Q1 2026 Coty Inc Earnings Call - Q&A

Speaker #3: Please stand by . Your program is about to begin . If you should require operator assistance during your conference today , please press star zero .

Speaker #3: Good morning and good afternoon , everyone . My name is Madison and I will be your conference operator today . At this time , I would like to welcome everyone to Cody's first quarter fiscal 2026 question and Answer conference call .

Speaker #3: As a reminder , this conference call is being recorded today , November six , 2025 at 9:30 a.m. Eastern Time or 3:30 p.m. Central European Time .

Speaker #3: Please note that on November 5th , at approximately 4:30 p.m. Eastern Time or 10:30 p.m. Central European Time , Cody issued a press release and prepared remarks webcast , which can be found on its Investor Relations website .

Speaker #3: On today's call are Sue Nabi chief executive officer and Laurent Mercier chief financial officer . I would like to remind you that many of the statements today may contain forward looking statements .

Speaker #3: 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 these forward looking statements .

Speaker #3: In addition , except where noted , the discussion of Cody's financial results and Cody's expectations reflect certain adjustments as specified in the non-GAAP Financial Measures section of the company's release .

Speaker #3: With that , we will now open the line for questions . If you would like to ask a question , please press Star One on your keypad to leave the queue at any time , press star two once again , that is star one .

Speaker #3: To ask a question and we'll pause for just a moment to allow everyone a chance to join the queue . And we will take our first question from Rob Rottenstein with Evercore .

Speaker #3: Please go ahead .

Speaker #4: Great . Thank you very much . I've got a few questions all around the the Gucci topic , if you will . So , you know , first , can you talk a little bit about how exiting the Gucci license will impact your overall portfolio , how you're thinking about it and then you know , does does the carrying announcement , you know , along with L'Oreal actually have any influence at all on how you're thinking about your overall licensing model ?

Speaker #4: You know , any tweaks to that ? And then finally , is it , you know , is it at all possible that that caring will try to take the license back before it's expiration and can can , can can you come to a deal with caring in terms of an early license termination ?

Speaker #4: Thank you very much .

Speaker #5: Good morning, Robert. Thank you very much for giving me again the opportunity to speak about this important topic. So let me start with the first question, which is around how this is going to impact Coty's portfolio.

Speaker #5: So with the public announcement that Gucci license will no longer be part of our portfolio after its expiry , as you can imagine , the focus of Coty for the next several years will be on number one , will be Overdriving .

Speaker #5: The brands with the biggest long term growth potential . Number two , we will be building and I should even say amplifying the new licenses and brands we have recently added to Coty's portfolio .

Speaker #5: And number three , in parallel , we will optimize the Gucci brand during its remaining term . While of course fully respecting and operating within all of its terms .

Speaker #5: In fact , and it's important for me to have the occasion to say this , the uncertainty over the last few years around the fate of Gucci license resulting from the public comments of the licensor were a challenge for the organization and the Coty reputation , including whether to build the brand in a strategic or a tactical way , and also its role in our overall portfolio .

Speaker #5: And now , as there is full clarity on the brand direction , we now have a fantastic opportunity to grow the rest of the portfolio with a bigger sense of focus , especially on the ultra luxury part of the business .

Speaker #5: With the comprehensive portfolio of ultra premium brands , I'm thinking about Ateliers de Flore from Chloé . I'm thinking about Burberry signatures , Jil Sander collection and Coty collection , and upcoming Retro and Marni collections .

Speaker #5: So even without the Gucci license , it's important to state that we remain firmly in the top three for total global fragrances and for prestige fragrances .

Speaker #5: And with this clarity on the fate of Gucci , now we will work to optimize the brand in a more tactical way . Until the last day of the license , while focusing on accelerating the rest of our portfolio .

Speaker #5: As a reminder , and you have seen it probably in our prepared remarks , we have already grown some of our biggest brands at a fantastic pace in the last five years .

Speaker #5: Burberry by 140% , Hugo Boss by 33% , Chloé by 70% , Marc Jacobs by 50% . And we can now focus even more on further expanding these brands , while in parallel building our next stars with brands like Swarovski , just like we have built Gucci , you may recall that we grew Gucci by 60% over the same period at constant currencies .

Speaker #5: Now I would like to take this opportunity . Robert , if you allow me to stress that some of the delusional media rumors from recent months about Coty potentially exploring the sale of some of our key fragrances are .

Speaker #5: Categorically , categorically false . May I repeat , categorically false . We are committed more than ever to solidifying our position as a prestige beauty company with a emphasis on fragrance and scenting across price points with cosmetics and skincare .

