Coty Q2 2026 Coty Inc Earnings Call - Pre-Recorded | AllMind AI Earnings | AllMind AI
Q2 2026 Coty Inc Earnings Call - Pre-Recorded
Hello, everyone. This is oak, 11th and <unk> Senior Vice President of Investor Relations. Thank you for joining us today for the prepared remarks portion of <unk> second quarter fiscal 2026 earnings.
On Friday February six 2026 at approximately eight a M eastern time or two P. M. Central European time, we will hold a separate live Q&A session on our results, which you can access via our Investor Relations website.
Joining me for our presentation, our markets struggle Cody as executive Chairman of the board and interim Chief Executive Officer, and Laura Mercy quotas, Chief Financial Officer.
Before I hand, the call over to Marcus I would like to remind you that many of the comments today may contain forward looking statements. Please.
Please refer to <unk> earnings release, and the reports filed with the SEC, where the company lists factors that could cause actual results to differ materially from these forward looking statements in.
In addition, except where noted the discussion of <unk> financial results and coatings expectations reflect certain adjustments are specified in the non-GAAP financial measures section of the company's release.
Thank you I will now turn it over to our executive Chairman and interim Chief Executive Officer Markus.
Hello, everyone. My name is market stable and if you have seen for Ya joined Coty on January one.
As the executive Chairman and interim CEO.
Today's my 30, 60 day on the job, but let me tell you. These days has been pretty intense.
I had the chance to conduct in depth business reviews visit some of our biggest markets like the U S and the UK.
Technical centers and review our R&D capabilities.
I managed to speak to.
Marcus: to speak to some of our key customers, and most importantly, met with many of our talented, beauty-minded, and passionate people. All this has given me a good sense of the business and a fundamental understanding of our challenges and opportunities. Since most of you don't know me, I thought I'd give you a quick summary of my background. I spent the last 33 years at P&G, and I retired a year ago in 2024. For the vast majority of my time at P&G, I had the pleasure of working in a variety of beauty categories: skincare, haircare, personal care, as well as almost 10 years working on fine fragrances. In the last 7.5 years, I was the president of the Skin and Personal Care division globally, run out of Singapore, with brands that you may know, like SK-II, Olay, Old Spice, and Native.
Markus Strobel: to speak to some of our key customers, and most importantly, met with many of our talented, beauty-minded, and passionate people. All this has given me a good sense of the business and a fundamental understanding of our challenges and opportunities. Since most of you don't know me, I thought I'd give you a quick summary of my background. I spent the last 33 years at P&G, and I retired a year ago in 2024. For the vast majority of my time at P&G, I had the pleasure of working in a variety of beauty categories: skincare, haircare, personal care, as well as almost 10 years working on fine fragrances. In the last 7.5 years, I was the president of the Skin and Personal Care division globally, run out of Singapore, with brands that you may know, like SK-II, Olay, Old Spice, and Native.
Speaker #1: To speak to some of our key customers and, most importantly, met with many of our talented, beauty-minded, and passionate people. All this has given me a good sense of the business and the fundamental understanding of our challenges and opportunities.
Some of our key customers and most importantly met with many of our talented beauty minded and passionate people.
All this has given me a good sense of the business and a fundamental understanding of our challenges and opportunities.
Since most of you don't know me a thought I'd give you a quick summary of my background.
Speaker #1: Since most of you don't know me, I thought I'd give you a quick summary of my background. I spent the last 33 years at P&G, and I retired a year ago in 2024.
I've spent the last 33 years of P&G and a retired a year ago in 2024.
For the vast majority of my time at P&G I had the pleasure of working in a variety of beauty categories skincare hair care personal care as well as almost 10 years working on fine fragrances in the last seven and a half year. So was the president of the skin and personal care divisions globally around Singapore with brands that you may know like SK II.
Speaker #1: For the vast majority of my time at P&G, I had the pleasure of working in a variety of beauty categories: skincare, hair care, personal care, as well as almost 10 years working on fine fragrances.
Speaker #1: In the last seven and a half years, I was the President of the Skin and Personal Care Division globally, run out of Singapore, with brands that you may know, like SK-II, Olay, Old Spice, and Native.
Clay would spice native.
Contract.
Speaker #1: Fun fact: in my early years working in fragrances, I was in charge of transforming Hugo Boss from a small local fragrance brand into a global success.
Early years working in fragrances I was in charge of transforming <unk> from a small local fragrance brand into a global success and honestly ways. We did this was by spearheading the launch of the first quarter franchise.
Marcus: Fun fact: in my early years working in fragrances, I was in charge of transforming Hugo Boss from a small local fragrance brand into a global success. And one of the ways we did this was by spearheading the launch of the BOSS Bottled franchise. Fast-forward to today, as I join Coty, Hugo Boss is now the largest brand in the portfolio, and with BOSS Bottled Beyond as this year's blockbuster launch, it feels like I've come full circle. And the task at hand now is to apply all my experience, both the extensive beauty experience, but also the operational data-driven discipline, to help the Coty organization focus and succeed in the beauty market of today and tomorrow. Coty has accomplished a lot in the last five years. The organization significantly strengthened its fragrance, innovation, and execution capabilities.
Markus Strobel: Fun fact: in my early years working in fragrances, I was in charge of transforming Hugo Boss from a small local fragrance brand into a global success. And one of the ways we did this was by spearheading the launch of the BOSS Bottled franchise. Fast-forward to today, as I join Coty, Hugo Boss is now the largest brand in the portfolio, and with BOSS Bottled Beyond as this year's blockbuster launch, it feels like I've come full circle. And the task at hand now is to apply all my experience, both the extensive beauty experience, but also the operational data-driven discipline, to help the Coty organization focus and succeed in the beauty market of today and tomorrow. Coty has accomplished a lot in the last five years. The organization significantly strengthened its fragrance, innovation, and execution capabilities.
