Q1 2026 Coty Inc Earnings Call - Pre-Recorded

November 5, 2025

Speaker #1: In launches and expansion as consumers continue to prioritize fragrances as affordable luxuries . We are encouraged by the progress and we remain confident in our ability to build momentum as we move through fiscal year 26 .

Sue Y. Nabi: New launches and expansion as consumers continue to prioritize fragrances as affordable luxuries. We are encouraged by the progress, and we remain confident in our ability to build momentum as we move through fiscal year 2026. In prestige, we saw sequential improvement in like-for-like sales trends as anticipated. Sales declined by 7% like-for-like in Q4, improving moderately to a 6% like-for-like decline in Q1. We are, of course, not happy with this performance as we continue to face a bigger gap between sell-in and sellout than many of our peers, following several years of outperformance versus our peer group, which likely also drove retailers to stock up on Coty's blockbusters. As we further shrink the sell-in and sellout gaps and reinvest behind our brands to drive stronger sellout during the holidays, we expect further prestige like-for-like trend improvement in Q2.

Speaker #1: In prestige , we saw sequential improvement in like for like sales trends as anticipated , sales declined by 7% . Like for like in Q4 , improving moderately to a 6% like for like decline in Q1 .

Speaker #1: We are , of course not happy with this performance as we continue to face a bigger gap between selling and sell out than many of our peers .

Speaker #1: Following several years of outperformance versus our peer group , which likely also drove retailers to stock up on Coty's blockbusters . As we further shrink the selling and sell out gaps and reinvest behind our brands to drive stronger sell out during the holidays , we expect further prestige .

Speaker #1: Like for like trend improvement in Q2 in consumer beauty . Now we are also seeing signs of sequential improvement , like for like sales declined by 12% in the fourth quarter and 11% in Q1 .

Sue Y. Nabi: In consumer beauty now, we are also seeing signs of sequential improvement. Like-for-like sales declined by 12% in Q4 and 11% in Q1. We anticipate further improvement in Q2 as the new divisional leadership drives operational changes. The broader beauty market is moderating after several years of exceptional growth. However, fragrances continue to outperform, benefiting from a structural shift towards affordable luxury, often described as recession glam or treatonomics. The prestige fragrance category has grown at a mid-single-digit pace in the last three quarters, even as other consumer categories languished. Fragrance volumes were up low single digits in Q1, reflecting sustained demand. The mass cosmetics category saw a sharper slowdown in fiscal 2025, though we are seeing some trend improvement to low single-digit percentage growth in Q1. These dynamics underscore the importance of agility in navigating the evolving beauty landscape.

Speaker #1: We anticipate further improvement in Q2 as the new divisional leadership drives operational changes. The broader beauty market is moderating after several years of exceptional growth.

Speaker #1: However , fragrances continue to outperform , benefiting from a structural shift towards affordable luxury often described as recession , glam or traditional mix , the prestige fragrance category has grown at a mid-single-digit pace in the last three quarters , even as other consumer categories languished .

Speaker #1: Fragrance volumes were up low single digits in Q1 , reflecting sustained demand . The mass cosmetics category saw a sharper slowdown in fiscal 25 , though we are seeing some trend improvement to low single digit percentage growth in Q1 .

Speaker #1: This dynamics underscore the importance of agility in navigating the evolving beauty landscape . Against this backdrop , we saw diverging dynamics between our sell out and sales performance in each division .

Sue Y. Nabi: Against this market backdrop, we saw diverging dynamics between our sellout and sales performance in each division. In prestige, the prestige beauty market grew 6% in Q1, reflecting strong consumer demand across categories, while our sellout grew 1%. Specifically in prestige fragrances, which is our core category, the market grew by 5%, while our sellout grew around 2%. The couple percentage points gap between the prestige fragrance market and our prestige sellout reflects the timing of our Boss Bottled Beyond fragrance launch at the end of the quarter, and our more disciplined approach to elevated promotional activities we see in many markets. As anticipated, our prestige sell-in tracked well below sellout due to ongoing retailer destocking, though this gap narrowed from the double-digit gap we saw in Q4. Our actions to rightsize inventory levels are impacting near-term results, but are necessary for a healthier trajectory ahead.

Speaker #1: In prestige . The prestige beauty market grew 6% in Q1 , reflecting strong consumer demand across categories . While our sell out grew 1% , specifically in prestige fragrances , which is our core category .

Speaker #1: The market grew by 5% , while our sell out grew around 2% . The couple percentage points gap between the prestige fragrance market and our prestige sell out reflects the timing of our boss battle .

Speaker #1: Beyond fragrance launch at the end of the quarter and our more disciplined approach to elevated promotional activities . We see in many markets as anticipated , our prestige saline tracked well below sell out due to ongoing retailer destocking , though this gap narrowed from the double digit gap we saw in Q4 .

Speaker #1: Our actions to right size inventory levels are impacting near-term results , but are necessary for a healthier trajectory ahead in consumer beauty . The dynamics are different .

Sue Y. Nabi: In consumer beauty, the dynamics are different. While the mass beauty market grew 2% in Q1, our sellout declined 6% and sell-in declined 11%, driven by rapid channel shifts, media investment reallocations away from lower return areas, and competitive pressure. These dynamics underscore the importance of our performance improvement plan for the consumer beauty color cosmetics business, alongside the ongoing strategic review. Now, I want to take a moment to discuss the progress we're making to address the challenges we faced in fiscal 2025. One of our top priorities has been to address the challenges we face in the US market, which accounted for the vast majority of our sales declines in 2025. In the spring, we announced the new regional structure to make Coty nimbler and more aligned with today's evolving channel landscape.

Speaker #1: While the beauty market grew 2% in Q1 , our sell declined 6% and saline declined 11% , driven by rapid channel shifts . Media investment relocations away from lower return areas and competitive pressure .

Speaker #1: These dynamics underscore the importance of our performance improvement plan for the consumer beauty and color cosmetics business, alongside the ongoing strategic review.

Speaker #1: Now , I want to take a moment to discuss the progress we're making to address the challenges we faced in fiscal 25 . One of our top priorities has been to address the challenges we face in the US market , which accounted for the vast majority of our sales declines in 25 .

Speaker #1: In the spring , we announced the new regional structure to make Coty nimbler and more aligned with today's evolving channel landscape . We also appointed new leadership in the US , and we are now benefiting from a seasoned leadership team and an overarching regional structure that adds another layer of experience and agility .

Sue Y. Nabi: We also appointed new leadership in the US, and we are now benefiting from a seasoned leadership team and an overarching regional structure that adds another layer of experience and agility. These adjustments are yielding positive green shoots as we close the gap between our US prestige fragrance sellout and the overall US prestige fragrance market from an approximately 5-point gap in Q4 2025 to full alignment with the market in Q1 of fiscal 2026. This progress validates the impact of our organizational and commercial interventions and reinforces our confidence in returning to outperformance in the US market. More effective leadership, sharper execution, better alignment between sell-in and sellout are driving meaningful improvement across our key metrics in the US.

Speaker #1: These adjustments are yielding positive greenshoots as we close the gap between our US prestige fragrance sell out and the overall US prestige fragrance market .

Speaker #1: From an approximately five-point gap in Q4 25 to full alignment with the market in Q1 of fiscal 26. This progress validates the impact of our organizational and commercial interventions and reinforces our confidence.

Speaker #1: In returning to outperformance in the US market . More effective leadership , sharper execution , better alignment between saline and sellout are driving meaningful improvement across our key metrics .

Speaker #1: In the US . In Q1 , we closed the gap between our US prestige fragrance sellout and the US market , with both growing approximately 7% , reflecting the impact of targeted interventions and commercial actions .

Sue Y. Nabi: In Q1, we closed the gap between our US prestige fragrance sellout and the US market, with both growing approximately 7%, reflecting the impact of targeted interventions and commercial actions. We expect to broadly maintain this alignment in the coming quarters. While our US prestige revenues have tracked well below our sellout over the last three quarters due to retailer destocking, inventory trends are improving. With our solid sellout growth in the last two quarters, and assuming the prestige fragrance market continues to grow at a similar pace, we expect our US prestige sell-in to return to growth in Q2. These results demonstrate Coty's agility and commitment to returning to outperformance in our largest markets. We have taken decisive steps to fundamentally improve Coty's ROI and operational efficiency. The next phase of All In to Win is underway, targeting significant fixed cost savings across the organization.

Speaker #1: We expect to broadly maintain this alignment in the coming quarters. While our U.S. prestige revenues have tracked well below our sellout over the last three quarters due to retailer destocking, inventory trends are improving with our solid growth for the last two quarters. Assuming the prestige fragrance market continues to grow at a similar pace, we anticipate further positive developments.