Speaker #5: Best in class capabilities . And as you can imagine , our long term fragrance brands are the backbone of this strategy . Now moving to the second part , which is a very important also question , which is around the impact of these .

Speaker #5: This event on the licensing model . I think that we can say that everything that happened confirms that the winners in beauty have been and will remain specially specialty beauty players like Coty in housing beauty remains incredibly complex , incredibly costly for beauty players , which reinforces the appeal of the licensing model .

Speaker #5: May I remember remind everyone about why this licensing model is really a strong model . It offers strong return on investment with no material upfront license or renewal costs .

Speaker #5: While established brand equity increases , the probability of success and of payoff . Again , a successful licensing business depends on portfolio diversification and on minimizing the license duration , risk .

Speaker #5: In recent years , as you have seen , we have proactively renewed and significantly extended many key licenses , including Hugo Boss , Marc Jacobs , Adidas , Davidoff and all these for an additional 15 years plus .

Speaker #5: So today , I would say that 85% of our portfolio is either an own brand , a perpetual license , which we view like an own brand or a license with very long term remaining duration of more than seven years , 85% .

Speaker #5: Again . So for our core beauty portfolio , it remains also a very long term in terms of nature , with approximately 80% of the brands either being owned or under long term license .

Speaker #5: We also have been very prudent , as I said it , for many years now , that no single brand in our portfolio accounts for more than approximately 10% of our sales .

Speaker #5: Now I'm going to answer the last part of your question , which is around , you know , an early exit from the license .

Speaker #5: So again , there is no change to Coty's existing license on our ability to operate the Gucci beauty license . All contractual rights remain in place and continue as agreed .

Speaker #5: Coty will continue to manage and operate Gucci Beauty under the same structure already in motion and overall , we continue to solve this amicably with caring .

Speaker #5: Last part of your question , which is around , you know , a potential deal , as you can imagine , we are always open to evaluate any proposal .

Speaker #5: If and only if this creates real value for the company.

Speaker #4: Thank you very much .

Speaker #3: Thank you .

Speaker #5: You're welcome .

Speaker #3: And we will take our next question from Susan Anderson with Canaccord . Please go ahead .

Speaker #6: Hi . Good morning . Thanks for taking my questions . I guess maybe just a follow up on the last question . I did see that Cody filed a lawsuit against caring for breach of contract .

Speaker #6: I guess maybe if you could just talk a little bit about what that means for Cody , if that may helps to sell the license back early and then also , I don't think you talked specifically about any financial impact when the Gucci license does transition to L'Oreal .

Speaker #6: Not sure if you could give any numbers around that . Thank you .

Speaker #5: Yeah . Good morning Suzanne . So let me maybe start with the second part of your question , which is around , you know , potentially the impact of this exit when it happens , as we have been discussing for some time now , we have been actively focused on risk management in the portfolio of Coty .

Speaker #5: And again , as I said it earlier , no brand bigger than approximately 10% of our sales . Now that the public announcement has been done , that the license will no longer be part of our portfolio after the expiry date , our focus for the next several years will be on Overdriving .

Speaker #5: The brands with the biggest long term growth potential is going to be also on building and amplifying the new licenses and brands . We recently added to the portfolio and in parallel , optimizing the Gucci brand during its remaining term .

Speaker #5: As you can know , it , Gucci is currently a sizable brand in a portfolio , so the loss of the brand at expiry will mean some profit impact in the year after .

Speaker #5: To address this gap , we will be overdriving again . All the other rest of the portfolio , while also addressing our cost structure .

Speaker #5: Now , regarding litigation , what I can tell you is that of course , I will not comment on ongoing litigations and I can tell you that we will defend our rights until the last day , until the last hour of the contract .

Speaker #6: Okay , great . Thank you so much . Good luck . This holiday .

Speaker #5: Thank you very much .

Speaker #3: Thank you . And we will take our next question from Filipo Falorni with Citi . Please go ahead .

Speaker #7: Hi . Good morning . Good afternoon everyone . Sue , maybe can you comment a bit about the better performance that you're seeing in .

Speaker #7: Fiscal Q2 that is driving you to the higher end of the range . Are you seeing an acceleration in some category growth ? Is it the inventory dynamic solving itself earlier than expected ?

Speaker #7: And then I had a bigger picture question on the fragrance . Miss , can you just help us Dimensionalize opportunity in that category and also just the margin profile as you expand there .

