rate is expected to be in the mid- to high-20s%.

Through the combination of gross margin expansion ongoing brand support short term cost containment efforts and structural cost savings programs. We are targeting adjusted EBITDA margin expansion of 70 to 90 basis points, both in niche to 'twenty five in fiscal year 'twenty five.

Our next generation funds of 30 basis points adjusted EBITDA margin expansion in fiscal year 2000.

This implies.

Adjusted EBITDA growing in the low single digits.

The $1 billion $115 million to $1.125 billion, which includes low to mid single digit headwind from Forex.

Our steady depth reduction is now translating to an anticipated sizable reduction in fiscal year 'twenty five interest expense too.

The low $200 million.

The adjusted effective tax rate is expected to be in the mid to high 20 percentage.

Laurent Mercier: As a result, we now expect fiscal year 2025 adjusted EPS to grow by a mid to high single-digit percentage ahead of EBITDA growth to $0.50 to $0.52. Excluding the $0.02 discrete tax benefits to EPS last year, our underlying EPS growth in fiscal year 2025 is expected to be 9% to 13% as we start benefiting from the strong reductions in our interest expense. We expect fiscal year 2025 free cash flow to grow roughly 10% year-over-year to approximately $400 million, driven by the combination of higher profit and lower cash taxes, partially offset by certain cash benefits recognized in fiscal year 2024, which will not reoccur. I want to note that we have two equity swap arrangements outstanding, which we intend to execute in calendar year 2026.

As a result, we now expect fiscal year 'twenty five adjusted EPS.

To grow that.

By mid to high single digit percentage.

<unk> of EBITDA growth to 50 to 52.

Excluding the <unk> discrete tax benefit to EPS last year, our underlying EPS growth in fiscal year 2005 is expected to be 9% to 13% as we start benefiting from the strong reductions in our interest expense.

We expect fiscal year 'twenty five free cash flow.

To grow roughly 10% year on year to approximately $400 million.

Driven by the combination of higher profit and lower cash taxes.

Shirley offset by certain cash benefit recognized in fiscal year, 'twenty, four which will not reoccur.

I want to note that we have tweaked with the swap arrangements outstanding, which we intend to execute in calendar year 2006.

Laurent Mercier: Per the terms of the swap agreements and as a result of the pullback in our stock price in the recent quarters, in Q3, we expect to make a true cash payment to the banks in connection with these swaps. The amount of the cash payment will depend on the stock price, but assuming a stock price of $7, we will make a Q3 payment of $88 million. Importantly, any payments are simply a partial prepayment of the aggregate cost which had been locked in for the future buyback, with no change to the predetermined cost of the future buyback or settlement of 48 million shares.

Per the terms of the swap agreements and as a result of the pullback in our stock price since our recent quarters in Q3, we expect to make.

Cash payment to the bank in connection with the swaps.

The amount of the cash payments will depend on the stock price, but assuming a stock price of $7, we will make our Q3 payment of $88 million.

Importantly, any payment or simply a partial prepayment of the aggregate cost which had been locked in for the future buyback with no change to the predetermined cost of the future buyback of settlement of 48 million shares.

Laurent Mercier: Given the more uncertain environment for the next couple of quarters and further pressure by forex headwinds, we are targeting a year-over-year reduction in leverage exiting calendar year 2025 of 0.5 times or more, resulting in leverage below 2.5 times, with our goal to reach closer to two times. This does not take into account proceeds from the targeted Wella divestiture, which will further accelerate both the leveraging and shareholder returns. As a reminder, the standstill period as part of our Wella shareholders' agreement with KKR expired at the end of November. Importantly, we have a number of initiatives which we expect to drive growth acceleration in fiscal year 2026. These include blockbuster launches under several top prestige fragrance brands, coupled with further geographic expansion. Let me now turn it back to Sue to discuss our continued strategic momentum and significant growth opportunities ahead.

Given the more uncertain on government for the next couple of quarters frozen pressure by Forex headwinds, we are targeting a year over year reduction in leverage exiting calendar year 'twenty five.

0.5 times or more resulting in leverage below two five times with our goal to reach closer to two times.

And he does not take into account proceeds from the targeted whaler divestiture, which will further accelerate both deleveraging and shareholder returns as a reminder.

<unk> period as part of our Vela shareholders' agreement with KKR expired at the end of November.

Importantly, we have a number of initiatives, which we expect to derive growth acceleration in fiscal year 2006.

These include blockbuster launches and there are several top prestige fragrance brands Copel with further geographic expansion.

Speaker Change: Let me now turn it back to soon to discuss our continued strategic momentum and significant growth opportunities ahead.

Sue Y. Nabi: Thank you, Laurent. Amid an uncertain year, what is clear is that our brands remain as powerful as ever, and our teams continue to develop winning innovations which are activated with best-in-class campaigns and commercial strategies. I would like to highlight four key takeaways. First, as an industry leader in fragrances, we continue to cement our leadership across both prestige and mass fragrances as we double down on this area of strength. Second, we continue to fuel our cosmetics brand through strong momentum in social media advocacy and are now beginning to be complemented by our agile innovation strategy. Third, we are continuing to capture growth opportunities across categories, channels, and of course, geographies. And finally, we are attaining new milestones in ESG as we pursue our goal of becoming a leader in sustainability.