Speaker #1: We expect our US prestige saline to return to growth in Q2 . This results demonstrate Coty's agility and commitment to returning to outperformance in our largest markets .

Speaker #1: We have taken decisive steps to fundamentally improve coty's ROI and operational efficiency . The next phase of all in to Win is underway .

Speaker #1: Targeting significant cost savings across the . Our newly established performance and operational excellence office is reinforcing operational oversight focused on consistent performance tracking and improving ROI in Q1 , we generated over 40 million in productivity savings and more than 10 million in fixed cost reduction .

Sue Y. Nabi: Our newly established performance and operational excellence office is reinforcing operational oversight, focused on consistent performance tracking and improving ROI. In Q1, we generated over $40 million in productivity savings and more than $10 million in fixed cost reduction. We remain on track to deliver approximately $200 million in combined fixed cost and productivity savings in fiscal 2026, giving us the flexibility to reinvest in growth, offset inflation, and support profit expansion. In light of the tariff landscape, Coty has taken decisive steps to reinforce, here again, our competitive advantages. We transferred some production of US-bound fragrances to our domestic plant, including mass fragrances, Adidas and Nautica, and also fragrance mists. We will continue to transfer additional fragrance products and adjacencies while we assess the final scope, prioritizing return on investment.

Speaker #1: We remain on track to deliver approximately $200 million in combined six IT costs and productivity savings in fiscal 20 . Six , organization flexibility to reinvest in growth , offset inflation and support profit expansion .

Speaker #1: In light of the tariff landscape . Coty has taken decisive steps to reinforce here again our competitive advantages . We transferred some production of US bound fragrances to our domestic plant , including mass fragrances , Adidas and Nautica , and also fragrance mists .

Speaker #1: We will continue to transfer additional fragrance products and adjacencies while we assess the final scope , prioritizing return on investment . All of these actions reinforce Coty's resiliency and relative cost advantage versus our peers who continue to produce primarily in Europe .

Sue Y. Nabi: All of these actions reinforce Coty's resiliency and relative cost advantage versus our peers, who continue to produce primarily in Europe. With the recent tariff updates, we now expect a gross tariff impact of under $50 million for the year, with a net impact of under $40 million, which is approximately $20 million lower than our assumptions several months ago. As we discussed last quarter, our digital and e-com teams are now embedded within local markets and brand organizations. This structure enables omni-channel execution and empowers commercial decision-making at the local level. In Q1, our e-com sellout grew mid-single digits in both prestige and consumer beauty, reflecting the effectiveness of our strategy and the demand for our brands online. As shared last quarter, we are accelerating AI implementation across Coty with a new roadmap to embed digital innovation throughout our operations.

Speaker #1: With the recent tariff updates . We now expect a gross tariff impact of under $50 million for the year , with a net impact of under 40 million , which is approximately 20 million lower than our assumptions several months ago .

Speaker #1: As we discussed last quarter , our digital and e-comm teams are now embedded within local markets and brand organizations . The structure enables omnichannel execution and empowers commercial decision making at the local level .

Speaker #1: In Q1 , our E-comm sellout grew mid-single digits in both prestige and consumer beauty , reflecting the effectiveness of our strategy and the demand for our brands online .

Speaker #1: As of last quarter , we are accelerating AI implementation across Coty with a new roadmap to embed digital innovation throughout our operations . A few priorities include content automation with AI , smarter decisions through predictive analytics and visualization , and better user experiences through chatbots .

Sue Y. Nabi: A few priorities include content, automation with Agentic AI, smarter decisions through predictive analytics and visualization, and better user experiences through chatbots. Plus, new AI assistance in procurement, for instance, which are transforming contracts and negotiations. With the rise of agentic shopping across retail platforms, we are already developing and integrating tools to enhance the shopper experience, including selection, optimization, and virtual try-ons. These initiatives are optimizing fixed cost investments across back-end functions and reducing the cost of content creation, freeing up funds for working media. We're already seeing some early benefits and expect them to ramp up over the coming years. Now, let me turn it over to Laurent to discuss our financial results and outlook.

Speaker #1: Plus new AI assistants in procurement for instance , which are transforming contracts and negotiations . And with the rise of agent shopping across retail platforms , we are already developing and integrating tools to enhance the shopper experience , including selection , optimization and virtual try ons .

Speaker #1: This initiatives are optimizing fixed cost investments across back end functions and reducing the cost of content creation , freeing up funds for working media .

Speaker #1: We already seeing some early benefits and expect them to ramp up over the coming years . Now let me turn it over to Laurent to discuss our financial results and outlook .

Speaker #1: Thank you . Sue . Our Q1 results were in line with expectations and guidance as we navigate the complex external environment and implement necessary changes within Coty .

Pierre-André Terisse: Thank you, Sue. Our Q1 results were in line with expectations and guidance. As we navigate the complex external environment and implement necessary changes within Coty, we remain focused on steadily improving our performance trend throughout fiscal year 2026. Our Q1 adjusted gross margin was 64.5%, in line with our expectations. This represents a decline of 100 basis points compared to the prior year, which reflects lower sales, as well as a 40 basis points headwind from tariffs. Despite near-term sales and gross margin pressure, we maintain strong support for ANCP in Q1. Our ANCP investment was approximately 26% of net revenues, up 110 basis points from the prior year. This demonstrates our ongoing commitment to invest behind our brands to drive consumer engagement, long-term growth, and value creation. Adjusted EBITDA declined 18% in Q1, in line with guidance.

Laurent Mercier: Thank you, Sue. Our Q1 results were in line with expectations and guidance. As we navigate the complex external environment and implement necessary changes within Coty, we remain focused on steadily improving our performance trend throughout fiscal year 2026. Our Q1 adjusted gross margin was 64.5%, in line with our expectations. This represents a decline of 100 basis points compared to the prior year, which reflects lower sales, as well as a 40 basis points headwind from tariffs. Despite near-term sales and gross margin pressure, we maintain strong support for ANCP in Q1. Our ANCP investment was approximately 26% of net revenues, up 110 basis points from the prior year. This demonstrates our ongoing commitment to invest behind our brands to drive consumer engagement, long-term growth, and value creation. Adjusted EBITDA declined 18% in Q1, in line with guidance.

Speaker #1: We remain focused on steadily improving our performance trends throughout fiscal year 2026. Our Q1 adjusted gross margin was 64.5%, in line with our expectations.

Speaker #1: This represents a decline of 100 basis points compared to the prior year , which reflects lower sales as well as a 40 basis points headwind from tariffs .

Speaker #1: Despite near-term sales and gross margin pressure , we maintained strong support for ANP in Q1 . Our ANP investment was approximately 26% of net revenues , up 110 basis points from the prior year .

Speaker #1: This demonstrates our ongoing commitment to invest behind our brands to drive consumer engagement , long term growth and value creation . Adjusted EBITDA declined 18% in Q1 , in line with guidance .

Speaker #1: The decline primarily reflected lower sales and lower gross margin , partially offset by lower fixed costs . Our disciplined approach to cost management and operational efficiency helps mitigate some of the top line pressures , even as we invested behind our brands and strategic priorities .

Pierre-André Terisse: The decline primarily reflected lower sales and lower gross margin, partially offset by lower fixed costs. Our disciplined approach to cost management and operational efficiency helps mitigate some of the top-line pressures, even as we invested behind our brands and strategic priorities. Our Q1 adjusted EPS, excluding the equity swap, was $0.15, in line with expectations. As discussed last quarter, we have launched the next phase of our All In to Win program, targeting $130 million in annual fixed cost savings by fiscal year 2027, alongside ongoing productivity savings. In Q1, we generated fixed cost savings of over $10 million, in addition to over $40 million in productivity savings. We continue to expect about $200 million in cumulative savings in fiscal year 2026....

Laurent Mercier: The decline primarily reflected lower sales and lower gross margin, partially offset by lower fixed costs. Our disciplined approach to cost management and operational efficiency helps mitigate some of the top-line pressures, even as we invested behind our brands and strategic priorities. Our Q1 adjusted EPS, excluding the equity swap, was $0.15, in line with expectations. As discussed last quarter, we have launched the next phase of our All In to Win program, targeting $130 million in annual fixed cost savings by fiscal year 2027, alongside ongoing productivity savings. In Q1, we generated fixed cost savings of over $10 million, in addition to over $40 million in productivity savings. We continue to expect about $200 million in cumulative savings in fiscal year 2026....

Speaker #1: Our Q1 adjusted EPs , excluding the equity swap , was $0.15 , in line with expectations . As discussed last quarter , we have launched the next phase of our all in to Win program , targeting $130 million in annual fixed cost savings by fiscal year 27 , alongside ongoing productivity savings in Q1 .