Speaker #7: Thank you .

Speaker #5: Yeah . Good morning Filippo . So on the first question regarding the better performance that we are contemplating for Q2 , which led to our , you know , increase in terms of being at the more favorable part of the guidance for Q2 .

Speaker #5: I would say that it's a it's a it's a mix of everything . In fact , the dynamism of the fragrance market in the US continues to be very strong .

Speaker #5: Again , we are talking about a market that's in the mid-single digit growth and what we see in Q2 in terms of market dynamics , is confirming this .

Speaker #5: This element . So we believe it's going to be a good holiday season . This is number one . Number two , our innovations , specifically the boss bottle beyond launch that started at the end of the Q1 , more or less .

Speaker #5: And it was exclusive to travel retail during the summer until the end of August . So it all started in domestic markets around the end of September .

Speaker #5: This is such a big success that I believe this is going to translate into a stronger selling . Also , for Q2 , both beyond bottle is today the number two innovation in Europe .

Speaker #5: The number one innovation in volume in the region , number one in Australia , and even number six in the US as an innovation for a brand that has never been a US , I would say traditionally present brand on this very important market .

Speaker #5: So for us , it's really a big strategic bet . And it looks like it's going to be very , very big , which will help us to increase our market share in the male fragrances , which are also booming as you know it .

Speaker #5: Number three , I think the dynamism is also at the entry part of the market , which is around the , you know , entry .

Speaker #5: Prestige brands . But moreover , around the mists , the mist today are representing more or less 2% of Q1 net revenues in fragrances , which is big .

Speaker #5: I have to say . We have become the number three or number four player in Europe , number one in Italy , to take a few examples everywhere or every brand that launched its own mist is seeing a very strong halo effect on the base business , be it Kylie , be it Philosophy or Calvin Klein that are the first to go to market .

Speaker #5: And there are other brands arriving soon . And last but not least , you have a question around you had the question around the gross margin of mists .

Speaker #5: The way we have built these mist is number one to make them fully additional . And this is really confirmed . Its really incremental sales for the company attracting consumers , which are the youngest part of the Gen Z target , which are not usually buying into traditional fragrances to that level .

Speaker #5: So this is one and two. It's a gross margin that is in line with that of our prestige fragrances. So there is absolutely no dilution in the way we have crafted and created this new category.

Speaker #5: So in a way , this Q2 better than expected , you know , outlook is driven by our ability . And I guess we are the only company doing this to play high , low , while at the same time securing the heart of our business , which are premium fragrances .

Speaker #3: Thank you . And our next question comes from Oliver Chen with TD Cowen . Please go ahead .

Speaker #8: Hi son . Laurent , as we are excited about the second half here . What are your thoughts in terms of the key launches and how you'll think about categories and the comparisons as well ?

Speaker #8: That will will give that return to that that growth in the second half . Also , as you think about consumer beauty and Brazil , would love your thoughts there on potential outlines and outcomes and timelines .

Speaker #8: Thank you .

Speaker #5: Yeah , thank . you . Good morning Oliver . So indeed about H2 and indeed we are confirming that we will be back to growth in the second half of this fiscal .

Speaker #5: So that's that's the the number one message . So you know , what is you know , behind this number is that indeed you know , the continuum momentum of the you know , the beauty category .

Speaker #5: And especially of the prestige and fragrance category . So we see really consistent resilient growth of this category . And again , you you see the numbers .

Speaker #5: If I take the , the Q1 category , you fragrance growth in the US which is a plus 7% and our sellout in Q1 is in line with this category growth .

Speaker #5: And indeed all the work that the new management team is putting in place in the US is really confirming that this trend is going to continue .

Speaker #5: And amplify in in the H2 . So that's very important category . And the US , which as you remember , was the main issue that we had a year ago , now we are really already , you know , in a good place and we are recovering very fast .

Speaker #5: So that's that's really the big element . It's going to be amplified by strong innovation . So as , as you heard and as you saw , I mean , you know , both billion bottle is off a very good start .

Speaker #5: And of course, it's going to continue and amplify. We are coming also in the second half with an additional blockbuster.

Speaker #5: So again the fundamentals of this growths are here . And the last element which I want to highlight , which is very important , is that indeed at the end of this calendar , 25 , we are seeing that our sellout performance will converge with the selling performance .

Speaker #5: So indeed , we are seeing already this quarter and we continue next quarter that the level of inventory with retailers is declining significantly .

Speaker #5: And indeed that we can really be back to really a well , you know , synchronized sellout and selling . So these are really all the the drivers , the key drivers confirming indeed having our H2 back to growth .