Sue Nabi: Thank you, Laurent. Amid an uncertain year, what is clear is that our brands remain as powerful as ever, and our teams continue to develop winning innovations which are activated with best-in-class campaigns and commercial strategies. I would like to highlight four key takeaways. First, as an industry leader in fragrances, we continue to cement our leadership across both prestige and mass fragrances as we double down on this area of strength. Second, we continue to fuel our cosmetics brand through strong momentum in social media advocacy and are now beginning to be complemented by our agile innovation strategy. Third, we are continuing to capture growth opportunities across categories, channels, and of course, geographies. And finally, we are attaining new milestones in ESG as we pursue our goal of becoming a leader in sustainability.

Soon: Thank you Tahira.

Speaker Change: I made an uncertain year, what is clear is that our brands remain as powerful as ever and our teams continue to develop winning innovations which are activated with best in class campaigns and commercial strategies.

Speaker Change: I would like to highlight four key takeaways first.

Speaker Change: As an industry leader in fragrances.

Speaker Change: We continue to cement our leadership across both prestige and mass fragrances as we double down on this area of strength.

Speaker Change: And we continue to fuel our cosmetics brands through strong momentum in social media advocacy.

Speaker Change: And are now beginning to be complemented by our agile innovation strategy.

Third we are continuing to capture growth opportunities across categories channels and of course geographies.

Speaker Change: And finally, we are attaining new milestones in ESG as we pursue our goal of becoming a leader in sustainability.

Sue Y. Nabi: Starting with the first point, as a best-in-class end-to-end fragrance operator and trendsetter, we continue to reinforce our leadership across the full price spectrum, ranging from mass and Mastiche fragrances all the way up to ultra premium and niche fragrances. Our leadership in fragrances across the price gamut was evidenced in the Q2 results. The combination of prestige and mass fragrances account for over 60% of annual sales. Given the importance of fragrances for Coty, the performance of our brands was encouraging. Sell-out for our prestige fragrances grew by a high single-digit percentage in the first half, even as sell-in was several points lower due to retailer inventory management. On the consumer beauty side, our mass fragrance like-for-like sales were also strong with mid-single digit growth. Starting with Hugo Boss. For Hugo Boss, now the largest brand at Coty, we are continuing the brand momentum.

Sue Nabi: Starting with the first point, as a best-in-class end-to-end fragrance operator and trendsetter, we continue to reinforce our leadership across the full price spectrum, ranging from mass and Mastiche fragrances all the way up to ultra premium and niche fragrances. Our leadership in fragrances across the price gamut was evidenced in the Q2 results. The combination of prestige and mass fragrances account for over 60% of annual sales. Given the importance of fragrances for Coty, the performance of our brands was encouraging. Sell-out for our prestige fragrances grew by a high single-digit percentage in the first half, even as sell-in was several points lower due to retailer inventory management. On the consumer beauty side, our mass fragrance like-for-like sales were also strong with mid-single digit growth. Starting with Hugo Boss. For Hugo Boss, now the largest brand at Coty, we are continuing the brand momentum.

Speaker Change: Starting with the first point is the best in class end to end the fragrance, operator and trend setter, we continue to reinforce our leadership across the full price spectrum, ranging from mass and Masstige fragrances.

Speaker Change: All the way up to ultra premium and niche fragrances.

Speaker Change: Well these are shipping fragrances across the price Gannett was evidenced in the Q2 results.

Speaker Change: The combination of prestige and mass fragrances account for over 60% of annual sales.

Speaker Change: The importance of fragrances for Coty.

Speaker Change: Of our brands was encouraging.

Speaker Change: Set out for our prestige fragrances grew by a high single digit percentage in the first half.

Speaker Change: Even our sell in was several points lower due to retailer inventory management.

Speaker Change: On the consumer beauty side, our mass fragrance like for like sales.

Were also strong with mid single digit growth.

Speaker Change: Starting with Hugo boss, but Hugo boss now the largest brand that correction, we are continuing the brand momentum.

Sue Y. Nabi: Hugo Boss has become the number 2 male fragrance brand in Europe, an increase of 1 rank from the prior year. This was fueled by the continued expansion of the Boss Bottled franchise, including the recently launched Boss Bottled Absolu and Elixir, as well as the strong performance of Boss De Saint Elixir. In total, the brand sales grew mid-single digit like-for-like in the first half. Moving to Burberry, the phenomenal success of Burberry Goddess, followed by the launch of Burberry Goddess Intense and continued momentum of the Burberry Her, and Burberry Hero franchises, drove Burberry to significantly outperform the underlying market. In calendar 2024, Burberry fragrance retail sales grew over 30%, which was more than 3 times the prestige fragrance market. Sales in the past 2 quarters were also robust with over 20% growth.

Sue Nabi: Hugo Boss has become the number 2 male fragrance brand in Europe, an increase of 1 rank from the prior year. This was fueled by the continued expansion of the Boss Bottled franchise, including the recently launched Boss Bottled Absolu and Elixir, as well as the strong performance of Boss De Saint Elixir. In total, the brand sales grew mid-single digit like-for-like in the first half. Moving to Burberry, the phenomenal success of Burberry Goddess, followed by the launch of Burberry Goddess Intense and continued momentum of the Burberry Her, and Burberry Hero franchises, drove Burberry to significantly outperform the underlying market. In calendar 2024, Burberry fragrance retail sales grew over 30%, which was more than 3 times the prestige fragrance market. Sales in the past 2 quarters were also robust with over 20% growth.