Speaker #1: We generated fixed cost savings of over $10 million. In addition to over $40 million in productivity savings, we continue to expect about $200 million in cumulative savings in fiscal year 2026.

Speaker #1: Altogether , our cumulative savings under the All in Turin is close to 900 million . Between fiscal year 21 and Q1 fiscal 26 .

Pierre-André Terisse: Altogether, our cumulative savings under the All In to Win program is close to $900 million between fiscal year 2021 and Q1 fiscal 2026. These savings provide us the flexibility to reinvest in growth, offset inflation, and other cost pressures, and support profit expansion. Shifting to our cash flow and balance sheet. We generated $11 million of free cash flow in Q1, an improvement of $19 million versus last year. As a result, we ended Q1 with leverage of 3.7, up 0.2 turns from the end of Q4, primarily driven by lower EBITDA. With strong seasonal free cash flow expected in Q2, we anticipate leverage to come down again exiting next quarter. Deleveraging remains a key objective for us, and we are currently actively pursuing the monetization of Vela.

Laurent Mercier: Altogether, our cumulative savings under the All In to Win program is close to $900 million between fiscal year 2021 and Q1 fiscal 2026. These savings provide us the flexibility to reinvest in growth, offset inflation, and other cost pressures, and support profit expansion. Shifting to our cash flow and balance sheet. We generated $11 million of free cash flow in Q1, an improvement of $19 million versus last year. As a result, we ended Q1 with leverage of 3.7, up 0.2 turns from the end of Q4, primarily driven by lower EBITDA. With strong seasonal free cash flow expected in Q2, we anticipate leverage to come down again exiting next quarter. Deleveraging remains a key objective for us, and we are currently actively pursuing the monetization of Vela.

Speaker #1: These savings provide us the flexibility to reinvest in growth , offset inflation and other cost pressures , and support profit expansion . Shifting to our cash flow and balance sheet , we generated 11 million of free cash flow in Q1 and improvement of 19 million versus last year .

Speaker #1: As a result , we ended Q1 with leverage of 3.7 , up 0.2 from the end of Q4 , primarily driven by lower EBITDA , with strong seasonal free cash flow expected in Q2 .

Speaker #1: We anticipate leverage to come down again exiting next quarter . Deleveraging remains a key objective for us , and we are currently actively pursuing the monetization of Vela on the balance sheet side in Q1 , we successfully refinanced $900 million of calendar year 26 debt maturities at an attractive cost of approximately 5.6% , with strong participation from investment grade investors .

Pierre-André Terisse: On the balance sheet side, in Q1, we successfully refinanced $900 million of calendar year 2026 debt maturities at an attractive cost of approximately 5.6%, with strong participation from investment-grade investors. We continue to expect seasonally strong Q2 free cash flow of over $300 million, supporting first half free cash flow of over $350 million, which should cover the remaining portion of our calendar year 2026 maturities. And in parallel, our focus remains on deleveraging and smoothing out our maturity towers. These actions reinforce Coty's financial position and reflect our disciplined approach to capital allocation, ongoing deleveraging, and risk management as part of our goal to become an investment-grade company. As we move into Q2, consistent with what we discussed last quarter, we expect sequential improvement in sales and profit trends versus Q1.

Laurent Mercier: On the balance sheet side, in Q1, we successfully refinanced $900 million of calendar year 2026 debt maturities at an attractive cost of approximately 5.6%, with strong participation from investment-grade investors. We continue to expect seasonally strong Q2 free cash flow of over $300 million, supporting first half free cash flow of over $350 million, which should cover the remaining portion of our calendar year 2026 maturities. And in parallel, our focus remains on deleveraging and smoothing out our maturity towers. These actions reinforce Coty's financial position and reflect our disciplined approach to capital allocation, ongoing deleveraging, and risk management as part of our goal to become an investment-grade company. As we move into Q2, consistent with what we discussed last quarter, we expect sequential improvement in sales and profit trends versus Q1.

Speaker #1: We continue to expect seasonally strong Q2 free cash flow of over 300 million , supporting first half free cash flow of over 350 million , which should cover the remaining portion of our calendar year 26 maturities .

Speaker #1: And in parallel , our focus remains on deleveraging and smoothing out our maturity towers . These actions reinforce Coty's financial position and reflect our disciplined approach to capital allocation .

Speaker #1: Ongoing deleveraging and risk management . As part of our goal to become an investment grade company . As we move into Q2 , consistent with what we discussed last quarter , we expect sequential improvement in sales and profit trends versus Q1 .

Speaker #1: The organizational changes underway in the US continue to yield results and should continue to build through the year . We still anticipate net revenues to be negative in the first half .

Pierre-André Terisse: The organizational changes and the way in the US continue to yield results and should continue to build through the year. We still anticipate net revenues to be negative in the first half, as strong contribution from innovation, new subcategories, and distribution gains are offset by headwinds from trade inventory reduction, a more promotional environment, and elevated year-over-year comparisons. Importantly, we anticipate net revenues will turn positive in the second half, supported by new launches, alignment between sell-in and sell-out, and easing comparisons. Lower sales, the net negative impact from tariffs, and the anticipated restorations of variable compensation are weighing on EBITDA in the first half. However, we expect positive EBITDA in the second half, supported by a return to sales growth, stepped up contribution from tariff mitigation, and the full benefit of our fixed cost savings initiatives. Let me share more concrete guidance for Q2.

Laurent Mercier: The organizational changes and the way in the US continue to yield results and should continue to build through the year. We still anticipate net revenues to be negative in the first half, as strong contribution from innovation, new subcategories, and distribution gains are offset by headwinds from trade inventory reduction, a more promotional environment, and elevated year-over-year comparisons. Importantly, we anticipate net revenues will turn positive in the second half, supported by new launches, alignment between sell-in and sell-out, and easing comparisons. Lower sales, the net negative impact from tariffs, and the anticipated restorations of variable compensation are weighing on EBITDA in the first half. However, we expect positive EBITDA in the second half, supported by a return to sales growth, stepped up contribution from tariff mitigation, and the full benefit of our fixed cost savings initiatives. Let me share more concrete guidance for Q2.

Speaker #1: As strong contribution from innovation , new subcategories and distribution gains are offset by headwinds from trade inventory reduction , a more promotional environment and elevated year over year comparisons .

Speaker #1: Importantly , we anticipate net revenues will turn positive in the second half , supported by new launches . Alignment between selling and sellout and easing comparisons , lower sales and net negative impact from tariffs and the anticipated restoration of variable compensation are weighing on EBITDA in the first half .

Speaker #1: However , we expect positive EBITDA in the second half , supported by a return to sales growth stepped up contribution from tariff mitigation and the full benefit of our fixed cost savings initiatives .

Speaker #1: Let me share more concrete guidance for Q2 . We continue to expect a gradual improvement in sales trends through fiscal year 26 from the Q4 25 life or like levels , with strong sales in October , particularly in prestige expect Q2 .

Pierre-André Terisse: We continue to expect a gradual improvement in sales trends through fiscal year 2026 from the Q4 2025 like-for-like levels. With strong sales in October, particularly in Prestige, we expect Q2 like-for-like sales to land at the more favorable end of our prior guidance of -3% to -5% like-for-like, with sequential trend improvement in both Prestige and Consumer Beauty. We estimate a low- to mid-single-digit Forex benefit on our reported revenues in Q2. We anticipate continued gross margin pressure in Q2, driven by lower sales and a sequentially higher net impact of tariffs. Fixed cost savings from the All In to Win program are expected to broadly offset the negative impact from the resumption of variable compensation.

Laurent Mercier: We continue to expect a gradual improvement in sales trends through fiscal year 2026 from the Q4 2025 like-for-like levels. With strong sales in October, particularly in Prestige, we expect Q2 like-for-like sales to land at the more favorable end of our prior guidance of -3% to -5% like-for-like, with sequential trend improvement in both Prestige and Consumer Beauty. We estimate a low- to mid-single-digit Forex benefit on our reported revenues in Q2. We anticipate continued gross margin pressure in Q2, driven by lower sales and a sequentially higher net impact of tariffs. Fixed cost savings from the All In to Win program are expected to broadly offset the negative impact from the resumption of variable compensation.

Speaker #1: Like for like sales to land at the more favorable end of our prior guidance of minus 3% to -5% . Like for like with sequential trend improvement in both prestige and consumer beauty , we estimate a low to mid single digit forex benefit on our reported revenues in Q2 .

Speaker #1: We anticipate continued gross margin pressure in Q2 , driven by lower sales and a sequentially higher net impact of tariffs . Fixed cost savings from the all in to win program .

Speaker #1: Are expected to broadly offset the negative impact from the resumption of variable compensation . We do expect quarterly phasing of net fixed costs to fluctuate as savings built over the year , while the year on year negative impact from variable compensation will be most pronounced in Q2 and Q3 .