Speaker #5: And and of course to continue on these on this growth trajectory . So indeed that's really on on the H2 . So indeed on consumer beauty cosmetics again I mean we announced and we made very clear that indeed now is really led by a Gordon van Brittan who , as you know , I mean knows very well the company .

Speaker #5: I mean , he was , you know , head of transformation , you know , a few few years ago . And , you , Gordon , is really currently assessing and really reviewing , you know , the full potential of this division working on all components .

Speaker #5: So the number one mandate , of course , is really to to rejuvenate really the PNL , I mean , the profit and the cash generation from , from cosmetics .

Speaker #5: And I can tell you that Gordon is already full speed , really , you know , built already a strong team , really to manage all these key initiatives .

Speaker #5: And I can tell you it's covering the full spectrum again of of the PNL starting , you know , of course , with top line growth to net gross margin and CP allocation and of course , the fixed costs .

Speaker #5: So it's really a it's really motion . And we will keep you posted . Of course , on the progress on on this journey .

Speaker #5: And second , which is on , on Brazil , as you know , Brazil is a very you know , is a profitable business .

Speaker #5: I mean , really the work done over the last years really has brought very , very good results and indeed , I mean , conclusions on , Brazil are likely to come before the on consumer beauty than on color , cosmetic business .

Speaker #3: Thank you . And we will take our next question from Olivia Tong with Raymond James . Please go ahead .

Speaker #9: Great . Thanks . Good morning . With respect to fragrances , you've got really substantial growth , both in ultra prestige and Miss .

Speaker #9: So can you talk about the opportunity you see for both of them and more importantly , how to balance the two , particularly in terms of of the missed side and and then just building on that , you know , just thinking about the barriers to entry on miss and then what your view is on price mix , impact over time , given those dynamics .

Speaker #9: Thank you .

Speaker #5: Good morning . Olivia . Let me take this this question . So again let me start with the missed with the miss part .

Speaker #5: So this missed . As I said it earlier , we really designed them with 2 or 3 principles in mind . The first principle is that we have to be where the Gen Z's and the consumers are shopping today , and they are shopping this kind of fragrances .

Speaker #5: You could think about a miss like a kind of modern Cologne . It's not new . The mist , but the way we've designed our mist .

Speaker #5: Maybe is the comparison that could be done between the Nokia mist and an iPhone . iPhone mist , more or less . That's exactly what we have done .

Speaker #5: And on top of this , we added entry barriers . Indeed , it's a very important element . First , in terms of our ability to use the library of winning sounds from our prestige , division .

Speaker #5: And number two , I can tell you that the formulation of our body mist , whatever is the brand , are patented formulations using ingredients that are there to act on the longevity of the scent , on the skin of the body .

Speaker #5: And this is really a unique know-how to the company, which allows us to do what a lot of brands miss and have not been able to do so far, which is to create a lasting impression.

Speaker #5: If you read online what people love and hate about The Mist , they love that it's easy to to spray . It's also stackable and this the phenomenon is incremental because a lot of young users use it as a lingerie , and then they add their favorite fragrance at the main outfit on top .

Speaker #5: So it's not . Instead , it's with the rest of the fragrance consumption . And if you look at social media , the number one night gap is that it does not last .

Speaker #5: So this is where we use this patented technology that allows the fragrance to stay on the skin as true as possible . From the moment you spray it on to the end of the day .

Speaker #5: So that's the first element regarding the mist . And for me , the mist is just a first step into what we call scenting everything , which I believe is the mission of the company .

Speaker #5: The know-how of the company and the competitive advantage of the company. So you'll see many more things arriving in the near future around scenting your body.

Speaker #5: Number two , which is around the ultra premium part of the market . This part , you know , we used to call it niche .

Speaker #5: I think "niche" is really the wrong word because it's not that niche. In fact, today, if you look at the biggest niche brands, they represent multiple hundreds of millions of dollars of net revenues in a country like the U.S., or in a country like the U.K., it's close to 20% of the prestige fragrance market.

Speaker #5: So it's a sizeable portion of the market and probably the most profitable part of the market to given the high prices that are that are used in this , in this area there , it took us some time to build a portfolio , but now we have a portfolio again , there aren't that many companies that have a portfolio of ultra premium brands .

Speaker #5: Again , I quoted the earlier , of course , the Chloé Atelier collection , the Burberry signature collection , the Jil Sander collection .