Speaker #1: And one of the ways we did this was by spearheading the launch of the Boss Bottle franchise. Fast forward to today, as I joined COTY, Hugo Boss is now the largest brand in the portfolio, and with Boss Bottle beyond, as this year's blockbuster launch, it feels like I've come full circle.
Fast forward to today is that joined Coty Hugo Boss's motor largest brand in the portfolio and we first modeled beyond SBC as blockbuster launch it feels like I've come full circle.
And the task at hand, now is to apply all my experience both the extensive beauty experience, but also the operational data driven discipline to help the Coty organization focus and succeed in the beauty market of today and tomorrow.
Speaker #1: And the task at hand now is to apply all my experience, both the extensive beauty experience, but also the operational data-driven discipline, to help the COTY organization focus and succeed in the beauty market of today and tomorrow.
Coty has accomplished a lot in the last five years.
Speaker #1: COTY has accomplished a lot in the last five years. The organization significantly strengthened its fragrance innovation and execution capabilities. Growing to prestige fragrance business at 10% CAGR from fiscal '21 to fiscal '25 is no small feat.
The organization significantly strengthened its fragrance innovation and execution capabilities.
Growing prestige fragrance business, a 10% CAGR from fiscal 'twenty, one through fiscal 'twenty five is no small feat.
Cody revamped the brand equities of the major consumer beauty brands, while modernizing consumer engagement and the innovation pipeline.
Speaker #1: Coty revamped the brand equities of the major consumer beauty brands, while modernizing consumer engagement and the innovation pipeline. The company grew gross margins by close to 500 basis points and deleveraged the company by over four turns in that time.
The company grew gross margin by close to 500 basis points and deleverage the company by over four turns in that time.
These are major accomplishments and the team should be very proud of the progress made.
Speaker #1: These are major accomplishments, and the team should be very proud of the progress made. Even though I'm still only a month into understanding the business and assessing the portfolio, it is already clear that Coty has outstanding assets, capabilities, and competitive advantages that will position it to succeed in beauty.
Even though I'm still only a month into understanding the business and assessing the portfolio is already cleared at Coty has outstanding assets capabilities and competitive advantages that will position it to succeed in beauty, but if and only if they are paired with the right operational discipline.
First coty is leading and highly desirable fragrance brands like Hugo boss Rubbery, Marc Jacobs Chloe.
<unk> significantly grew each of these brands between 30% and 140% from fiscal 19% to $50 25, and there remains substantial room to expand in Florida.
Marcus: Coty significantly grew each of these brands between 30% and 140% from fiscal 2019 to fiscal 2025, and there remains substantial room to expand them further. Second, after visiting our fragrance R&D Center of Excellence in Geneva, meeting our leading perfumers, understanding our cutting-edge compositions, and seeing our proprietary testing, I'm convinced that Coty has stellar fragrance innovation capabilities. Third, I've spoken to the various global and local teams, and I'm very impressed by the amazing creativity and entrepreneurial spirit across the organization. Finally, Coty's vertically integrated model, particularly in fragrances, is a real differentiator and a competitive advantage, enabling Coty to translate our internal R&D and global commercial scale into winning propositions across our multi-tier fragrance portfolio.
Markus Strobel: Coty significantly grew each of these brands between 30% and 140% from fiscal 2019 to fiscal 2025, and there remains substantial room to expand them further. Second, after visiting our fragrance R&D Center of Excellence in Geneva, meeting our leading perfumers, understanding our cutting-edge compositions, and seeing our proprietary testing, I'm convinced that Coty has stellar fragrance innovation capabilities. Third, I've spoken to the various global and local teams, and I'm very impressed by the amazing creativity and entrepreneurial spirit across the organization. Finally, Coty's vertically integrated model, particularly in fragrances, is a real differentiator and a competitive advantage, enabling Coty to translate our internal R&D and global commercial scale into winning propositions across our multi-tier fragrance portfolio.
Speaker #1: And that remains substantial room to expand them further. Second, after visiting our fragrance R&D Center of Excellence in Geneva, seeing our cutting-edge compositions and our proprietary testing, I'm convinced that Coty has stellar fragrance innovation capabilities.
Second after visiting our fragrance, our R&D center of excellence in Geneva meeting are leaving for a few months understanding our cutting edge compositions and seeing our proprietary testing I am convinced that Coty has stellar fragrance innovation capabilities.
But I've spoken to the various global and local teams and I'm very impressed by the amazing creativity and entrepreneurial spirit across the organization.
Speaker #1: Third, I've spoken to the various global and local teams, and I'm very impressed by the amazing creativity and entrepreneurial spirit across the organization. And finally, COTY is vertically integrated model, particularly in fragrances, is a real differentiator and a competitive advantage.
And finally cordis vertically integrated model, particularly in fragrances is a real differentiator and a competitive advantage, enabling cody to translate our internal R&D and global commercial scale into winning propositions across a multitude of fragrance portfolio.
Speaker #1: Enabling COTY to translate our internal R&D and global commercial scale into winning propositions across our multi-tiered fragrance portfolio. But as they say, if you're so smart, why aren't you rich?
Our SSA, if you're so smart why angio rich.
Marcus: But as they say, "If you're so smart, why aren't you rich?" There is no denying that Coty's financial results in the past 18 months has been disappointing. The stock has also been hovering around the $3 for several months, which I see as a signal that investors are skeptical about Coty's long-term ability to compete in beauty, sustain fair market share, and deliver consistent, profitable growth. Both things are true. Coty has outstanding assets and capabilities, but we have not been delivering at the level that we should. My takeaway is simple: Our business imperative is to leverage our collective brainpower and competitive advantage to deliver the financial and operational performance that reflects Coty's potential. Coty has breadth. Breadth can be a strength, but only when it is curated. This is the foundation of our new strategic framework, Coty Curated.