Pierre-André Terisse: We do expect quarterly phasing of net fixed costs to fluctuate as savings build over the year, while the year-on-year negative impact from variable compensation will be most pronounced in Q2 and Q3. We continue to expect gradual profit trend improvement, with adjusted EBITDA declining by a low- to mid-teens percentage in Q2, consistent with our prior guidance. Importantly, with declining Fed rates and some benefit from cross-currency swaps, we expect quarterly P&L interest expense to remain broadly consistent with our Q1 interest in the $45 to 50 million range, resulting in annual interest expense of around $190 million. This reflects roughly $25 million in interest savings year-on-year or a $0.02 EPS benefit. Therefore, we expect you to adjust adjusted EPS, excluding the equity swap of $0.18 to 0.21, bringing the first half adjusted EPS, excluding swap, to $0.33 to 0.36, consistent with prior guidance.

Laurent Mercier: We do expect quarterly phasing of net fixed costs to fluctuate as savings build over the year, while the year-on-year negative impact from variable compensation will be most pronounced in Q2 and Q3. We continue to expect gradual profit trend improvement, with adjusted EBITDA declining by a low- to mid-teens percentage in Q2, consistent with our prior guidance. Importantly, with declining Fed rates and some benefit from cross-currency swaps, we expect quarterly P&L interest expense to remain broadly consistent with our Q1 interest in the $45 to 50 million range, resulting in annual interest expense of around $190 million. This reflects roughly $25 million in interest savings year-on-year or a $0.02 EPS benefit. Therefore, we expect you to adjust adjusted EPS, excluding the equity swap of $0.18 to 0.21, bringing the first half adjusted EPS, excluding swap, to $0.33 to 0.36, consistent with prior guidance.

Speaker #1: We continue to expect gradual profit trend improvement with . EBITDA We declining by a low to mid teens percentage in Q2 . Consistent with our prior guidance .

Speaker #1: Importantly , with declining fed rates and some benefit from cross-currency swaps , we expect quarterly net interest expense to remain broadly consistent with our Q1 interest in the 45 to 50 million range , resulting in annual interest expense of around 190 million .

Speaker #1: This reflects roughly 25 million in interest savings year on year , or a $0.02 EPs benefit . Therefore , we expect Q2 adjusted EPs excluding the equity swap of 18 to $0.21 , bringing the first half adjusted EPs excluding swap to 33 to $0.36 .

Speaker #1: Consistent with prior guidance , we continue to estimate seasonally stronger free cash flow in H1 fiscal 26 of over 350 million . Resulting in leverage at the end of calendar year 25 .

Pierre-André Terisse: We continue to estimate seasonally stronger free cash flow in H1 fiscal 2026 of over $350 million, resulting in leverage at the end of calendar year 2025, approximately in line with the Q4 2025 leverage level of around 3.5 times. Turning now to our outlook for the second half. We continue to expect our like-for-like sales to return to growth in the second half as sell-in and sell-out reach alignment, and supported by several key launches in prestige, as well as more favorable comparisons. We also expect to return to adjusted EBITDA growth in the second half, targeting around $1 billion in adjusted EBITDA for the year. While this outlook implies very strong year-over-year expansion in our second half EBITDA, it is important to remind that this is off very low prior year comparisons, particularly in Q4 2025.

Laurent Mercier: We continue to estimate seasonally stronger free cash flow in H1 fiscal 2026 of over $350 million, resulting in leverage at the end of calendar year 2025, approximately in line with the Q4 2025 leverage level of around 3.5 times. Turning now to our outlook for the second half. We continue to expect our like-for-like sales to return to growth in the second half as sell-in and sell-out reach alignment, and supported by several key launches in prestige, as well as more favorable comparisons. We also expect to return to adjusted EBITDA growth in the second half, targeting around $1 billion in adjusted EBITDA for the year. While this outlook implies very strong year-over-year expansion in our second half EBITDA, it is important to remind that this is off very low prior year comparisons, particularly in Q4 2025.

Speaker #1: Approximately in line with the Q4 25 leverage level of around 3.5 times . Turning now to our outlook for the second half , we continue to expect our like for like sales to return to growth in the second half as selling and sell out reach alignment and supported by several key launches in prestige as well as more favorable comparisons .

Speaker #1: We also expect to return to adjusted EBITDA growth in the second half , targeting around 1 billion in adjusted EBITDA for the year .

Speaker #1: While this outlook implies very strong year over year expansion in our second half , EBITDA , it is important to remind that this is of very low prior year comparisons , particularly in Q4 25 on a two year basis , our EBITDA outlook for second half fiscal year 26 is a few percentage points higher than second half of fiscal year 24 .

Pierre-André Terisse: On a two-year basis, our EBITDA outlook for second half fiscal year 2026 is a few percentage points higher than second half of fiscal year 2024. The expected profit growth will in turn fuel Adjusted EPS growth in the second half. Our goal is also to continue deleveraging in calendar year 2026, as we target reaching an investment-grade profile. Now, let me turn the call over to Sue to discuss our evolution in lockstep with the beauty market.

Laurent Mercier: On a two-year basis, our EBITDA outlook for second half fiscal year 2026 is a few percentage points higher than second half of fiscal year 2024. The expected profit growth will in turn fuel Adjusted EPS growth in the second half. Our goal is also to continue deleveraging in calendar year 2026, as we target reaching an investment-grade profile. Now, let me turn the call over to Sue to discuss our evolution in lockstep with the beauty market.

Speaker #1: The . Expected profit growth will in turn fuel adjusted EPs growth in the second half . Our goal is also to continue delivering in calendar year 26 as we target reaching an investment grade profile .

Speaker #1: Now , let me turn the call over to Sue to discuss our evolution in lockstep with the beauty market . Thank you very much , Laurent .

Speaker #1: Coty has always been a best in class fragrance operator . And in this next phase , we are doubling down to become a fragrance and setting powerhouse .

Sue Y. Nabi: Thank you very much, Laurent. Coty has always been a best-in-class fragrance operator, and in this next phase, we are doubling down to become a fragrance and scenting powerhouse from $5 to $500. This is a category where Coty has a proven right to win, backed by leading R&D and IP, manufacturing, marketing, and distribution capabilities, combined with a very attractive brand portfolio. First, we have a strong, long-duration portfolio that provides a solid foundation for sustainable growth. Developments in the beauty and luxury industry over the past year all confirm that the winners in beauty have been, and will remain, specialized beauty players like Coty. In-housing beauty remains incredibly complex and costly for non-beauty players, reinforcing the appeal of the licensing model. Licensors offer strong ROI with no material upfront license or renewal costs, while established brand equity increases the probability of success and payoff.

Speaker #1: From 5 to $500 . This is a category where Coty has a proven right to win , backed by leading R&D and IP manufacturing , marketing and distribution capabilities .

Speaker #1: Combined with the very attractive brand portfolio . First , we have the strong , long duration portfolio that provides a solid foundation for sustainable growth developments in the beauty and luxury industry over the past year , all confirm that the winners in beauty have been and will remain specialized beauty players like Coty in Beauty remains incredibly complex and costly for beauty players , reinforcing the appeal of the licensing model .

Speaker #1: Licenses offer strong ROI , with no material upfront . License or renewal costs . While established brand equity increases , the probability of success and payoff a successful licensing business depends on portfolio diversification and minimizing licensed duration risk .

Sue Y. Nabi: A successful licensing business depends on portfolio diversification and minimizing license duration risk. In recent years, we have proactively renewed and significantly extended many key licenses, including Hugo Boss, Marc Jacobs, Adidas, and Davidoff, for an additional 15+ years. Today, 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 7 years or more. Even when looking at our core beauty portfolio, approximately 80% of our brands are either owned or under long-term license. We have also been prudent in ensuring that no single brand in our portfolio accounts for more than approximately 10% of our sales.

Speaker #1: In recent years , we have proactively renewed and significantly extended many key licenses , including Hugo Boss , Marc Jacobs , Adidas and Davidoff for an additional 15 plus years .

Speaker #1: Today , 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 seven years or more .

Speaker #1: Even when looking at our core beauty portfolio , approximately 80% of our brands are other owned or under long term license . We have also been prudent in ensuring that no single brand in our portfolio accounts for more than approximately 10% of our sales .

Speaker #1: With the public announcement that the Gucci license will no longer be part of our portfolio after its expiry , our focus for the next several years will be on Overdriving , the brand with the biggest long term growth potential .