Speaker #5: The Boss Collection , the upcoming Marni and H2O collections , and of course , the own brand , which is Paris . And we are continuing to chase new names in this area so that we are able to build a Coty Ultra Premium business that represents between 10 and 20% of our business , and today , it's only 1% .

Speaker #5: It's growing at 17% . But we start from a small base . So for me , this is a fantastic growth engine for the future of the company .

Speaker #5: So again , we are the only company playing high low on top of the core of the market .

Speaker #3: Thank you . And we will take our next question from Ashley Helgens with Jefferies . Please go ahead .

Speaker #10: Hi . This is Sydney on for Ashley . Thanks for taking our question . Can you talk a little bit more about what you're seeing in terms of promotion and how that maybe varies by region or channel ?

Speaker #10: It sounded like there was some challenge from peers leaning into promotions. So, just curious if that puts pressure on you guys to shift your promotional approach at all.

Speaker #10: And then also just curious about any trade down or up dynamics . As you've mentioned , you are really spanning price point , especially within your fragrance offerings .

Speaker #10: So curious kind of what you're seeing there in terms of consumption trends . Thank you .

Speaker #5: Yeah . Good morning Ashley . In . Yeah indeed . So indeed we are seeing some indeed you know some promotional activity . Indeed .

Speaker #5: I mean , I can tell you indeed from some of our peers , I mean we are very disciplined and very diligent really , you know , not to be aggressive on that game .

Speaker #5: So indeed , we are very choiceful really focusing on , again on innovation and continue really to , to protect indeed our brands .

Speaker #5: So and we are also developing really some ways to , you know , to avoid this game , which is as we shared a few times now we have really , you know , dedicated teams working on revenue management and revenue management is exactly how to avoid playing this kind of , you know , promotional game .

Speaker #5: I give you some , some examples is in the US one one category , which is growing fast is a paint spray paint spray are smaller format 30ml .

Speaker #5: Indeed lower , you know , lower price and indeed instead of promoting , you know , some of our icons , in fact some consumers can go to these to this segment and it's also a smart way to enter the category .

Speaker #5: And then they go they go to the icon . So we are really developing different formats , different games . Exactly . To to match .

Speaker #5: Also , sometimes , you know , some pricing expectations at the same time . What is very interesting and was the previous point from Sue is that you are seeing that , you know , the high premium category is flying .

Speaker #5: Okay . So , so it shows that we have really we really our capabilities , or how and really all the formulation and you know , that we are bringing there is really a path that it's not it's not you know , only about price .

Speaker #5: It's really about always , you know , the excitement about the category . So I think again , we are very well positioned and you understand that these 5 to 500 is the best answer to these promotional environment , because we are covering the full spectrum .

Speaker #5: We are , you know , matching the needs of all our consumers . And indeed , I can tell you . So we are very choiceful and we are making sure indeed that we are protecting .

Speaker #5: So our profitability . So and on your last point , dry down versus trade off , I mean , that's exactly this point about the 5 to 500 .

Speaker #5: So it's really managing the full the full spectrum . But it is also , you know , a very great answer to this , to this question .

Speaker #5: I mean , we are seeing Gen Z very excited by your body mist . You know , it's 20 to 30 US dollar product that they really enjoy different formulas .

Speaker #5: As we indicated . And then it's also a path at some moment to access , to more premium products . So you absolutely right .

Speaker #5: But I think also the strategy the teams and the tools that we are we have in place are really helping to navigate in this , this environment , in fact , to complement what Laurent just said , we are seeing clearly that consumers are stacking , you know , the sense this comes from the Middle East .

Speaker #5: This is a trend that's globalizing . We call it sense stacking or sent wardrobe , depending on the moment . So it's about using a body mist on your skin and then using a lotion on the rest of your body .

Speaker #5: And on top of this, you add your favorite cologne for the day and your favorite elixir for the night. So that's exactly what we are seeing.

Speaker #5: So no trade down because the more expensive categories are the fastest growing . But it's a story of and rather than a story of either .

Speaker #5: In fact .

Speaker #3: Thank you . And our next question comes from Charles Scotti with Kepler . Please go ahead .

Speaker #11: Yes . Hello . Good afternoon . Do you hear me ?

Speaker #5: Yes we do . Yes . Good morning .

Speaker #11: Okay , good . Thank you . Good morning . I have three questions , please . The first one . How how is the shift toward the e-commerce affecting the selling ?

Speaker #11: Sell out dynamics ? I suspect that brick and mortar retailers are experiencing some destocking , partly due to the intensifying competition from from online players .