Markus Strobel: But as they say, "If you're so smart, why aren't you rich?" There is no denying that Coty's financial results in the past 18 months has been disappointing. The stock has also been hovering around the $3 for several months, which I see as a signal that investors are skeptical about Coty's long-term ability to compete in beauty, sustain fair market share, and deliver consistent, profitable growth. Both things are true. Coty has outstanding assets and capabilities, but we have not been delivering at the level that we should. My takeaway is simple: Our business imperative is to leverage our collective brainpower and competitive advantage to deliver the financial and operational performance that reflects Coty's potential. Coty has breadth. Breadth can be a strength, but only when it is curated. This is the foundation of our new strategic framework, Coty Curated.
There is no denying that <unk> financial results in the past 18 months has been disappointing.
Speaker #1: There is no denying that COTY's financial results in the past 18 months have been disappointing. The stock has also been hovering around $3 for several months, which I see as a signal that investors are skeptical about COTY's long-term ability to compete in beauty, sustain fair market share, and deliver consistent, profitable growth.
Because also been hovering around a $3 for several months, which I see as a signal that investors are skeptical about cordis long term ability to compete in beauty sustained fair market share and deliver consistent profitable growth.
Both things are true Coty has outstanding assets and capabilities.
Speaker #1: Both things are true. Coty has outstanding assets and capabilities. We have not been delivering at the level that we should. My takeaway is simple: our business imperative is to leverage our collective brainpower and competitive advantage to deliver the financial and operational performance that reflects Coty's potential.
We have not been delivering at the level that we should.
My takeaway is simple our business imperative is to leverage our collective brainpower and competitive advantage to deliver the financial and operational performance that reflects <unk> potential.
<unk> breath.
Speaker #1: Coty has—but only when it is curated. This is the foundation of our new strategic framework, Coty Curated. At its core, this means focused investment and sharper priorities.
<unk> can be a strength.
But only when it is curated.
This is the foundation of our new strategic framework Cody curated at its core this means focused investment in shopper priorities.
Marcus: At its core, this means focused investment and sharper priorities. Coty Curated is about making big even bigger, scaling what wins, stopping what dilutes, and removing layers that slow execution. Ultimately, success hinges on disciplined execution, operational effectiveness, and sufficient multi-year marketing support. Let me illustrate how complexity quietly dilutes impact. Today at Coty, we sell more than 40 brands across dozens of markets. This results in over 1,000 possible brand and market combinations, highlighting the significant complexity we manage. The risk is clear. When resources are stretched across too many permutations, our core brands may not get the consistent, concentrated support they need. This manifests in the following ways: Without adequate support, our top initiatives don't reach their full potential in the markets that matter most, the largest, highest growth potential markets, where impact should be the greatest.
Markus Strobel: At its core, this means focused investment and sharper priorities. Coty Curated is about making big even bigger, scaling what wins, stopping what dilutes, and removing layers that slow execution. Ultimately, success hinges on disciplined execution, operational effectiveness, and sufficient multi-year marketing support. Let me illustrate how complexity quietly dilutes impact. Today at Coty, we sell more than 40 brands across dozens of markets. This results in over 1,000 possible brand and market combinations, highlighting the significant complexity we manage. The risk is clear. When resources are stretched across too many permutations, our core brands may not get the consistent, concentrated support they need. This manifests in the following ways: Without adequate support, our top initiatives don't reach their full potential in the markets that matter most, the largest, highest growth potential markets, where impact should be the greatest.
Cody curated is about making big even bigger scaling <unk>, stopping what dilutes and removing layers that slow execution.
Speaker #1: COTY Curated is about making big even bigger, scaling what wins, stopping what dilutes, and removing layers that slow execution. Ultimately, success hinges on disciplined execution, operational effectiveness, and sufficient multi-year marketing support.
Ultimately success hinges on disciplined execution operational effectiveness and sufficient multi year marketing support.
Let me illustrate how complexity quietly dilutive impact.
Speaker #1: Let me illustrate how complexity quietly dilutes impact. Today at COTY, we sell more than 40 brands across dozens of markets. This results in over 1,000 possible brand and market combinations.
Today at Coty, we sell more than 40 brands across dozens of markets. This results in over 1000 possible brand and market combinations highlighting the significant complexity diminish.
Speaker #1: Highlighting the significant complexity we manage, the risk is clear. When resources are stretched across too many permutations, our core brands may not get the consistent, concentrated support they need.
Risk is clear when resources are stretched across too many permutations, our core brands may not get the consistent concentrated support they need.
This manifests in the following ways without adequate support our top initiatives don't reach their full potential in the markets that metal minimalist.
Speaker #1: This manifests in the following ways: without adequate support, our top initiatives don't reach their full potential in the markets that matter most—the largest, highest-growth potential markets, where impact should be the greatest.
<unk> highest growth potential markets, where impact should be the greatest.
The creativity of the Coty organization is amazing and we can create beautiful and cutting edge assets, but too often we create too many new assets across too many brands and too many markets.
Speaker #1: The creativity of the COTY organization is amazing, and we can create beautiful and cutting-edge assets. But too often, we create too many new assets across too many brands and too many markets.
Marcus: The creativity of the Coty organization is amazing, and we can create beautiful and cutting-edge assets. But too often, we create too many new assets across too many brands and too many markets. A disproportionate amount of our spending gets tied up in asset creation, and not enough flows into working media and consumer engagement, which can lead to insufficient awareness, trial, and purchase. And finally, strong year one initiatives may often lack sufficient year two support because we are allocating too many resources to new product launches. So many activities, so many projects, but very few make a real difference. So how do we break this cycle? We will place a much stronger focus on our top markets, brands, and initiatives, ensuring they are sufficiently funded and grow year after year. We will refocus investment on the core, ensuring that the more supports the core through built-in halo effects.