Sue Y. Nabi: With the public announcement that the Gucci license will no longer be part of our portfolio after its expiry, our focus for the next several years will be on overdriving the brands with the biggest long-term growth potential, building and amplifying our newly added licenses and brands, and in parallel, optimizing the Gucci brand during its remaining term. The second critical point is that Coty maintains a top position in global fragrances. We remain a top 3 global fragrance player, with leading positions in both prestige and mass fragrances. In the highly attractive $15 billion prestige fragrance market, Coty is a top 3 player with 12% market share. Importantly, even excluding the Gucci license, Coty solidly remains the number 3 player in prestige fragrances, a position we aim to boost further by overdriving our core brands and doubling down on our new licenses.

Speaker #1: Building and amplifying our newly added licenses and brands . And in parallel , optimizing the Gucci brand during its remaining term . The second critical point is that Coty maintains a top position in global fragrances .

Speaker #1: We remain a top three global fragrance player with leading positions in both prestige and mass fragrances . In the highly attractive 15 billion prestige fragrance market .

Speaker #1: Coty is a top three player with 12% market share . Importantly , even excluding the Gucci license , Coty solidly remains the number three player in prestige fragrances , a position we aim to boost further by overdriving our core brands and doubling down on our new licences .

Speaker #1: Among the top five global fragrance players only Coty and L'Oreal operate licensing models , meaning luxury brands have limited partners capable of building scaled global and importantly , Multi-category beauty businesses .

Sue Y. Nabi: Among the top five global fragrance players, only Coty and L'Oréal operate licensing models, meaning luxury brands have limited partners capable of building scaled, global, and importantly, multi-category beauty businesses, combining prestige fragrances and prestige cosmetics. With this backdrop, we continue to attract new and desirable licenses, most recently adding Swarovski, Etro, and Marni to our portfolio, reinforcing Coty's position as a preferred partner for luxury brands. We also lead the mass fragrance market, a $7 billion category across developed markets, which grew over 10% in Q1. Coty holds the number one position with 12% market share, well ahead of peers, positioning us well to expand our portfolio with new internally created and licensed brands. Our dominant position across all fragrance price points is a core strength, as the category carries higher barriers to entry and stronger consumer loyalty than many other beauty categories.

Speaker #1: Combining prestige fragrances and prestige cosmetics . With this backdrop , we continue to attract new and desirable licenses . Most recently adding Swarovski , Etro and Marni to our portfolio , reinforcing Curtis position as a preferred partner for luxury brands .

Speaker #1: We also lead the mass fragrance market , a 7 billion category across developed markets , which grew over 10% in Q1 . Coty holds the number one position with 12% market share , well ahead of peers , positioning us well to expand our portfolio with new internally created and licensed brands .

Speaker #1: Our dominant position across all fragrance price points is a core strength . As the category carries higher barriers to entry and stronger consumer loyalty than many other beauty categories .

Speaker #1: Success in fragrances is anchored on technical superiority and performance . Internal fragrance development and brand names that are both desirable and aspirational . In fact , approximately 90% of the top 20 global prestige fragrance brands wear designer brands .

Sue Y. Nabi: Success in fragrances is anchored on technical superiority and performance, internal fragrance development, and brand names that are both desirable and aspirational. In fact, approximately 90% of the top 20 global prestige fragrance brands were designer brands in 2019 and in 2024.... This trend holds even among more price-sensitive Gen Z consumers. In the latest Piper Sandler US Teen Survey, 16 of the top 20 fragrance brands among male teens were designer or ultra-premium brands. All of these underscores that even in a fragmented beauty market with many new entrants, the fragrance category remains remarkably stable, with brand equity serving as a key competitive mode.

Speaker #1: In 2019 and in 2024 . This trend holds even among more price sensitive consumers . In the latest US survey , 16 of the top fragrance brands among men with designer or ultra brands .

Speaker #1: All of these underscores that even in a fragmented beauty market with many new entrants , the category remains remarkably stable , with brand equity serving as a key competitive mode .

Speaker #1: Furthermore, our best-in-class fragrance capabilities and our desirable and complementary designer brands will continue to fuel our strong position in prestige fragrances.

Sue Y. Nabi: Furthermore, our best-in-class fragrance capabilities and our desirable and complementary designer brands will continue to fuel our strong position in prestige fragrances, while our unique portfolio, which also extends to more affordable consumer beauty fragrance brands, will allow us to capture opportunities in the prestige-inspired juice trends. With designer brands remaining critical to success in beauty, Coty's portfolio of leading designer fragrance and prestige cosmetics brands is a key asset. We have nurtured and elevated each of our core brands, delivering exceptional growth across our designer brand portfolio over the past six years. Between 2019 and 2025, at constant currency, we've grown Burberry by an impressive 141%, Hugo Boss by 33%, Chloé by almost 70%, and Marc Jacobs by almost 50%. These results highlight Coty's ability to unlock long-term value through strategic brand building and innovation across our designer portfolio.

Speaker #1: While our unique portfolio , which also extends to more affordable consumer beauty , fragrance brands with the lowest to capture opportunities in the prestige inspired juice trends with designer brands remaining critical to success in beauty , Coty's portfolio of leading designer fragrance and prestige cosmetics brands is a key asset .

Speaker #1: We have nurtured and elevated each of our core brands , delivering exceptional growth across our designer brand portfolio over the past six years .

Speaker #1: Between 2019 and 2025 , at constant currency , we've grown Burberry by an impressive 141% . Hugo Boss by 33% , Chloé by almost 70% , and Marc Jacobs by almost 50% .

Speaker #1: These results highlight Coty's ability to unlock long term value through strategic brand building and innovation across our designer portfolio . Importantly , we have delivered similar momentum and success behind brands exiting the portfolio as we grew , Gucci Beauty by 61% between 2019 and 2025 .

Sue Y. Nabi: Importantly, we have delivered similar momentum and success behind brands exiting the portfolio as we grew Gucci Beauty by 61% between 2019 and 2025 at constant currency. Building on this, we have an exciting pipeline ahead with major launches and category expansions across our portfolio. We remain on track to launch Marc Jacobs makeup in calendar year 2026, with a very distinctive and craveable assortment. Under Etro, we are already taking steps to strengthen the brand visibility with consumers. Our re-promotion of Etro Nectar and Orange Blossom Fragrance has resonated with consumers since its relaunch, setting the stage for what's next. Building on this momentum, we are preparing for Coty-produced fragrance launches starting in calendar year 2026, a significant milestone in our partnership and expanding Etro's presence in the prestige fragrance market.

Speaker #1: At constant currency . Building on this , we have an exciting pipeline ahead with major launches and category expansions across our portfolio . We remain on track to launch Marc Jacobs makeup in calendar year 26 with a very distinctive and craveable assortment under Etro , we are already taking steps to strengthen the brand visibility with consumers .

Speaker #1: Our repromotion of Nectar and orange blossom fragrance has resonated with consumers since its relaunch , setting the stage for what's next . Building on this momentum , we are preparing for Coty produced fragrance launches starting in calendar year 26 , as significant milestone in our partnership and expanding presence in the prestige fragrance market .

Speaker #1: We expect to launch beauty under Marni in calendar year 27 . Further expanding our reach and category presence . Looking ahead to calendar year 27 , we see a tremendous opportunity for Swarovski , another newly added license .

Sue Y. Nabi: We expect to launch Beauty under Marni in calendar year 2027, further expanding our reach and category presence. Looking ahead to calendar year 2027, we see a tremendous opportunity for Swarovski, another newly added license. This launch will unlock distribution in over 2,000 Swarovski doors, in addition to the tens of thousands of traditional beauty retail doors. In parallel, we continue building on our multi-year track record of leading fragrance innovation. Our Boss Bottled Beyond launch is already resonating with consumers across markets. I'm very excited to share that Boss Bottled Beyond is on track to be the number 2 male fragrance launch of the fall in Europe, including the number 1 male fragrance launch in Germany, in units, and the number 1 male SKU in Australia.

Speaker #1: This launch will unlock distribution in over 2000 Swarovski doors . In addition to the tens of thousands of traditional beauty retail doors . In parallel , we continue building on our multi-year track record of leading fragrance innovation .

Speaker #1: Our boss battle beyond launch is already resonating with consumers across markets . I'm very excited to share that both bottles , beyond is on track to be the number two male fragrance launch of the Fall in Europe , including the number one fragrance launch in Germany in units and the number one male SKU in Australia , the launch is elevating the Hugo Boss brand equity , strengthening our position in male fragrances and unlocking a significant opportunity in the US .

Sue Y. Nabi: The launch is elevating the Hugo Boss brand equity, strengthening our position in male fragrances, and unlocking a significant opportunity in the US, where Boss Bottled Beyond is already the number 6 innovation, despite limited historical presence. We also have a major prestige fragrance launch in the second half under a key brand. As we double down on fragrances, we are integrating our prestige and mass fragrances capabilities more closely, leveraging scale across R&D, consumer insight, fragrance library, manufacturing, and distribution to strengthen our revenue and profit engine. This coordination will amplify our mass fragrance portfolio. Adidas Vibes marks our largest mass launch in a decade, showcasing the strength of Adidas brand and Coty's execution. This launch marks the foundation for a global mass scenting platform designed to expand across categories and geographies.