Speaker Change: <unk> has become the number two mill fragrance brand in Europe, an increase of one from the prior year.

Speaker Change: This was fueled by the continued expansion of the bus but franchise, including the recently launched bus both absolute and in each year.

Speaker Change: As well as the strong performance of boss the scent at each year.

Speaker Change: In total the brand sales grew mid single digit like for like in the first half.

Speaker Change: Moving to Burberry, the phenomenal success of Burberry goddess followed by the launch of Burberry. Good is intense and continued momentum of the burberry her and burglary hero franchises drove burberry to significantly outperform the underlying market in <unk>.

Speaker Change: Calendar 'twenty for burglary fragrance retail sales grew over 30%, which was more than three times the prestige fragrance market.

Speaker Change: Sales in the past two quarters were also robust with over 20% growth.

Sue Y. Nabi: Next, on Chloé, the launch of Chloé Signature Intense resonated strongly across many global markets, boosting this core pillar for Chloé. At the same time, the ultra premium Chloé Atelier des Fleurs line maintained strong growth momentum. We also leveraged the success of both lines to relaunch Chloé in the US, which is off to a strong and promising start. Altogether, Chloé revenues increased by a mid-teens percentage in the first half. On Marc Jacobs, our recent launches, Perfect Elixir and Daisy Wild, expanded the brand's reach and boosted performance. Marc Jacobs' Daisy Wild remains the number one fragrance launch in the UK throughout calendar 2024, propelling the overall Daisy franchise to the number one spot. As a result, sales for Marc Jacobs grew to a mid-single digit pace like-for-like in the first half.

Sue Nabi: Next, on Chloé, the launch of Chloé Signature Intense resonated strongly across many global markets, boosting this core pillar for Chloé. At the same time, the ultra premium Chloé Atelier des Fleurs line maintained strong growth momentum. We also leveraged the success of both lines to relaunch Chloé in the US, which is off to a strong and promising start. Altogether, Chloé revenues increased by a mid-teens percentage in the first half. On Marc Jacobs, our recent launches, Perfect Elixir and Daisy Wild, expanded the brand's reach and boosted performance. Marc Jacobs' Daisy Wild remains the number one fragrance launch in the UK throughout calendar 2024, propelling the overall Daisy franchise to the number one spot. As a result, sales for Marc Jacobs grew to a mid-single digit pace like-for-like in the first half.

Speaker Change: Next on the launch of clues signature and toss resonated strongly across many global markets boosting this core Peter for closing at the same time, the ultra premium clearly after the floor line maintained strong growth momentum we also leveraged the.

Speaker Change: Of both lines to re launch <unk> in the U S, which is off to a strong and promising stopped altogether <unk> revenues increased by a mid teens percentage in the first half.

Speaker Change: And Marc Jacobs, our recent launches perfected ixia and <unk> expanded the brand's rich and boosted performance.

Speaker Change: Jacobs Daisy while the remains the number one fragrance launch in the U K throughout calendar 'twenty for propelling the overall Daisy franchise to the number one spot as a result sales from Marc Jacobs grew to a mid single digit base like for like in the first half.

Sue Y. Nabi: Next, on Davidoff, one of our top seven fragrance brands, like-for-like sales in the first half grew at a high single digit level. We are excited about the next phase for Davidoff as we've recently announced Gen Z favorite Charles Melton as the new brand ambassador, with a key initiative for the brand on track for the second half of this year. Importantly, our consumer beauty fragrance portfolio accounts for a high single digit percentage of our sales in the first half of 2025. Our big bet this year was the Adidas Vibes collection of six fragrances, the first mass fragrance line designed and scientifically proven to enhance one's mood, reinforcing our leading fragrance R&D capabilities. We are very encouraged by the initial results.

Sue Nabi: Next, on Davidoff, one of our top seven fragrance brands, like-for-like sales in the first half grew at a high single digit level. We are excited about the next phase for Davidoff as we've recently announced Gen Z favorite Charles Melton as the new brand ambassador, with a key initiative for the brand on track for the second half of this year. Importantly, our consumer beauty fragrance portfolio accounts for a high single digit percentage of our sales in the first half of 2025. Our big bet this year was the Adidas Vibes collection of six fragrances, the first mass fragrance line designed and scientifically proven to enhance one's mood, reinforcing our leading fragrance R&D capabilities. We are very encouraged by the initial results.

Speaker Change: Next on <unk>, one of our top seven fragrance brands like for like sales in the first half grew at the high single digit level and we are excited about the next phase for Debbie does as we've recently announced that Gen Z favorite Charles Medicine, as the new brand Ambassador.

Speaker Change: With a key initiative for the brand on track for the second half of this year.

Speaker Change: Importantly, our consumer beauty fragrance portfolio accounts for a high single digit percentage of our sales in the first half of 'twenty five.

Our big bet this share was.

Speaker Change: Adidas Zipes collection of six fragrances, the first mass fragrance line design and scientifically proven to enhance one's mood reinforcing our leading fragrance R&D capabilities.

Speaker Change: We are very encouraged by the initial results <unk> is on track to be our largest consumer beauty launch in at least six years driving double digit growth in Adidas fragrance sales in the first half.