Markus Strobel: The creativity of the Coty organization is amazing, and we can create beautiful and cutting-edge assets. But too often, we create too many new assets across too many brands and too many markets. A disproportionate amount of our spending gets tied up in asset creation, and not enough flows into working media and consumer engagement, which can lead to insufficient awareness, trial, and purchase. And finally, strong year one initiatives may often lack sufficient year two support because we are allocating too many resources to new product launches. So many activities, so many projects, but very few make a real difference. So how do we break this cycle? We will place a much stronger focus on our top markets, brands, and initiatives, ensuring they are sufficiently funded and grow year after year. We will refocus investment on the core, ensuring that the more supports the core through built-in halo effects.
A disproportionate amount of our spending gets tied up in asset creation and not enough flows into working media and consumer engagement, which can lead to insufficient awareness trial and purchase and.
Speaker #1: A disproportionate amount of our spending gets tied up in asset creation, and not enough flows into working media and consumer engagement, which can lead to insufficient awareness, trial, and purchase.
And finally strong year, one initiatives often less sufficiently to support because we're allocating to any resources to new product launches. So many activities. So many projects, but very few will make a real difference.
Speaker #1: And finally, strong year-one initiatives may often lack sufficient year-two support because we are allocating too many resources to new product launches. So many activities, so many projects, but very few make a real difference.
So how do we break the cycle, we will place a much stronger focus on our top markets brands and initiatives, ensuring they're sufficiently funded and grow year. After year, we will be focused investment on the core ensuring that the more supports the core through built in halo effects.
Speaker #1: So, how do we break this cycle? We will place a much stronger focus on our top markets, brands, and initiatives, ensuring they are sufficiently funded and grow year after year.
Speaker #1: We will refocus investment on the core, ensuring that the more supports the core through built-in halo effects. This insights are not revolutionary, but they are fundamental to every beauty and consumer business that delivers long-term success.
These insights are not revolutionary, but they are fundamental to every beauty and consumer business that delivers long term success.
Marcus: These insights are not revolutionary, but they are fundamental to every beauty and consumer business that delivers long-term success. Fewer assets, better execution, bigger propositions, the more supporting the core. We will share more details about Coty Curated in the coming quarters. Let me share a few examples of what this looks like in practice, focusing on our biggest brands and biggest markets. It's only fitting to begin with Hugo Boss. Hugo Boss is Coty's biggest brand in the portfolio, and despite its scale size, Coty has grown this brand by over 30% at constant currency since fiscal 2019, a testament to how the strategy is broadly working. BOSS Bottled Beyond, launched this past fall, is a top-notch innovation and is already ranking as the number two innovation in key markets.
Markus Strobel: These insights are not revolutionary, but they are fundamental to every beauty and consumer business that delivers long-term success. Fewer assets, better execution, bigger propositions, the more supporting the core. We will share more details about Coty Curated in the coming quarters. Let me share a few examples of what this looks like in practice, focusing on our biggest brands and biggest markets. It's only fitting to begin with Hugo Boss. Hugo Boss is Coty's biggest brand in the portfolio, and despite its scale size, Coty has grown this brand by over 30% at constant currency since fiscal 2019, a testament to how the strategy is broadly working. BOSS Bottled Beyond, launched this past fall, is a top-notch innovation and is already ranking as the number two innovation in key markets.
A few assets.
Speaker #1: Fewer assets, better execution, bigger propositions, and more support for the core. We will share more details about COTY Curated in the coming quarters. Let me share a few examples of what this looks like in practice, focusing on our biggest brands and biggest markets.
Better execution bigger propositions are more supporting the call we will share more details about coty curated in the coming quarters.
Let me share a few examples of what this looks like in practice focus on our biggest brands and biggest market. It's only fitting to begin with Hugo boss <unk>.
Speaker #1: It's only fitting to begin with Hugo Boss. Hugo Boss is Coty's biggest brand in the portfolio, and despite its scale, Coty has grown this brand by over 30% at constant currency since fiscal '19.
<unk> biggest brand in the portfolio and despite its scale size Cody has grown this brand by over 30% at constant currencies since fiscal 19.
Estimate to harvest strategy is broadly work.
Speaker #1: A testament to how the strategy is broadly working. What's bottled beyond launched this past fall is a top-notch innovation and is already ranking as the number two innovation in key markets.
Beyond launched this past fall is a top notch innovation is already ranking as the number two innovation in key markets.
With strong momentum has driven market share gains for the iconic boss bottled franchise in all major markets, including Germany, UK, Spain, France, Canada and Mexico.
Speaker #1: Its strong momentum has driven market share gains for the iconic Boss Bottled franchise in all major markets, including Germany, the UK, Spain, France, Canada, and Mexico.
Marcus: Its strong momentum has driven market share gains for the iconic BOSS Bottled franchise in all major markets, including Germany, UK, Spain, France, Canada, and Mexico. Importantly, by leveraging BOSS Bottled Beyond to unlock the US market for the Hugo Boss brand, the innovation has already captured 90 basis points of share in the US. These achievements highlight the strength of Coty's innovation, creativity, and marketing capabilities. But without sufficiently strong operational discipline, the success of BOSS Bottled Beyond did not translate into the growth of the broader Hugo Boss brand in the past 2 quarters. The launch did not generate enough halo impact on the other core Hugo Boss franchises, like BOSS The Scent.
Markus Strobel: Its strong momentum has driven market share gains for the iconic BOSS Bottled franchise in all major markets, including Germany, UK, Spain, France, Canada, and Mexico. Importantly, by leveraging BOSS Bottled Beyond to unlock the US market for the Hugo Boss brand, the innovation has already captured 90 basis points of share in the US. These achievements highlight the strength of Coty's innovation, creativity, and marketing capabilities. But without sufficiently strong operational discipline, the success of BOSS Bottled Beyond did not translate into the growth of the broader Hugo Boss brand in the past 2 quarters. The launch did not generate enough halo impact on the other core Hugo Boss franchises, like BOSS The Scent.