Speaker #1: While boss bottle beyond is already the number six innovation . Despite limited historical presence , we also have a major prestige fragrance launch in the second half under a key brand .

Speaker #1: As we double down on fragrances , we are integrating our prestige and mass fragrances capabilities more closely , leveraging scale across R&D , consumer insights , fragrance library , manufacturing and distribution to strengthen our revenue and profit engine .

Speaker #1: This coordination will amplify our mass fragrance portfolio . Adidas Vibes marks our largest mass launch in a decade , showcasing the strength of Adidas brand and Coty's execution .

Speaker #1: This launch marks the foundation for a global , mass centric platform designed to expand across categories and geographies . We continue to roll out our internally developed chanting project with key retailers to .

Sue Y. Nabi: We continue to roll out our internally developed scenting projects with key retailers to drive incremental sales and expand distribution. Building on the booming trend in Arabian fragrances, we recently launched our internally developed fragrance collection, Jawhara, on Amazon in the US, as well as several retailers across Europe. While the launch is in early days, we have already seen some positive results in Germany, with Jawhara already amongst Coty's top 10 female eau de parfum in sellout. We will continue leveraging consumer insights and global reach to continue capturing opportunities across scenting formats, trends, and price points. Beyond traditional fragrances, we are unlocking new scenting adjacencies within our portfolio. This includes expanding into ultra-premium fragrances and innovative categories that complement our core fragrance business. Our approach positions Coty to lead in emerging scenting opportunities, creating incremental growth platforms that extend the reach and relevance of our fragrance brands....

Speaker #1: Drive incremental sales and expand distribution . Building on the booming trend in Arabian fragrances , we recently launched our internally developed fragrance collection , Johara on Amazon in the US , as well as several retailers across Europe .

Speaker #1: While the launch is in early days , we have already seen some positive results in Germany , with Johara already amongst Coty's top ten female Eau de Parfum in sell out .

Speaker #1: We will continue leveraging consumer insights and global reach to continue capturing opportunities across formats , trends and price points beyond traditional fragrances , we are unlocking new scenting adjacencies within our portfolio .

Speaker #1: This includes expanding into ultra premium fragrances and innovative categories that complement our core fragrance business . Our approach positions , Coty to lead in emerging scenting opportunities , creating incremental growth platforms that extend the reach and relevance of our fragrance brands .

Speaker #1: Two of the fastest growing fragrance subsegments are ultra premium fragrances and fragrance mists . Positioned at the high and low end of price points , respectively .

Sue Y. Nabi: Two of the fastest growing fragrance subsegments are ultra-premium fragrances and fragrance mists, positioned at the high and low end of price points, respectively. These subcategories are highly complementary, as consumers increasingly embrace Scent Stacking, a trend rooted in Arabian traditions. Many consumers use fragrance mists as a base, layering premium or ultra-premium scents on top for longevity and for personal expression. With these trends accelerating, Coty is ramping up efforts to capture our fair share in both segments. Ultra-premium fragrances now represent over 10% of the prestige fragrance market, yet account for only 2% of Coty's Q1 prestige fragrance sales, highlighting here a significant opportunity for expansion. At the other end, fragrance mists make up roughly 10% of the total fragrance market.

Speaker #1: This subcategories are highly complementary as consumers increasingly embrace scent stacking , a trend rooted in Arabian traditions . Many consumers use fragrance mists as a base , layering premium or ultra premium scents on top for longevity and for personal expression .

Speaker #1: With this , trends accelerating , Coty is ramping up efforts to capture our fair share in both segments . Ultra premium fragrances now represent over 10% of the prestige fragrance market , yet account for only 2% of Coty's first quarter prestige fragrance sales .

Speaker #1: Highlighting here a significant opportunity for expansion . At the other end , Fragrance mists make up roughly 10% of the total fragrance market , while our presence in mists was previously limited , recent launches under multiple brands have grown contributions to 1 to 2% of Coty's Q1 fiscal 26 fragrance sales .

Sue Y. Nabi: While our presence in mists was previously limited, recent launches under multiple brands have grown the mist contributions to 1 to 2% of Coty's Q1 fiscal 2026 fragrance sales. We see here substantial room to grow in both ultra-premium and mist segments, and are committed to capturing our fair share over time. Coty's ultra-premium fragrance collections delivered 17% sales growth in Q1, driven by strong consumer demand and the appeal of our differentiated offerings, including our Chloé Atelier des Fleurs, Jil Sander Olfactory Series One collections, and Infiniment Coty Paris. This performance highlights our ability to capture growth at the high end of the market and reinforces our strategy to expand in segments where appetite is accelerating. Speaking of ultra-premium fragrances, I want to highlight our latest limited edition launch under Infiniment Coty Paris, Ambre Antique.

Speaker #1: We see here substantial room to grow in both ultra premium and mist segments and are committed to capturing our fair share of our time , cottage ultra premium fragrance collections delivered 17% sales growth in Q1 , driven by strong consumer demand and the appeal of our differentiated offerings , including our Chloé Flower , Jill Sander , olfactory Series one collections and Paris .

Speaker #1: These performance highlights our ability to . Capture growth at the high end of the market , and reinforces our strategy to expand in segments where appetite is accelerating .

Speaker #1: Speaking of ultra premium fragrances , I want to highlight our latest limited edition launch under Coty Paris Ombre Antique . Originally introduced in 1905 , Amber Antique revolutionized perfumery and defined the modern olfactory family of amber fragrances .

Sue Y. Nabi: Originally introduced in 1905, Ambre Antique revolutionized perfumery and defined the modern olfactory family of amber fragrances. Now, 120 years later, we have revived this iconic creation, which is a tribute that honors the original spirit and formula, blending heritage and innovation together in a way that only Coty can. As we shared last quarter, we are the first and only global beauty player embracing the fast-growing fragrance mist market. In recent months, we've launched mist collections under Calvin Klein, Philosophy, Kylie, Adidas Vibes, Nautica, and Jawhara, with plans to launch mists across over a dozen of our prestige and consumer beauty brands. Mists are affordable, complementary, and strongly profitable, with similar margin contribution to our core fragrance business. They also unlock to Coty access to the rapidly growing $7 billion fragrance mist market.

Speaker #1: Now , 120 years later , we have revived this iconic creation , which is a tribute that honors the original spirit and formula , blending heritage and innovation together in a way that only Coty can .

Speaker #1: As we shared last quarter , we are the first and only global beauty player embracing the fast growing fragrance mist market . In recent months , we've launched Miss Collections under Calvin Klein philosophy , Kylie , Adidas Vibes , Nautica and Jahara .

Speaker #1: With plans to launch Mist across over a dozen of our prestige and consumer beauty brands, Mist is our affordable, complementary, and strongly profitable line, with a similar margin contribution to our core fragrance business.

Speaker #1: They also unlock Coty's access to the rapidly growing $7 billion fragrance market. Fueled by these launches, mist contributed 1% to 2% of our total fragrance sales during the quarter.

Sue Y. Nabi: Fueled by these launches, mists contributed 1 to 2% of our total fragrance sales during the quarter. I'm proud to share that our patented mist launches are all off to strong starts. Importantly, the results confirm that fragrance mists are incremental to the fragrance-based business of each of our brands, boosting overall sales. After only a few months in market, our Calvin Klein mist collection of four scents is already the number 4 fragrance mist brand in Europe and the number 1 mist brand in Italy. The incrementality is evident, with total Calvin Klein fragrance sellout growing at a mid-single digits percentage, with growth in both fragrances and fragrance mists. Our recent launch of Philosophy fragrance mist is also igniting excitement for the brand. In recent months, Philosophy's overall fragrance sellout grew double digits, with both growth in core fragrances, and mists showing particular strength at Ulta.

Speaker #1: I'm proud to share that our patented mist launches are all off to strong starts . Importantly , the results confirmed that fragrance myths are incremental to the fragrance based business of each of our brands , boosting overall sales after only a few months in market .

Speaker #1: Our Calvin Klein Mist collection of four scents is already the number four Fragrance Mist brand in Europe , and the number one mist brand in Italy and the Incrementality is evident with total Calvin Klein fragrance sell growing at a mid-single digits percentage , with growth in both fragrances and fragrance mists .

Speaker #1: Our recent launch of philosophy Fragrance Mist is also igniting excitement for the brand . In recent months . Philosophies overall fragrance Sellout grew double digits , with both growth in core fragrances and mists showing particular strength at Ulta .