Sue Y. Nabi: Adidas Vibes is on track to be our largest consumer beauty launch in at least six years, driving double digit growth in Adidas fragrance sales in the first half. This sales growth has been accompanied by market share gains in the countries of launch, including France, Italy, and Central Europe. With Vibes on track to be launched in additional countries in the coming months, we see significant potential for this launch, setting the foundation to transform Adidas Vibes into a multi-category scenting platform. We are also bringing our agile beauty approach to mass fragrances with recent launches under Chanson d'Eau and Prêt-à-Porter, which had been dormant brands in our portfolio. We developed the 6 Cent Prêt-à-Porter collection, which you can see on this slide, in under a year and recently launched it online at Amazon, and in store at Walmart.

Sue Nabi: Adidas Vibes is on track to be our largest consumer beauty launch in at least six years, driving double digit growth in Adidas fragrance sales in the first half. This sales growth has been accompanied by market share gains in the countries of launch, including France, Italy, and Central Europe. With Vibes on track to be launched in additional countries in the coming months, we see significant potential for this launch, setting the foundation to transform Adidas Vibes into a multi-category scenting platform. We are also bringing our agile beauty approach to mass fragrances with recent launches under Chanson d'Eau and Prêt-à-Porter, which had been dormant brands in our portfolio. We developed the 6 Cent Prêt-à-Porter collection, which you can see on this slide, in under a year and recently launched it online at Amazon, and in store at Walmart.

Speaker Change: And this sales growth has been accompanied by market share gains in the countries of launch, including France, Italy, and Central Europe with vibes on track to be launched in additional countries in the coming months.

Speaker Change: We see significant potential for this launch setting the foundation to transform <unk> into a multi category sensing platform.

Speaker Change: We are also bringing our agile beauty approach to mass fragrances with recent launches in <unk> and <unk>.

Speaker Change: Which had been dominant brands in our portfolio with.

Speaker Change: We developed the <unk> pickup of the collection, which you can see on this slide in under a year and you recently launched it online at Amazon and in store at Walmart.

Sue Y. Nabi: With luxury codes, quality juices, and a price point under $20, we are attracting consumers who are looking to participate in the current fragrance index at a value price. The third lever in our fragrance strategy is adding new and attractive scalable licenses. In December, we announced that we entered into a new long-term license agreement with Swarovski, further strengthening our prestige fragrance portfolio. Swarovski Pop Luxury positioning has strong appeal among consumers worldwide, and the brand is present in over 140 countries. The first fragrance under the Swarovski brand will launch in calendar year 2026, and we see significant potential for the fragrance line, which will access Swarovski's 2,300 boutiques in addition to traditional retail. Shifting now to our mass color cosmetics business, which accounts for a low 20s% of our annual sales.

Sue Nabi: With luxury codes, quality juices, and a price point under $20, we are attracting consumers who are looking to participate in the current fragrance index at a value price. The third lever in our fragrance strategy is adding new and attractive scalable licenses. In December, we announced that we entered into a new long-term license agreement with Swarovski, further strengthening our prestige fragrance portfolio. Swarovski Pop Luxury positioning has strong appeal among consumers worldwide, and the brand is present in over 140 countries. The first fragrance under the Swarovski brand will launch in calendar year 2026, and we see significant potential for the fragrance line, which will access Swarovski's 2,300 boutiques in addition to traditional retail. Shifting now to our mass color cosmetics business, which accounts for a low 20s% of our annual sales.

Speaker Change: With luxury codes quantity juices, and the price point under $20.

Speaker Change: Attracting consumers who are looking to participate in the current fragrance index at a value price.

Speaker Change: The third lever in our fragrance strategy is adding new and attractive scalable licenses in December we announced that we entered into a new long term license agreement with <unk> further strengthening our prestige fragrance portfolio.

Speaker Change: Perhaps keep up luxury positioning has strong appeal among consumers worldwide and the brand is present in over 140 countries.

Speaker Change: The first fragrance under the <unk> brand, we launched in calendar year, 2026, and we see significant potential for the fragrance line, which we would access Stawski 2300 boutiques. In addition to traditional retail.

Speaker Change: Shifting now to our mass color cosmetics business, which accounts for a low twenties percentage of our annual sales.

Sue Y. Nabi: Dynamics in the mass color cosmetics market remain complex, with flattish category performance globally and moderate declines in the US, coupled with ongoing competition from established and newer players. The combination of this and continued pressure on certain retailers resulted in our color cosmetic sales declining moderately. However, against this backdrop, we continue to strengthen our brands through a combination of social media advocacy and a more agile innovation cycle. Multi-tier influencer activations behind viral CoverGirl launches such as Outlast Lip Stain and Yummy Gloss Plumper drove a 4-times increase year on year in CoverGirl's earned media value linked to influencers' activity, and the brand maintained an EMV rank of number 5. This continued strength in social media advocacy, coupled with our on-trend innovations, resulted in CoverGirl gaining 60 basis points of online market share during last quarter.