Importantly by leveraging both quarterly beyond to unlock the U S market for Hugo Boss brand. The innovation has already captured 90 basis points of share in the U S.
Speaker #1: Importantly, by leveraging Boss Bottled Beyond to unlock the U.S. market for the Hugo Boss brand, the innovation has already captured 90 basis points of share in the U.S.
These achievements highlight the strength of <unk> innovation creativity and marketing capabilities.
Speaker #1: These achievements highlight the strength of Coty's innovation, creativity, and marketing capabilities. But without sufficiently strong operational discipline, the success of Boss Bottled Beyond did not translate into the growth of the broader Hugo Boss brand in the past two quarters.
But we are sufficiently strong operational discipline. The success of cross border beyond did not translate into the growth of the broader Hugo boss brand in the past two quarters. The launch did not generate a halo impact on the other call Hugo boss franchises like boss the scent.
Speaker #1: They launched it, but it did not generate enough halo impact on the other core Hugo Boss franchises, like Boss Descent. This is not rocket science, which is why we are putting in place a more holistic plan for next year, with continued support and co-merchandising around Boss Bottle Beyond, a broader brand-level halo strategy, and sustained reinforcement of the core business.
This is not rocket science, which is why we are putting place a more holistic plan for next year with continued support and co merchandising around boss bottled beyond.
Marcus: This is not rocket science, which is why we are putting in place a more holistic plan for next year, with continued support and co-merchandising around BOSS Bottled Beyond, a broader brand-level halo strategy, and sustained reinforcement of the core business. We've seen similar puts and takes in our largest market, the US. As shared in recent quarters, underperformance in the US market in both divisions accounted for nearly all of Coty's fiscal 2025 sales decline. The company has taken action in calendar 2025, including a new leadership team, new organizational structure, and increased marketing support. However, the results in the last couple of quarters have been inconsistent. There are many things that are working well in the US. We have several scaled leading fragrance brands, such as Burberry and Marc Jacobs, with several female franchises like Burberry Her and Marc Jacobs Daisy ranking in the top 15.
Markus Strobel: This is not rocket science, which is why we are putting in place a more holistic plan for next year, with continued support and co-merchandising around BOSS Bottled Beyond, a broader brand-level halo strategy, and sustained reinforcement of the core business. We've seen similar puts and takes in our largest market, the US. As shared in recent quarters, underperformance in the US market in both divisions accounted for nearly all of Coty's fiscal 2025 sales decline. The company has taken action in calendar 2025, including a new leadership team, new organizational structure, and increased marketing support. However, the results in the last couple of quarters have been inconsistent. There are many things that are working well in the US. We have several scaled leading fragrance brands, such as Burberry and Marc Jacobs, with several female franchises like Burberry Her and Marc Jacobs Daisy ranking in the top 15.
Broader brand level Halo strategy and sustained reinforcement of the core business.
This being similar puts and takes in our largest market the U S. A.
Speaker #1: We've seen similar puts and takes in our largest market, the U.S. As shared in recent quarters, underperformance in the U.S. market in both divisions accounted for nearly all of Coty's fiscal '25 sales decline.
As shared in recent quarters underperformance in the U S market in both divisions accounted for nearly all of <unk> fiscal 'twenty, 5% sales decline.
The company has taken actions in calendar 'twenty, five, including a new leadership team new organization structure and increased marketing support however, the risk.
Speaker #1: The company has taken actions in calendar '25, including a new leadership team, a new organizational structure, and increased marketing support. However, the results in the last couple of quarters have been inconsistent.
And the last couple of quarters has been inconsistent there are many things that are working well in the U S. We have several scale, leading fragrance brands, just as Burberry and Marc Jacobs with several chemo franchises like February here and Marc Jacobs Daisy ranking in the top 15.
Speaker #1: There are many things that are working well in the US. We have several scaled leading fragrance brands, just as Burberry and Marc Jacobs, with several female franchises like Burberry Hair and Marc Jacobs Daisy ranking in the top 15.
You are strongly outperforming into prestige makeup category led by momentum in Kylie makeup.
Speaker #1: We are strongly outperforming in the prestige makeup category, led by momentum and Kylie makeup. On the retail side, we are strengthening our position with growing customers.
Marcus: We are strongly outperforming in the prestige makeup category, led by momentum and Kylie Makeup. On the retail side, we are strengthening our position with growing customers. As a result of our strong partnership with Ulta, they are now one of our largest retail partners, and we are outperforming with them. Similarly, we are delivering best-in-class execution in the critical prestige e-commerce channel, with strong double-digit growth in the first half. Amazon is now a leading beauty retailer in the US, albeit with a smaller position in prestige fragrances. We are proud to have grown Coty's fragrance sales on Amazon by over 30%, fueled by our existing brands and the successful launch of Marc Jacobs fragrance on Amazon in July. Importantly, our efforts on the TikTok shop in both the US and the UK are driving halo for our brands in both e-commerce and brick-and-mortar.
Markus Strobel: We are strongly outperforming in the prestige makeup category, led by momentum and Kylie Makeup. On the retail side, we are strengthening our position with growing customers. As a result of our strong partnership with Ulta, they are now one of our largest retail partners, and we are outperforming with them. Similarly, we are delivering best-in-class execution in the critical prestige e-commerce channel, with strong double-digit growth in the first half. Amazon is now a leading beauty retailer in the US, albeit with a smaller position in prestige fragrances. We are proud to have grown Coty's fragrance sales on Amazon by over 30%, fueled by our existing brands and the successful launch of Marc Jacobs fragrance on Amazon in July. Importantly, our efforts on the TikTok shop in both the US and the UK are driving halo for our brands in both e-commerce and brick-and-mortar.
On the retail side, we are strengthening our position with growing customers.
As a result of our strong partnership with Ulta.