Speaker #11: So I would like to understand whether the shift to online , particularly in the US , could lead to a prolonged period of net stocking in in that market .

Speaker #11: Second question on EMEA , which , if I'm not mistaken , was on 9% . Like for like in Q1 , it seems that it's the mask cosmetic business , which is dragging on growth .

Speaker #11: Could you comment on the trends of the prestige fragrance business you mentioned mid-single-digit growth in the US . What about EMEA ? And if you could give us an idea of the price mix , volume breakdown of the category , both in EMEA and in the US , it would be helpful .

Speaker #11: And lastly , in China , demand seems to be recovering . You are obviously under indexed on the Chinese market , but you mentioned that the outlook for the fragrance category is is quite promising .

Speaker #11: Who do you think will take the lion's share of the market between the niche brands and prestige brands , and with which brands are you going to tackle ?

Speaker #11: The Chinese market ? More specifically ? Thank you .

Speaker #5: Yeah , good . Good afternoon . Good afternoon Charles . So indeed , I can take the the first one indeed . And we can complement it in an on China .

Speaker #5: So indeed on your question about brick and mortars and and and e-commerce just to to zoom out a little . Yeah . Of course , I mean e-commerce is , is growing very fast and , and you know that now it's , it's more than 1 billion net revenue for total COTY INC. .

Speaker #5: And it's it's growing fast in the , in the Q1 we are seeing . I mean , the sell out of our e-commerce on both divisions is 5 to 6% .

Speaker #5: So indeed , we are really taking full opportunity of these channels . So that's of course very dynamic from the stocking standpoint , no major difference , you know , between both what I would highlight though is that of course , e-commerce players and the number one being Amazon .

Speaker #5: As you know , they are , you know , very strict and very well-organized on their inventory management . So indeed , it means that it's it's creating .

Speaker #5: If you look at full picture in the , you know , reduction of retailers inventory . So indeed you have I would say I call it more mix effect , you know , from between e-com and brick and mortar .

Speaker #5: So that's the fact . But it's not material . The other element is also that it's putting pressure on the brick and mortar retailers .

Speaker #5: And as a result , they are also becoming more disciplined and strict on their inventory management . So I think you need really to look at , to look at it more , more this way between both both channels , EMEA .

Speaker #5: Yeah . Down indeed . Yeah . It's it's mostly it's mostly color cosmetic indeed . As as you see for the whole company indeed our you know prestige fragrance sell out is positive .

Speaker #5: So it's , it's really , you know , dynamic . And again all the , you know the innovations that we are bringing , I mean both beyond bottles is a number two male initiative in Europe .

Speaker #5: It's number one in volume in Germany . And we are only at the beginning . So it's going to continue . And amplify in the Q2 .

Speaker #5: So you will see really the sell out in in EMEA continue to , to increase at the same time , same as the US .

Speaker #5: Here . We are still facing and we will , you know , close by end of calendar . Indeed . You know from a selling standpoint facing the retailer destocking and you know for example Douglas made very made public that they are focusing on inventory reduction .

Speaker #5: So these are really on the first two element . And yeah I will hand over to Laurent . Maybe I can complement your answer regarding the dynamics of the fragrance market in the US versus in Europe .

Speaker #5: Again , what we can say is that the prestige fragrance market grew by 5% during the quarter . Globally , which is a little slower than month ago , but it's ahead of many other consumer categories , including color cosmetics in the US , the market remains very strong .

Speaker #5: As I said it before , 7% of growth in the quarter and very importantly , this is to answer your question , this includes low single digit volume growth .

Speaker #5: Since the category continues to gain users and additional usage occasions in Europe , the picture is a bit different where the market has been growing only by , you know , low single digits in Q1 , coming from mid-single digits .

Speaker #5: This is mainly due to one market . It's very important where , by the way , Coty is quite small . It's the French market where the likes of L'Oreal , LVMH and such are very big .

Speaker #5: It's the market that is really very big and not very dynamic . Whereas markets like the UK and Spain remain very strong , with a mid-single digit growth , including here again , low single digit growth from units .

Speaker #5: So that's the picture between the and EMEA value volume growth . Now on China . The market is recovering . That's good news .

Speaker #5: It's recovering on all the categories that the company is playing on . Be it skincare or fragrances or color cosmetics . Coty has posted 15% sales growth in the market to be compared to a market that was around 7% of growth , which is a good growth .

Speaker #5: And this was driven by our skincare business . Lancaster is doing wonders in this market , which is very important . It's the most competitive skincare market in the world , even if it's from a small base .