Speaker #1: At the end of Q1 , we launched Kylie Cosmetics Fragrance mix featuring Sweet Gourmand scent profiles . Once again , we've seen strong incrementality with Total Kylie fragrance sales up double digit in Q1 , fueled by the successful cosmic Kylie Jenner 2.0 fragrance launch and strong reception of fragrance mists , this mist launches Showcase Coty at our best .

Sue Y. Nabi: At the end of Q1, we launched Kylie Cosmetics fragrance mists, featuring sweet gourmet scent profiles. Once again, we've seen strong incrementality, with total Kylie fragrance sales up double digits in Q1, fueled by the successful Cosmic Kylie Jenner 2.0 fragrance launch and strong reception of fragrance mists. These mist launches showcase Coty at our best, spotting trends early, deploying them across our brands with agility, and designing the products for profitability with comparable margins from the start. The vibrant, modern packaging on trend trends and accessible price points make our mist stand out at key retailers, attracting Gen Z consumers and supporting the layering phenomenon as our beauty advisors encourage pairing mists with traditional perfumes. And building on our success in traditional fragrances and our extension into mists, we are working to extend into complementary scenting categories with more details to come in the coming quarters.

Speaker #1: Spotting trends early , deploying them across our brands with agility and designing the products for profitability with comparable margins from the start . The vibrant , modern packaging trends and accessible price points make our standout at key retailers , attracting Gen Z consumers and supporting the layering phenomenon as our beauty advisors encourage pairing myths with traditional perfumes and building on our success in traditional fragrances and our extension into mists .

Speaker #1: We are working to extend into complimentary scenting categories with more details to come in the coming quarters . As global temperatures rise , scenting will become increasingly pervasive in daily life across product types , and Coty will be at the forefront .

Sue Y. Nabi: As global temperatures rise, scenting will become increasingly pervasive in daily life across product types, and Coty will be at the forefront. These adjacencies represent incremental growth opportunities and reinforces Coty's strategy to lead in scent innovation across multiple touchpoints. We are also steadily building our prestige, cosmetics, and skincare businesses. In prestige cosmetics, Kylie Cosmetics continues to perform exceptionally. Global sell-out grew double digits, both Q1 and color of the year to date, driven by strong momentum across makeup and fragrances. Growth is also broad-based geographically, with momentum across all major markets, including the US, Europe, and travel retail. Kylie is now a balanced business with strong pillars in lip, complexion, and in fragrances. For Burberry makeup, we are focused on fueling our recent launches of Beyond Wear blush and loose powders.

Speaker #1: These adjacencies represent incremental growth opportunities and reinforces Coty's strategy to lead in scent innovation across multiple touchpoints . We are also steadily building our prestige cosmetics and skincare businesses in prestige cosmetics .

Speaker #1: Kylie Cosmetics continues to perform . Exceptionally global sales grew double digits , both Q1 and the year to date , driven by strong momentum across makeup and fragrances , and growth is also broad based geographically with momentum across all major markets , including the US , Europe and travel retail .

Speaker #1: Kylie is now a balanced business with strong pillars in lip complexion and fragrances . And for Burberry makeup , we are focused on fueling our recent launches of beyond , where blush and loose powders now on skincare .

Speaker #1: Each of our brands is anchored in its unique expertise and brand identity , or Veda . The longevity expert doubled like for like sales year over year of a small base .

Sue Y. Nabi: Now on skincare, each of our brands is anchored in its unique expertise and brand identity. Orveda, the longevity expert, doubled like-for-like sales year-over-year off a small base. Lancaster, our photoaging and repair expert, is accelerating in China with our Q1 skincare sellout nearly doubling. In fact, Lancaster is now ranked within the top 15 UV care brands, and our recently launched Lancaster Golden Lift is now ranked within the top 30, confirming that Coty is capable of driving growth and building its position in the world's most competitive skincare market. Philosophy, our new beauty brand, grew double digits year-over-year. Together, these brands position Coty to steadily scale within skincare. Our prestige business continues to gain momentum in China, including Hainan, which represents roughly 3% of our sales.

Speaker #1: Lancaster . Our photoaging and repair expert is accelerating in China with our Q1 skincare sellout nearly doubling . In fact , Lancaster is now ranked within the top 15 UV care brands , and our recently launched Lancaster Golden Lift is now ranked within the top 30 , confirming that Coty's capable of driving growth and building its position in the world's most competitive skincare market and philosophy .

Speaker #1: Our new beauty brand grew double digit year over year . Together , these brands positioned Coty to steadily scale within skincare . Our prestige business continues to gain momentum in China , including Hainan , which represents roughly 3% of our sales .

Speaker #1: Coty's Q1 China sellout grew 15% , more than double the market . Even as our net revenues were lower due to destocking . Fragrances remain the fastest growing category in China , and our sellout was 1.5 times the market in makeup .

Sue Y. Nabi: Coty's Q1 China sellout grew 15%, more than double the market, even as our net revenues were lower due to destocking. Fragrances remain the fastest growing category in China, and our sellout was 1.5 times the market. In makeup, we grew at twice the market, and in skincare, we expanded approximately 10 times the market, fueled by the momentum we are building in Lancaster skincare. These results reflect the strengths of our portfolio and targeted execution in the region. Within our global travel retail business, we saw solid growth this quarter, led by a recovery in Asia. As we strengthen our fragrance leadership across price points and expand into ultra-premium fragrances, mists, and scenting adjacencies, we have launched the full performance plan for our consumer beauty business and, in parallel, a strategic review.

Speaker #1: We grew at twice the market and in skincare we expanded approximately ten times the market , fueled by the momentum we are building in Lancaster .

Speaker #1: Skincare . This results reflect the strength of our portfolio and targeted execution in the region and within our global travel retail business . We saw solid growth this quarter , led by a recovery in Asia .

Speaker #1: As we strengthen our fragrance leadership across price points and expand into ultra premium fragrances , mists and scenting adjacencies , we have launched the full performance plan for our consumer beauty business and in parallel , a strategic review in consumer beauty , color cosmetics .

Speaker #1: We are focused on transforming the business while pursuing a strategic review . Our portfolio includes iconic brands including scale brands such as CoverGirl , Rimmel and Sally Hansen , alongside medium sized brands such as Max factor and Bourgeois .

Sue Y. Nabi: In consumer beauty color cosmetics, we are focused on transforming the business while pursuing a strategic review. Our portfolio includes iconic brands, including scale brands such as CoverGirl, Rimmel, and Sally Hansen, alongside medium-sized brands such as Max Factor and Bourjois. The business generated sales of $1.2 billion in 25, with strong gross margin of over 60%, though profitability has been modest. The mass cosmetics market faced pressure over the past year, but is now returning to moderate growth. Our near-term objective is for the new consumer beauty leadership team to drive execution and strategy for meaningful operational improvements. This will generate value for Coty, regardless of the strategic review's outcome. Since announcing our strategic update in late September, we have moved quickly to achieve our objectives.

Speaker #1: The business generated sales of 1.2 billion in 2025 , with strong gross margin of over 60% , though profitability has been modest . The cosmetics market faced pressure over the past year , but is now returning to moderate growth .

Speaker #1: In near our near-term objective is for the new consumer beauty leadership team to drive execution and strategy for meaningful operational improvements . This will generate value for Coty regardless of the strategic reviews outcome .

Speaker #1: Since announcing our strategic update in late September , we have moved quickly to achieve our objectives , Gordon van Breton , Board member and former chief Transformation officer , has rejoined the Coty Executive Committee as the President of Consumer Beauty .

Sue Y. Nabi: Gordon von Bretten, Coty board member and former Chief Transformation Officer, has rejoined the Coty Executive Committee as the President of Consumer Beauty. This new role gives Gordon end-to-end responsibility of consumer beauty, spanning innovation, manufacturing, marketing, and of course, distribution. In recent weeks, he has appointed his leadership team, composed of key leaders from within Coty, and they are now in the process of filling key roles at the next level. A pivotal role within the new consumer beauty leadership team is our new EVP of Global Brands and New Product Development, who previously led the Kylie Cosmetics business and helped drive brand growth by over 30% in the last two years. She's streamlining core innovation to focus on fewer, high-impact initiatives while complementing with trend-driven launches. The team is actively shaping the color cosmetics transformation program, with the full plan to be finalized by Q3.

Speaker #1: This new role gives Gordon an end to end responsibility of consumer beauty , spanning innovation , manufacturing , marketing and of course , distribution .

Speaker #1: In recent weeks , he has appointed his leadership team composed of key leaders from within Coty , and they are now in the process of filling key roles at the next level .

Speaker #1: A pivotal role within the new consumer beauty leadership team is our new EVP of Global Brands and New Product Development , who previously led the Kylie Cosmetics business .

Speaker #1: And helped drive brand growth by over 30% in the last two years . She is streamlining core innovation to focus on fewer high impact initiatives while complementing with trend driven launches .