Speaker #1: As a result of our strong partnership with Ulta, they are now one of our largest retail partners and we are outperforming with them. Similarly, we are delivering best-in-class execution in the critical Prestige e-commerce channel, with strong WG growth in the first half.
Now one of our largest retail partners and we are outperforming with them.
Really we are delivering best in class execution, and the critical prestige E Commerce channel with strong double digit growth in the first half.
Allison is now a leading beauty retailer in the U S, albeit of a smaller position in prestige fragrances, we are.
Speaker #1: Amazon is now a leading beauty retailer in the US, all based with a smaller position in prestige fragrances. We are proud to have grown Coty's fragrance sales on Amazon by over 30%, fueled by our existing brands and the successful launch of Marc Jacobs fragrance on Amazon in July.
Proud to have grown codecs fragrance sales on Amazon by over 30% fueled by our existing brands and the successful launch of Marc Jacobs fragrance on Amazon in July.
And importantly, our efforts on the tick tock shop in both the U S and the UK are driving Halo for our brands in both e-commerce and brick and mortar.
Speaker #1: And importantly, our efforts on the TikTok Shop in both the US and the UK are driving halo for our brands in both e-commerce and brick-and-mortar.
So while many areas of the U S business are working well results. During the critical Q2 holiday period were below our expectations. We saw three key areas of pressure.
Speaker #1: So, while many areas of the U.S. business are working well, results during the critical Q2 holiday period were below our expectations. We saw three key areas of pressure.
Marcus: So while many areas of the US business are working well, results during the critical Q2 holiday period were below our expectations. We saw three key areas of pressure. First, the prestige fragrance market slowed from 7% growth in Q1 to approximately 3% growth in Q2, with much of the consumer purchasing concentrated at the very end of the quarter. Second, we saw a very aggressive promotional activity in prestige fragrances during the holiday season. This not only suppressed broader US fragrance growth, but also the profit contribution from this key market. And third, our performance versus the market has been inconsistent. In prestige fragrances, after lagging the market by 5 to 7% in prior quarters, our fiscal Q1 sell-out was in line with the market. However, in Q2, our sell-out was flattish, underperforming the market by several points in the critical fragrance category.
Markus Strobel: So while many areas of the US business are working well, results during the critical Q2 holiday period were below our expectations. We saw three key areas of pressure. First, the prestige fragrance market slowed from 7% growth in Q1 to approximately 3% growth in Q2, with much of the consumer purchasing concentrated at the very end of the quarter. Second, we saw a very aggressive promotional activity in prestige fragrances during the holiday season. This not only suppressed broader US fragrance growth, but also the profit contribution from this key market. And third, our performance versus the market has been inconsistent. In prestige fragrances, after lagging the market by 5 to 7% in prior quarters, our fiscal Q1 sell-out was in line with the market. However, in Q2, our sell-out was flattish, underperforming the market by several points in the critical fragrance category.
First the prestige fragrance market slowed from 7% growth in Q1 to approximately 3% growth in Q2 with much of the consumer purchasing concentrated at the very end of the quarter.
Speaker #1: First, the prestige fragrance market slowed from 7% growth in Q1 to approximately 3% growth in Q2, with much of the consumer purchasing concentrated at the very end of the quarter.
Second we saw a very aggressive promotional activity in prestige fragrances during the holiday season. It's.
Speaker #1: Second, we saw very aggressive promotional activity in Prestige fragrances during the holiday season. This not only suppressed broader U.S. fragrance growth, but also the profit contribution from this key market.
This is not only suppressed broader use fragrance growth, but also the profit contribution from this key market.
And third our performance versus the market has been inconsistent and prestige fragrances after lagging the market by 5% to 7% in prior quarter. Our fiscal Q1 sell out was in line with the market. However in Q2, our sellout was flattish underperforming the market by several points in the critical fragrance category.
Speaker #1: And third, our performance versus the market has been inconsistent. In Prestige fragrances, after lagging the market by 5% to 7% in prior quarters, our fiscal Q1 sellout was in line with the market.
Speaker #1: However, in Q2, our sellout was flattish, underperforming the market by several points in the critical fragrance category. In consumer beauty, we continue to see a large gap in our sellout performance relative to the US mass cosmetics category, though the recent changes we implemented are starting to show some modest improvement.
In consumer beauty, we continue to see a large gap in our sell out performance relative to the U S mass cosmetics category.
Marcus: In consumer beauty, we continue to see a large gap in our sell-out performance relative to US mass cosmetics category, though the recent changes we implemented are starting to show some modest improvement. The root cause of this underperformance comes back to the same themes: focus, making choices, prioritizing investment, and operational discipline. Over the past couple of years, in both prestige and consumer beauty, Coty has funded too many projects and initiatives. As a result, high-potential core franchises didn't receive sufficient investment or organizational focus. Too much emphasis was placed on launching new innovation and not enough on the core business. The challenge was most acute in mass cosmetics, where our SKU count in seasonal innovation bundles kept increasing, resulting in less productive SKUs, replacing more productive SKUs on the shelf, in addition to incurring more costs from returns.
Markus Strobel: In consumer beauty, we continue to see a large gap in our sell-out performance relative to US mass cosmetics category, though the recent changes we implemented are starting to show some modest improvement. The root cause of this underperformance comes back to the same themes: focus, making choices, prioritizing investment, and operational discipline. Over the past couple of years, in both prestige and consumer beauty, Coty has funded too many projects and initiatives. As a result, high-potential core franchises didn't receive sufficient investment or organizational focus. Too much emphasis was placed on launching new innovation and not enough on the core business. The challenge was most acute in mass cosmetics, where our SKU count in seasonal innovation bundles kept increasing, resulting in less productive SKUs, replacing more productive SKUs on the shelf, in addition to incurring more costs from returns.
Though the recent changes we've implemented are starting to show some modest improvement.