Speaker #5: The brand is doing 90% of growth on a market that's more or less 8 to 9% . So we are growing ten times faster than the market .

Speaker #5: Both in photo protection , which is UV care , but also on traditional skincare . With our moisturizer . Among the best selling moisturizers of the Chinese market .

Speaker #5: The other part , which is the biggest part of our business , it's 70% of our business . It's fragrances . And there the market is back to growth and we are growing two times faster than the market .

Speaker #5: So your question is what is needed to compete in this market exactly? The brands we have at Coty, in fact, are there.

Speaker #5: It's not a question of high low . It's all about high high high high . And the higher you go the better it is .

Speaker #5: And again , I've been describing at length the very comprehensive portfolio of ultra premium brands that we have today in our hands . Again , which is doing well in Asia .

Speaker #5: Burberry signature boss collection , Jil Sander signature , Marni and upcoming collection , and Coty Paris . And I'm sure I forgot 1 or 2 , but this is really a portfolio that will allow us to play in this area that never before to reach here .

Speaker #5: Not 20% of the market , but likely 40 to 50% of the Chinese market , are ultra premium brands . So there there is really a big game to be played with a very , very profitable business to build .

Speaker #3: Thank you . And we will take our next question from Anna Lisel with Bank of America . Please go ahead .

Speaker #9: Hi . Good morning . Good afternoon . Thank you .

Speaker #12: So much for the question . I was wondering if I could follow up on The prestige fragrance expectations for just the holiday season .

Speaker #12: You know , gifting is such a big driver of fragrance sales for many retailers during this time . And should we expect trends , I guess be more similar as you saw in fiscal Q1 , on the more difficult comps for fragrance gifting , despite some of the sequential improvement that you might be expecting in the next quarters .

Speaker #12: And then on the on the beauty side , just wanted to follow up on the comment regarding the rapid channel shift . If you could elaborate on on where you're seeing buyers gravitate in mass beauty and how it's impacting your business .

Speaker #12: Thank you .

Speaker #5: Yeah , so good morning . Good morning . And indeed , I mean , you know , just to confirm again and we shared with you a few numbers .

Speaker #5: I mean , we are , you know , very confident again about , you know , the prestige fragrance performance and category . Again , you know , the numbers .

Speaker #5: I mean , it has been , you know , very resilient for many years , many quarters . You know , the fragrance index that we talked a lot about , I mean is , is fully at play .

Speaker #5: So we are expecting similar trend for Q1 also amplified by very powerful innovation . And both beyond bottle is one of them . We are seeing Gen Z being very very excited by the category .

Speaker #5: And again , back to the previous point . What's very healthy is , is 5 to 500 , where we are seeing , you know , the high premium category growing double digit and of .

Speaker #5: Course , holiday season is a great season for that . And at the same time , we are seeing entry premium being very dynamic .

Speaker #5: So yeah , we are . We are expecting really very dynamic trend in the US and also , in , in Europe . So now on the yes , yes .

Speaker #5: So yeah , we are . We are expecting really very dynamic trend in the US and also in your question is about the shifts that are happening between .

Speaker #5: Let's say the brick and mortar slash retailers on one side versus Amazon and TikTok shop on the other side . If I'm not wrong , then I will elaborate on this .

Speaker #5: What we are seeing indeed is a shift that's very important , and it's a story of . And rather than a story of either .

Speaker #5: Again , here , you know , it's a question of funnel . And what we see is that a lot of the youngest consumers , at least , are really , you know , looking for what's new on TikTok , almost like a search engine and a hype engine at the same time .

Speaker #5: It's already also an e-commerce engine , not in every country . It's the case in UK . I think it's the retailer already in the UK , and this is where we learned our lesson with Rimmel , where we really tested the channel to understand how , you know , to play with this channel , and we understood that we need to see it as an investment channel .

Speaker #5: Now , more and more as an e-com channel . But this is really where you create the cool factor for your brand , and then you move to Amazon where you get the ratings and the big numbers .

Speaker #5: Then after you go to the rest of the retailers , including Dotcoms second beauty from retailers . So that's really a way that is today played by key players when it comes to how to how to create , you know , virality or how to create desirability and demand .

Speaker #5: So we are doing this in the US also with CoverGirl , that also did the test on TikTok shop recently , and we are amplifying these two moves in the coming quarter with the new innovations that are that are going to be done in , in Q3 .

Speaker #5: The other thing that we are also seeing is that there is a shift in terms of the share of what we call in the mass color cosmetics brands.