Sue Nabi: Dynamics in the mass color cosmetics market remain complex, with flattish category performance globally and moderate declines in the US, coupled with ongoing competition from established and newer players. The combination of this and continued pressure on certain retailers resulted in our color cosmetic sales declining moderately. However, against this backdrop, we continue to strengthen our brands through a combination of social media advocacy and a more agile innovation cycle. Multi-tier influencer activations behind viral CoverGirl launches such as Outlast Lip Stain and Yummy Gloss Plumper drove a 4-times increase year on year in CoverGirl's earned media value linked to influencers' activity, and the brand maintained an EMV rank of number 5. This continued strength in social media advocacy, coupled with our on-trend innovations, resulted in CoverGirl gaining 60 basis points of online market share during last quarter.

Speaker Change: Dynamics in the mass color cosmetics market remain complex with flattish category performance globally and moderate declines in the U S. Coupled with ongoing competition from established and newer players.

The combination of this and continue its pressure on certain retailers resulted in our cutoff cosmetic sales declining moderately.

Speaker Change: However against this backdrop, we continued to strengthen our brands through a combination of social media advocacy and a more agile innovation cycle.

Speaker Change: Multi tier influencer activations behind viral cutoff game launches such as our class Leap state and Yummy guitar Center drove a four times increase year on year and cover Gal's earned media value linked to influence sales activity and the brand maintained <unk>.

Speaker Change: Number five.

Speaker Change: This continued strength in social media advocacy, coupled with our on trend innovations resulted in covergirl, gaining 60 basis points of online market share during last quarter.

Sue Y. Nabi: As part of our Agile Beauty initiative, we are supplementing our core cosmetics innovation with fast innovation launched in a matter of months, including the recently launched CoverGirl True Blend Skin Enhancer Balms. Similarly, Rimmel's earned media value linked to influencers' activity grew 13%, with the brand ranking number 7 globally in terms of EMV among both mass and prestige brands. This EMV momentum and Rimmel's leading innovations, including Better Than Filters Foundation, supported 30 basis points of online market share gains in the past quarter for Rimmel. Altogether, leveraging this playbook of multi-tiered influencer engagement and support, strong e-com activation, and a robust pipeline of innovations, our consumer beauty makeup brands are performing better than most legacy cosmetics brands. The omnichannel market share of our leading brands, Rimmel, CoverGirl, and Max Factor, is modestly lower, with gains online offset by declines in brick-and-mortar.

Sue Nabi: As part of our Agile Beauty initiative, we are supplementing our core cosmetics innovation with fast innovation launched in a matter of months, including the recently launched CoverGirl True Blend Skin Enhancer Balms. Similarly, Rimmel's earned media value linked to influencers' activity grew 13%, with the brand ranking number 7 globally in terms of EMV among both mass and prestige brands. This EMV momentum and Rimmel's leading innovations, including Better Than Filters Foundation, supported 30 basis points of online market share gains in the past quarter for Rimmel. Altogether, leveraging this playbook of multi-tiered influencer engagement and support, strong e-com activation, and a robust pipeline of innovations, our consumer beauty makeup brands are performing better than most legacy cosmetics brands. The omnichannel market share of our leading brands, Rimmel, CoverGirl, and Max Factor, is modestly lower, with gains online offset by declines in brick-and-mortar.

Speaker Change: As part of our agile beauty initiative, we are supplementing our core cosmetics innovation with fast innovation launched in a matter of months.

Speaker Change: Including the recently launched <unk> cover girl true blend skin enhancer bulbs.

Speaker Change: Similarly removes earned media value zinc to influenza like GDT grew 13% with a brand ranking number seven globally in terms of CMV amongst both mass and prestige brands.

Speaker Change: <unk> momentum and <unk>, leading innovations, including better than filters Foundation supported 30 basis point of online market share gains in the past quarter for reman.

Speaker Change: Altogether, leveraging this playbook of multi tiered influencer engagement and support strong E comm activation and a robust pipeline innovation of innovations. Our consumer beauty makeup brands are performing better than most legacy cosmetics brands the omni.

Speaker Change: China market share of our leading brands V-mail carve out go and Max factor is modestly lower with games online offset by declines in brick and motor the.

Sue Y. Nabi: But importantly, our cosmetics brands are outperforming other established brands, which have seen more significant pressure from newer brands. It's also equally true that many disruptor makeup brands that entered the market in the last 5 to 10 years and saw strong initial momentum are struggling to maintain relevancy. In fact, we believe one of the key drivers of the pressure in the mass cosmetics category is the increasing reliance on newer brands, in contrast with the much healthier luxury cosmetics category, which has a positive balance between heritage brands and new brands, with both fueling the market growth. This picture holds true in the US as well. In the last quarter, while CoverGirl maintained stable to slightly lower market share on an omnichannel basis, most legacy brands have seen material market share declines.

Sue Nabi: But importantly, our cosmetics brands are outperforming other established brands, which have seen more significant pressure from newer brands. It's also equally true that many disruptor makeup brands that entered the market in the last 5 to 10 years and saw strong initial momentum are struggling to maintain relevancy. In fact, we believe one of the key drivers of the pressure in the mass cosmetics category is the increasing reliance on newer brands, in contrast with the much healthier luxury cosmetics category, which has a positive balance between heritage brands and new brands, with both fueling the market growth. This picture holds true in the US as well. In the last quarter, while CoverGirl maintained stable to slightly lower market share on an omnichannel basis, most legacy brands have seen material market share declines.

Speaker Change: But importantly, our cosmetics brands.

Speaker Change: Outperforming other established brands, which have seen more significant pressure from newer brands.