The root cause of this underperformance comes back to the same themes focus making choices prioritizing investment and operational discipline.
Speaker #1: The root cause of this underperformance comes back to the same themes. Focus making choices, prioritizing investment, and operational discipline. Over the past couple of years, in both Prestige and consumer beauty, COTY has funded too many projects and initiatives.
Over the past couple of years and both prestige consumer beauty Coty has funded too many projects and initiatives.
As a result high potential core franchises didn't receive sufficient investment organizational focus too.
Speaker #1: As a result, high-potential core franchises didn't receive sufficient investment or organizational focus. Too much emphasis was placed on launching new innovation, and not enough on the core business.
Too much emphasis was placed on launching new innovation and not enough on the core business.
The challenge was most acute in mass cosmetics, where our SKU count and seasonal innovation bundles kept increasing resulting in less productive svu's, replacing more productive ftes on the shelf. In addition to incurring more costs from returns.
Speaker #1: The challenge was most acute in mass cosmetics, where our SKU count in seasonal innovation bundles kept increasing, resulting in less productive SKUs replacing more productive SKUs on the shelves, in addition to incurring more costs from returns.
The good news is that we are clear on our priorities from here we.
Speaker #1: The good news is that we are clear on our priorities from here. We are actively shaping the US playbook for both Prestige and Consumer Beauty to, first of all, continue winning where we are already strong, and second, concentrate media support, in-store execution, and organizational focus behind the brands, franchises, retailers, and channels that will move the needle and deliver sustainable sell-out growth.
Marcus: The good news is that we are clear on our priorities from here. We are actively shaping the US playbook for both prestige and consumer beauty to, first of all, continue winning where we are already strong, and second, concentrate media support, in-store execution, and organizational focus behind the brands, franchises, retailers, and channels that will move the needle and deliver sustainable sell-out growth. Burberry continues to be a standout performer in our portfolio. We have grown Burberry by more than 140% between fiscal 2019 and fiscal 2025, a testament to the strength of the brand and the discipline of our execution over time. Over the past 6 years, we've built three core fragrance franchises, Burberry Her, Burberry Hero, and Burberry Goddess. In Q2, each grew by a mid-single-digit to double-digit percentage like-for-like. Importantly, Burberry continues to steadily strengthen its position.
Markus Strobel: The good news is that we are clear on our priorities from here. We are actively shaping the US playbook for both prestige and consumer beauty to, first of all, continue winning where we are already strong, and second, concentrate media support, in-store execution, and organizational focus behind the brands, franchises, retailers, and channels that will move the needle and deliver sustainable sell-out growth. Burberry continues to be a standout performer in our portfolio. We have grown Burberry by more than 140% between fiscal 2019 and fiscal 2025, a testament to the strength of the brand and the discipline of our execution over time. Over the past 6 years, we've built three core fragrance franchises, Burberry Her, Burberry Hero, and Burberry Goddess. In Q2, each grew by a mid-single-digit to double-digit percentage like-for-like. Importantly, Burberry continues to steadily strengthen its position.
We are actively shaping the U S playbook for both prestige consumer beauty to first of all continue winning where we already are strong and second concentrate media support in store execution and organizational focus behind the brand franchises retailers and channels that will move the needle and deliver sustainable sellout grow.
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February continues to be a standout performer in our portfolio.
Speaker #1: Burberry continues to be a standout performer in our portfolio. We have grown Burberry by more than 140% between fiscal '19 and fiscal '25, a testament to the strength of the brand and the discipline of our execution over time.
We have grown burberry by more than 140% between fiscal 19 in fiscal 'twenty five a testament to the strength of the brand and the discipline of our execution over time.
For the past six years, we build three core fragrance franchises burberry her wherever in euro and broker regardless and in Q2, each grew by a mid single digit to double digit percentage like for like.
Speaker #1: Over the past six years, we built three core fragrance franchises: Burberry Hair, Burberry Hero, and Burberry a mid-single digit to double-digit percentage like-for-like. And importantly, Burberry continues to steadily strengthen its position.
And importantly, burberry continues to steadily strengthen its position.
<unk> global fragrance ranking improved from <unk> 30 in 2019 to number 15 in 2025.
Speaker #1: Burberry's global fragrance ranking improved from number 30 in 2019 to number 15 in 2025. In female fragrances, specifically, Burberry is now within the top 10, up from number 27 in 2019.
Marcus: Burberry's global fragrance ranking improved from 30 in 2019 to 15 in 2025. In female fragrances, specifically, Burberry is now within the top 10, up from 27 in 2019, a remarkable step change in just a few years. Complementing fragrances, Burberry makeup also delivered high single-digit growth in Q2, reinforcing the brand's ability to perform across categories. Let me move to another example of what's working well, Marc Jacobs. We are seeing continued momentum in key franchises like Perfect. We also saw exceptional performance from the Daisy Murakami limited edition collection, which exceeded all expectations and rapidly sold out in the US. We are excited to roll out this launch into additional markets in the coming months. The launch of Marc Jacobs on Amazon last summer has been highly incremental.
Markus Strobel: Burberry's global fragrance ranking improved from 30 in 2019 to 15 in 2025. In female fragrances, specifically, Burberry is now within the top 10, up from 27 in 2019, a remarkable step change in just a few years. Complementing fragrances, Burberry makeup also delivered high single-digit growth in Q2, reinforcing the brand's ability to perform across categories. Let me move to another example of what's working well, Marc Jacobs. We are seeing continued momentum in key franchises like Perfect. We also saw exceptional performance from the Daisy Murakami limited edition collection, which exceeded all expectations and rapidly sold out in the US. We are excited to roll out this launch into additional markets in the coming months. The launch of Marc Jacobs on Amazon last summer has been highly incremental.
And female fragrances, specifically Burberry is now within the top 10 up from number 27 in 2019.
A remarkable step change in just a few years complement.