Speaker #5: If I take the example of beauty in Australia , which was a kind of , you know , this kind of indie brands that are quite cheap in terms of pricing , very nimble , very agile , mainly from the shelf innovation , from TPMS , etc.

Speaker #5: they are collapsing . They are collapsing after 1 or 2 years . And this is really something that we are seeing across many regions with this kind of players , including key ones in the US , but also in UK who are starting to lose market share and who are not giving the growth of the category that retailers are expecting .

Speaker #5: So we expect a kind of inside the channels . We expect a kind of rebalancing between this indie players , which are more or less new players , and the more traditional players which are learning the lesson quite quickly .

Speaker #3: Thank you . And we will take our next question from Shivani Chowdhury with JP Morgan . Please go ahead .

Speaker #9: Good morning and good afternoon. Thanks for taking my question. I have a couple of questions. You addressed the strategic review to Oliver's question earlier, but I wanted to dig a little bit further into how you're thinking about the various options.

Speaker #9: Can you give us more color on the results that would inform your decision for each of the options out of this review , whether you decide to keep the business given like you're trying , you had management changes and you just mentioned you're trying with CoverGirl testing out on TikTok , or would it be a JV or an outright sale given the strategic review , how do you prioritize ?

Speaker #9: Prioritize the decision of the strategic review versus the wella sale ? Thanks .

Speaker #5: Okay . Let me let me take this last question . Good morning . So indeed , what we are doing are two stories , two very different stories .

Speaker #5: So you have on one side the Brazilian business , which has stated it before , is a very profitable business , a business of $400 million , a business that doubled its size in the last , I would say , decade .

Speaker #5: A business that has its own factory that produces more or less half a billion units per year . R&D specialized in melanin rich skins .

Speaker #5: You have also end to end capabilities , be it in terms of digital capabilities , commercial capabilities , marketing capabilities . And last but not least , with the portfolio of brands .

Speaker #5: That is very different from the global portfolio of brands that Coty is operating elsewhere. So it's really local players. The number one nail maker, Risqué.

Speaker #5: The number one , you know , male skincare brand in in the market , big growth in terms of skincare leadership position in terms of body sensing .

Speaker #5: So it's really a business that we believe have potentially more chances to continue to do its journey with the new acquire , if I may call it like this .

Speaker #5: And this could happen quite quickly given the size of the business, the profitability, and the dynamism. So, that's one. On the other side.

Speaker #5: Regarding the color cosmetics business there again , the strategic review is a real one . It's not , you know , just a word to mean something else .

Speaker #5: It's really reviewing our strategic options . The first one is by nature to do the job of making these business as fast growing and as profitable as possible and as quickly as possible , and there the duo that Gordon and myself are having at the helm of this business , hopefully will produce quick results that we will see in the coming quarters .

Speaker #5: Then there is a deeper work that's going to be done . On the cost structure , on the gross to net . You know , ability to lower this part that is today very , very heavy .

Speaker #5: But also regarding the ANP allocation, we believe we went too far in terms of spending a lot on Gen Z's, who are by nature the least loyal consumers on Earth.

Speaker #5: Instead of keeping our key loyal millennials and Gen X users , which are the big portion of the market , but also the ones that are growing more and more , this kind of market , given the indie brands are not growing anymore , the market .

Speaker #5: So in a way , that's really the outcome potentially , of this part and there , you know , the first results in 12 to to 18 months .

Speaker #5: But it could take longer . So there is not the idea to sell the business tomorrow . There is the idea to really assess all the possibilities and see if this is an area where we want to continue to play or not .

Speaker #5: Specifically , given the fact that it's going to be more and more and we see it a business of in and out , small players , sometimes they go big , but they become smaller later and they take a shelf space and they disappear .

Speaker #5: So that's really something we need to pay attention to . Do we want to play this game or not ? Are we equipped to play this game and are we able to do I would say , a positive progress in this , in this , in this area .

Speaker #5: Now , does it have any impact on Vella ? Absolutely not . You know , Vila is a very separate topic . As Lawrence said , it's several times the standstill period is over since the end of calendar 24 .

Speaker #5: We are actively, more than ever, working on this topic right now. So stay tuned.

Speaker #3: Thank you . And at this time , there are no further questions in queue . I will now turn the meeting back to our presenters .

Speaker #5: Thank you everyone for your questions and see you soon .

Speaker #3: Thank you . This brings us to the end of today's meeting . We appreciate your time and participation . You may now disconnect .