Speaker Change: Also equity true that many disruptor makeup brands that entered the market in the last five to 10 years and so strong initial momentum are struggling to maintain relevancy. In fact, we believe one of the key drivers of the pressure in the mass cosmetics category.

Speaker Change: Is the increasing reliance on newer brands in contrast, with the much healthy year luxury cosmetics category, which has a positive balance between heritage brands and new brands with both fueling the market growth.

Speaker Change: This is Victor holds true in the U S as well.

Speaker Change: In the last quarter, while Coca maintained stable to slightly lower market share on an omnichannel basis.

Speaker Change: Most legacy brands have seen material market share declines.

Sue Y. Nabi: Of course, in addition to our core categories and initiatives, we also continue to capture additional growth opportunities across channels, categories, and markets. We saw strong consumer demand in our e-com business, which accounts for about 20% of our sales. Our e-com sell-out in both our prestige and consumer beauty businesses grew double digits in both Q2 and the first half. This was well ahead of the underlying e-com market growth in the first half, as captured by third parties such as Circana and Nielsen, as we gained market share across many brands, including Burberry and Marc Jacobs in prestige and CoverGirl, Sally Hansen, and Nautica in consumer beauty. At the same time, our e-com sell-in significantly lagged sell-out in both prestige and consumer beauty, as we observed similar behavior in terms of tight order management.

Sue Nabi: Of course, in addition to our core categories and initiatives, we also continue to capture additional growth opportunities across channels, categories, and markets. We saw strong consumer demand in our e-com business, which accounts for about 20% of our sales. Our e-com sell-out in both our prestige and consumer beauty businesses grew double digits in both Q2 and the first half. This was well ahead of the underlying e-com market growth in the first half, as captured by third parties such as Circana and Nielsen, as we gained market share across many brands, including Burberry and Marc Jacobs in prestige and CoverGirl, Sally Hansen, and Nautica in consumer beauty. At the same time, our e-com sell-in significantly lagged sell-out in both prestige and consumer beauty, as we observed similar behavior in terms of tight order management.

Speaker Change: Of course in addition to our core categories and initiatives. We also continue to capture additional growth opportunities across channels categories and markets.

Speaker Change: We saw strong consumer demand in our E comm business, which accounts for about 20% of our sales.

Speaker Change: Our E comm set out in both our prestige in consumer beauty businesses grew double digits in both Q2 and the first half. This was well ahead of the underlying E com market growth in the first half as captured by third parties, such as <unk> and Nielsen as we gained market share.

Speaker Change: Many brands, including burglary, and Marc Jacobs prestige and Covergirl, Sally Hansen and noted in consumer beauty.

At the same time, our E comm setting significantly lagged set out in both prestige and consumer beauty as we observed similar behavior in terms of site order management.

Sue Y. Nabi: Of course, with e-retailers and retailer.com players continuing to gain share within the beauty market and our brands gaining share globally on these platforms, this reaffirms our strong digital capabilities and the relevance of our brands. Shifting now to our skincare business, we are continuing to steadily expand the reach of our brands, Lancaster, Philosophy, and Orveda, through new launches, gradual distribution expansion, and strong social media activations. While we are still only a few months into Lancaster's repositioning as an expert in photo protection and photo repair, the new positioning, coupled with the newly launched Golden Leaf skincare line, are driving continued expansion of the brand with double-digit percentage Lancaster sales growth fueled by both Europe and China. Our social media advocacy strategy is supporting this growth.

Sue Nabi: Of course, with e-retailers and retailer.com players continuing to gain share within the beauty market and our brands gaining share globally on these platforms, this reaffirms our strong digital capabilities and the relevance of our brands. Shifting now to our skincare business, we are continuing to steadily expand the reach of our brands, Lancaster, Philosophy, and Orveda, through new launches, gradual distribution expansion, and strong social media activations. While we are still only a few months into Lancaster's repositioning as an expert in photo protection and photo repair, the new positioning, coupled with the newly launched Golden Leaf skincare line, are driving continued expansion of the brand with double-digit percentage Lancaster sales growth fueled by both Europe and China. Our social media advocacy strategy is supporting this growth.

Speaker Change: Of course with E retailers and retailer Dot com players continuing to gain share within the beauty market and our brands gaining share globally on this platforms. This reaffirms our strong digital capabilities and the relevance of our brands.

Shifting now to our skincare business, we are continuing to steadily expand the reach of our brands Lancaster. He doesn't see end of it all.

Speaker Change: Through new launchers, gradual distribution expansion and strong social media Activations.

Speaker Change: While we are still only a few months into Lancaster is repositioning as a next step in photo protection and photo repair the new positioning coupled with the newly launched at Golden Ridge Skincare line driving continued expansion of the brand with double digit percentage Lancaster sales growth.

Speaker Change: Used by both Europe and China.

Speaker Change: And our social media advocacy strategy is supporting this growth in Q2 noncash staffs EMG grew by a factor of 13 year over year and ranking at number seven amongst its competitive set which is an increase of four ranks versus a year ago.