Speaker #1: The team is actively shaping the color cosmetics transformation program, with the full plan to be finalized by Q3. The second part of our consumer beauty business under evaluation is our distinct end-to-end Brazil business.

Sue Y. Nabi: The second part of our consumer beauty business under evaluation is our distinct end-to-end Brazil business. It includes iconic local brands, Monange, Risqué, and Bozzano, generating nearly $400 million in sales with strong operating margins. These brands remain highly relevant locally, with sustained market share gains in nail, in skincare, and in shower gels. Our Brazil business also benefits from a best-in-class platform spanning local go-to-market, R&D, manufacturing, and digital capabilities. Importantly, our Brazil business is quite distinct and operated fairly independently of the rest of Coty. Our desirable local brands, strong management, and top-tier platform have fueled sustained market share gains in our Brazilian business, especially in beauty-oriented categories. Risqué, our nail brand, remains the number one brand in Brazil, growing market share by over 400 basis points in the last two years to 34.4%.

Speaker #1: It includes iconic local brands , meaning risqué by and Bozano , generating nearly $400 million in sales with strong operating margins . These brands remain highly relevant locally , with sustained market share gains in nail in skincare and , in short , gels .

Speaker #1: Our Brazil business also benefits from a best in class platform spanning local go to market R&D , manufacturing and digital capabilities . Importantly , our Brazil business is quite distinct and operated fairly independently of the rest of Coty .

Speaker #1: Our desirable local brands . Strong management and top tier platform have fueled sustained market share gains in our Brazilian business , especially in beauty oriented categories .

Speaker #1: Risque . Our nail brand remains the number one brand in Brazil . Growing market share by over 400 basis points in the last two years to 34.4% .

Speaker #1: We have also expanded market share in skincare by 140 basis points and in male beauty by 390 basis points . Touching briefly on our continued digital momentum despite retailer destocking and cautious inventory management .

Sue Y. Nabi: We have also expanded market share in skincare by 140 basis points, and in male beauty by 390 basis points. Touching briefly on our continued digital momentum. Despite retailer destocking and cautious inventory management, even in e-com channel, our sell-out trends remain strong across the business. In Q1, our prestige sell-out grew 5% and our consumer beauty sell-out grew 6%, while revenues were lower due to trade inventory reduction. Social media advocacy continues to fuel strong momentum across our portfolio. Burberry global earned media value from influencer activity nearly doubled year over year, and our outstanding 360 activation for Boss Bottled Beyond drove Hugo Boss EMV to grow tenfold versus a year ago. In consumer beauty now, Adidas Vibes continues to resonate, particularly with Gen Z, driving a doubling of EMV for the brand.

Speaker #1: Even in e-commerce channel , our sell out trends remain strong across the business . In Q1 , our prestige sellout grew 5% and our consumer beauty sellout grew 6% .

Speaker #1: While revenues were lower due to trade inventory reduction , social media advocacy continues to fuel strong momentum across our portfolio . Burberry global global earned media value from influencer activity nearly doubled year over year , and our outstanding 360 activation for both bottle beyond draw Hugo Boss GMV to grow tenfold versus a year ago in consumer beauty .

Speaker #1: Now Adidas Vibes continues to resonate , particularly with GNC driving a doubling of EMV for the brand remains . EMV also grew by over 30% year on year .

Sue Y. Nabi: Rimmel EMV also grew by over 30% year-on-year. We continue expanding our e-com distribution. While we partnered early with Amazon, several of our prestige brands have not yet listed on the platform. This summer, we added Marc Jacobs to Amazon's premium beauty marketplace. The launch has been strong on Amazon, and we have seen a clear halo effect, with total Marc Jacobs sellout in the US up 11% since the Amazon launch, a notable acceleration from pre-launch trends. Finally, we continue making strong progress on our ESG commitments, reaching new milestones that reinforce Coty's leadership in sustainability and in transparency. This quarter, we published our fiscal 2025 sustainability report, our first disclosure under the EU Corporate Sustainability Reporting Directive, or CSRD, advancing transparency and data integrity. Let me highlight a few of the key takeaway from the report.

Speaker #1: We continue expanding our E-comm distribution while we partnered early with Amazon , several of our prestige brands have not yet listed on the platform .

Speaker #1: This summer , we added Marc Jacobs to Amazon's premium beauty marketplace , the launch has been strong on Amazon , and we have seen a clear halo effect with total Marc Jacobs sellout in the US , up 11% since the Amazon launch and notable acceleration from pre-launch trends .

Speaker #1: Finally , we continue making strong progress on our ESG commitments , reaching new milestones that reinforce Coty's leadership in sustainability and in transparency .

Speaker #1: This quarter , we published our fiscal 25 Sustainability Report . Our first disclosure under the EU Corporate Sustainability Reporting Directive , or Csrd , Advancing Transparency and Data Integrity .

Speaker #1: Let me highlight a few of the key takeaways from the report . First , on the environmental front , we reduce our water withdrawal by 16% in the first year since setting out our target , putting us ahead of schedule towards our 2030 goal of a 25% reduction .

Sue Y. Nabi: First, on the environmental front, we reduced our water withdrawal by 16% in the first year since setting out our target, putting us ahead of schedule towards our 2030 goal of a 25% reduction. Second, we achieved 100% RSPO certified palm oil, including our sourcing from third-party manufacturers, and 99% FSC certified fourteen boxes for our products, strengthening our responsible sourcing practices globally. We also introduced new retailer partnerships and opened our first multi-brand sustainability hub in travel retail, showcasing Coty's commitment to innovation and collaboration in ESG. Finally, we launched an online ingredient resource to provide consumers with clear, accessible information about what goes into our products. These achievements underscore Coty's commitment to advancing sustainability. Let me now wrap up with our key messages for today.

Speaker #1: Second , we achieved 100% . Rspo certified palm oil , including our sourcing from third party manufacturers and 99% FSC certified . 14 boxes for our products .

Speaker #1: Strengthening our responsible sourcing practices globally . We also introduced new retailer partnerships and opened our first multi-brand sustainability hub in travel retail , showcasing Coty's commitment to innovation and collaboration in ESG .

Speaker #1: Finally , we launched an online ingredient resource to provide consumers with clear , accessible information about what goes into our products . These achievements underscore Coty's commitment to advancing sustainability .

Speaker #1: Let me now wrap up with our key messages for today . Our strategic announcement made in September , includes focusing and optimizing our portfolio and resources behind our areas of strength .

Sue Y. Nabi: Our strategic announcement, made in September, includes focusing and optimizing our portfolio and resources behind our areas of strength. We aim to elevate Coty as a prestige beauty company with an emphasis on fragrance and scenting across price points, with best-in-class capabilities in prestige, cosmetics, and skincare. This includes closer integration of prestige and mass fragrance businesses, unlocking opportunities in ultra-premium fragrances, mists, and broader scenting, developing a performance improvement plan for consumer beauty cosmetics, and advancing strategic reviews of our consumer beauty cosmetics and Brazil businesses. Encouragingly, underlying business trends continue to improve, tracking in line to slightly ahead of expectations. We continue to anticipate a return to profitable sales growth in the second half of fiscal 2026.

Speaker #1: We aim to elevate Coty as a prestige beauty company, with an emphasis on fragrance and scenting across price points and with best-in-class capabilities.

Speaker #1: In prestige cosmetics and skincare . This includes closer integration of prestige and mass fragrance businesses , unlocking opportunities and ultra premium fragrances , mists and broader scenting .

Speaker #1: Developing a performance improvement plan for consumer beauty , cosmetics and advancing strategic reviews of our consumer beauty , cosmetics and Brazil businesses . Encouragingly , underlying business trends continue to improve , tracking in line to slightly ahead of expectations .

Speaker #1: We continue to anticipate a return to profitable sales growth in the second half of fiscal 26 . In summary , our medium term focus remains clear outperform the beauty market , expand margins , continue to reduce our leverage and deliver sustainable growth within our best in class fragrance and scenting portfolio , complemented by prestige , color cosmetics and skincare .

Sue Y. Nabi: In summary, our medium-term focus remains clear: outperform the beauty market, expand margins, continue to reduce our leverage, and deliver sustainable growth within our best-in-class fragrance and scenting portfolio, complemented by prestige color cosmetics and skincare. Thank you very much for your time today. We look forward to connecting on Thursday, 6 November, at 9:30AM Eastern Time or 3:30PM Central European Time for our live Q&A session.

Speaker #1: Thank you very much for your time today . We look forward to connecting on Thursday , November 6th at 9:30 a.m. Eastern Time or 330 Central European Time for our live Q&A session .

Q1 2026 Coty Inc Earnings Call - Pre-Recorded

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