Sue Y. Nabi: In Q2, Lancaster's EMV grew by a factor of 13 year-over-year, ranking at number 7 among its competitive set, which is an increase of 4 ranks versus a year ago. Similarly, we've seen strong social media momentum behind Philosophy, which ranked number 4 in EMV among its competitive set, which is an increase of 4 ranks again from a year ago. We also see momentum in our Growth Engine Markets, which account for over 20% of our sales, which remains quite strong. In China, which accounts for only 3% of our sales, the market dynamics remain quite challenging for all industry players, even though the fragrance category continues to outperform overall beauty. Despite the headwinds in China, nearly all of our other Growth Engine Markets are performing well.

Sue Nabi: In Q2, Lancaster's EMV grew by a factor of 13 year-over-year, ranking at number 7 among its competitive set, which is an increase of 4 ranks versus a year ago. Similarly, we've seen strong social media momentum behind Philosophy, which ranked number 4 in EMV among its competitive set, which is an increase of 4 ranks again from a year ago. We also see momentum in our Growth Engine Markets, which account for over 20% of our sales, which remains quite strong. In China, which accounts for only 3% of our sales, the market dynamics remain quite challenging for all industry players, even though the fragrance category continues to outperform overall beauty. Despite the headwinds in China, nearly all of our other Growth Engine Markets are performing well.

Speaker Change: Similarly, we've seen strong social media momentum behind philosophy, which ranked number four in EMG amongst its competitive set which is an increase of four ranks again from a year ago.

Speaker Change: We also see momentum in our growth engine markets, which account for over 20% of our sales, which remains quite strong in China, which accounts for only 3% of our sales.

Speaker Change: Market dynamics remain quite challenge for all industry players, even though the fragrance category continues to outperform overall beauty. Despite the headwinds in China nearly all of our other growth engine markets are performing well with the benefit of a healthy beauty market backdrop and limited.

Sue Y. Nabi: With the benefit of a healthy beauty market backdrop and limited impact from retailer destocking dynamics, we are capturing white space opportunities in markets such as Brazil, Mexico, India, Southeast Asia, and Africa. In fact, Coty has now become the number one prestige fragrance company in South Africa. In total, growth engine markets grew close to 10% like-for-like in the first half and by mid-single digits in Q2. Our Latin America business, including Brazil, remains a highlight of our portfolio. Together, these markets contribute 9% of our sales and grew by mid-single digits in the first half. This included momentum across Brazil, Mexico, and smaller local markets, irrespective of the hyperinflationary environment in Argentina. In Brazil, our largest growth engine market, our sell-out in consumer beauty grew over 10% in the first half.

Sue Nabi: With the benefit of a healthy beauty market backdrop and limited impact from retailer destocking dynamics, we are capturing white space opportunities in markets such as Brazil, Mexico, India, Southeast Asia, and Africa. In fact, Coty has now become the number one prestige fragrance company in South Africa. In total, growth engine markets grew close to 10% like-for-like in the first half and by mid-single digits in Q2. Our Latin America business, including Brazil, remains a highlight of our portfolio. Together, these markets contribute 9% of our sales and grew by mid-single digits in the first half. This included momentum across Brazil, Mexico, and smaller local markets, irrespective of the hyperinflationary environment in Argentina. In Brazil, our largest growth engine market, our sell-out in consumer beauty grew over 10% in the first half.

Speaker Change: From retailer Destocking dynamics, we are capturing white space opportunities in markets, such as Brazil, Mexico, India Southeast Asia and Africa. In fact, Coty has now become the number one prestige fragrance company in South Africa.

Speaker Change: In total growth engine markets grew close to 10% like for like in the first half and by mid single digits in Q2.

Speaker Change: Our Latin America business, including Brazil remains a highlight of our portfolio.

Speaker Change: Together these markets contribute 9% of our sales and grew by mid single digits in the first half.

Speaker Change: This included momentum across Brazil, Mexico, and smaller local markets irrespective of the hyper inflationary environment in Argentina.

Speaker Change: In Brazil, our largest growth engine market, our set out in consumer beauty grew over 10% in the first half.

Sue Y. Nabi: Skincare has become one of our largest revenue contributors in Brazil, supported by the successful launches of a face care line, a body hyaluronic acid aqua gel under Monange, and a special edition lotion and body oil line under Pai Chau brand. And while still relatively small, we are building the mass fragrance category in Brazil's retail channels, reaching 7% market share in this country in the mass fragrance retail after only one year, with brands like Gabriela Sabatini, Nautica, and Adidas resonating with consumers. Finally, as part of our ambition to be a leader in sustainability, let me highlight a key recent sustainability milestone. We are proud to announce that last week, CDP raised COTY's climate score to A-minus from the previous score of B, putting us towards the top of thousands of disclosing companies.

Sue Nabi: Skincare has become one of our largest revenue contributors in Brazil, supported by the successful launches of a face care line, a body hyaluronic acid aqua gel under Monange, and a special edition lotion and body oil line under Pai Chau brand. And while still relatively small, we are building the mass fragrance category in Brazil's retail channels, reaching 7% market share in this country in the mass fragrance retail after only one year, with brands like Gabriela Sabatini, Nautica, and Adidas resonating with consumers. Finally, as part of our ambition to be a leader in sustainability, let me highlight a key recent sustainability milestone. We are proud to announce that last week, CDP raised COTY's climate score to A-minus from the previous score of B, putting us towards the top of thousands of disclosing companies.

Speaker Change: Skincare has become one of our largest revenue contributors in Brazil supported by the successful launches of our face care line of <unk> <unk> and a special edition lotion and body line under by child Grant.

Speaker Change: And while still relatively small we are building the mass fragrance category in Brazil, So retail channels, reaching 7% market share in this country in the mass fragrance retail after only one year with brands like Gabriela Sabatini, Nautica and added <unk> <unk>.

Speaker Change: <unk> with consumers.

Speaker Change: Finally, as part of our ambition to be a leader in sustainability, let me highlight a key recent sustainability milestone.

Speaker Change: We are proud to announce that last week CDP raise cookies climate score to a minus from the previous score of be putting us towards the top of thousands of disclosing companies.

Sue Y. Nabi: CDP is the leading global platform rating companies on their management of their environmental impacts. This strong ranking and improvement recognizes Coty's continued progress in measuring our climate impact, setting ambitious yet achievable targets, and progressing on our sustainability agenda. This marked the first year that Coty made submissions to CDP Water and Forests. In sum, we have made major strides in the last four years under our Beauty Atlas sustainability platform, with more still to come. To conclude, we are, of course, not satisfied by the current sales trends. While the resilience of the beauty market, both historically and even now, and solid sell-out trends for the majority of our business give us confidence that the current sales challenges are shorter-term in nature, we are resolute in our objective to return to outperforming the beauty market while continuing our strong margin, EPS, and cash expansion.

Sue Nabi: CDP is the leading global platform rating companies on their management of their environmental impacts. This strong ranking and improvement recognizes Coty's continued progress in measuring our climate impact, setting ambitious yet achievable targets, and progressing on our sustainability agenda. This marked the first year that Coty made submissions to CDP Water and Forests. In sum, we have made major strides in the last four years under our Beauty Atlas sustainability platform, with more still to come. To conclude, we are, of course, not satisfied by the current sales trends. While the resilience of the beauty market, both historically and even now, and solid sell-out trends for the majority of our business give us confidence that the current sales challenges are shorter-term in nature, we are resolute in our objective to return to outperforming the beauty market while continuing our strong margin, EPS, and cash expansion.

Speaker Change: CDP is the leading global platform rating companies on their management of their environmental impacts the strong ranking and improvement recognizes Curtis continuous progress in measuring our climate impact.

Speaker Change: Setting ambitious yet achievable targets and progressing on our sustainability agenda.

Speaker Change: And this marked the first year that cookie made submissions to CDP water and forest in some we have made major strides in the last four years under our beauty that class sustainability platform with more.

Speaker Change: To come.

Speaker Change: To conclude.

Speaker Change: We are of course, not satisfied by the current sales trends.

Speaker Change: While the resilience of the beauty market, both historically and even now and solid sellout trends for the majority of our business gives us confidence that the current sales challenges are shorter term in nature. We are resolute in our objective to return to outperforming the beauty market, while continuing our.

Speaker Change: <unk> margin EPS and cash expansion.

Sue Y. Nabi: The beauty market has changed significantly since we first laid out our strategy and ambitions 4 years ago. From a category perspective, fragrances have accelerated significantly, supported by structural consumer behavior shifts, while color cosmetics is challenged by evolving channel preferences and new business models. At the market level, China is no longer a key short-term growth engine for beauty, while the US market sustains its momentum. With this backdrop, fiscal 2025 is shaping up to be a pivotal year for COTY as we evaluate our operations to fuel COTY's long-term success. And with exciting brand initiatives and distribution opportunities on track for fiscal 2026 and beyond, we remain confident in COTY's ability to accelerate sales growth and fuel industry-leading total shareholder returns. We look forward to sharing a deeper dive into our strategy and outlook as part of our CAGNI presentation on 19 February 2025. Thank you very much.

Sue Nabi: The beauty market has changed significantly since we first laid out our strategy and ambitions 4 years ago. From a category perspective, fragrances have accelerated significantly, supported by structural consumer behavior shifts, while color cosmetics is challenged by evolving channel preferences and new business models. At the market level, China is no longer a key short-term growth engine for beauty, while the US market sustains its momentum. With this backdrop, fiscal 2025 is shaping up to be a pivotal year for COTY as we evaluate our operations to fuel COTY's long-term success. And with exciting brand initiatives and distribution opportunities on track for fiscal 2026 and beyond, we remain confident in COTY's ability to accelerate sales growth and fuel industry-leading total shareholder returns. We look forward to sharing a deeper dive into our strategy and outlook as part of our CAGNI presentation on 19 February 2025. Thank you very much.

Speaker Change: The beauty market has changed significantly since we first laid out our strategy and ambitions four years ago.

Speaker Change: From a category perspective, fragrances have accelerated significantly supported by structural consumer behavior shifts Weill Cornell cosmetics is challenged by evolving channel preferences and new business models.

Speaker Change: At the market level, China is no longer a key short term growth engine for beauty, while the U S market sustained its momentum.

Speaker Change: With this backdrop fiscal 'twenty five is shaping up to be a pivotal year for coty as we evaluate our operations to Hugh cookies long term success.

Speaker Change: And with exciting brand initiatives and distribution opportunities on track for fiscal 'twenty, six and beyond we remain confident in <unk> ability to accelerate sales growth and huge industry, leading total shareholder returns.

Speaker Change: We look forward to sharing a deeper dive into our strategy and outlook as part of our Cagny presentation on February 19th Thank you very much.

Q2 2025 Coty Inc Earnings Call - Pre-Recorded

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