Speaker #1: A remarkable step change in just a few years. Complementing fragrances, Burberry makeup also delivered high single-digit growth in Q2, reinforcing the brand's ability to perform across categories.
In Fragrances Burberry makeup also delivered high single digit growth in Q2.
Reinforcing the brand's ability to perform across categories.
Let me move to another example of what's working well managed vehicles. We are seeing continued momentum in key franchises like perfect. We also saw exceptional performance from the DC more economy limited edition collection, which exceeded all expectations and rapidly sold out in the U S.
Speaker #1: Let me move to another example of what's working well. Marc Jacobs. We are seeing continued momentum in key franchises like Perfect. We also saw exceptional performance from the Daisy Murakami limited edition collection, which exceeded all expectations and rapidly sold out in the US.
We're excited to rollout launch into additional markets in the coming months.
Speaker #1: We are excited to roll out this launch into additional markets in the coming month. The launch of Marc Jacobs on Amazon last summer has been highly incremental.
The launch of Marc Jacobs and Amazon last summer has been highly incremental and fact Davidson launched supported growth across other channels, including brick and mortar with Marc Jacobs U S. Total sellout growing double chin double digits since the launch.
Speaker #1: In fact, the Amazon launch has supported growth across other channels, including brick-and-mortar, with Marc Jacobs U.S. total sell-out growing double digits since the launch.
Marcus: In fact, the Amazon launch has supported growth across other channels, including brick-and-mortar, with Marc Jacobs' US total sellout growing double digits since the launch. Looking ahead, we are excited to launch makeup under Marc Jacobs Beauty in mid-calendar 2026. This combination of strong core franchises, high-impact innovations, and presence in top markets and key channels illustrates why disciplined momentum building is central to our strategy across the portfolio. Kylie Cosmetics is another example of what is working well. In Q2, Kylie delivered strong like-for-like sales growth. Fragrance sales more than doubled year over year, led by the Cosmic franchise and the brand's entry into fragrance mists. Makeup sales also grow at high single-digit rates, thanks to momentum in lip products and the viral social media success of the Skin Tint Blurring Elixir.
Markus Strobel: In fact, the Amazon launch has supported growth across other channels, including brick-and-mortar, with Marc Jacobs' US total sellout growing double digits since the launch. Looking ahead, we are excited to launch makeup under Marc Jacobs Beauty in mid-calendar 2026. This combination of strong core franchises, high-impact innovations, and presence in top markets and key channels illustrates why disciplined momentum building is central to our strategy across the portfolio. Kylie Cosmetics is another example of what is working well. In Q2, Kylie delivered strong like-for-like sales growth. Fragrance sales more than doubled year over year, led by the Cosmic franchise and the brand's entry into fragrance mists. Makeup sales also grow at high single-digit rates, thanks to momentum in lip products and the viral social media success of the Skin Tint Blurring Elixir.
Looking ahead, we are excited to launch makeup under Marc Jacobs beauty in mid calendar 2026.
Speaker #1: Looking ahead, we are excited to launch makeup under Marc Jacobs Beauty in mid-calendar 2026. This combination of strong core franchises, high impact innovations, and presence in top markets in key channels illustrates why disciplined momentum building is central to our strategy across the portfolio.
This combination of strong core franchises high impact innovations and presence in top markets and key channels illustrates swipe disciplined momentum building central to our strategy across the portfolio.
Kylie cosmetics is another example of what is working well in the second quarter Haile delivered strong like for like sales growth frequency has more than doubled year on year over year led by the cosmic franchise and the brand's entry into fragrance mist make.
Speaker #1: example of what is working well. Kylie Cosmetics is another In the second quarter, Kylie delivered strong, like-for-like sales growth. Frequent sales, more than double year-over-year, led by the cosmic franchise and the brand's entry into fragrance lists.
<unk> sales also grow at high single digit rate, thanks to momentum and lip products and the viral social media success of the skin blurring Alexia.
Speaker #1: Makeup sales also grow at high single-digit rates, thanks to momentum in lip products and the viral social media success of the Skin Tint Blurring Elixir.
Totally totally Kylie cosmetics brands sell out growth in Q2 with more than 20% supported by strong momentum in both makeup and fragrance.
Speaker #1: Total Kylie Cosmetics brand sellout growth in Q2 was more than 20%, supported by strong momentum in both makeup and fragrance. In recent weeks, we launched the next fragrance iteration, Cosmic Kylie Jenner Intense.
Marcus: Total Kylie Cosmetics brand sell-out growth in Q2 was more than 20%, supported by strong momentum in both makeup and fragrance. In recent weeks, we launched the next fragrance iteration, Cosmic Kylie Jenner Intense, and this innovation is off to an exceptional start, well ahead of our expectations. And as a further proof of the brand's global resonance and Kylie's own influence, Kylie Cosmetics ranked number 2 among all beauty brands in calendar 2025 in social media engagement through creator-led strategies by both Traackr and Cosmetify. Moving to our mass fragrance business. The broader Coty issue of pursuing too many small projects, adding complexity without moving the needle, is also evident here. Smaller lifestyle fragrance initiatives have diverted focus and resources from core brands, reinforcing the need to focus and streamline the portfolio.
Markus Strobel: Total Kylie Cosmetics brand sell-out growth in Q2 was more than 20%, supported by strong momentum in both makeup and fragrance. In recent weeks, we launched the next fragrance iteration, Cosmic Kylie Jenner Intense, and this innovation is off to an exceptional start, well ahead of our expectations. And as a further proof of the brand's global resonance and Kylie's own influence, Kylie Cosmetics ranked number 2 among all beauty brands in calendar 2025 in social media engagement through creator-led strategies by both Traackr and Cosmetify. Moving to our mass fragrance business. The broader Coty issue of pursuing too many small projects, adding complexity without moving the needle, is also evident here. Smaller lifestyle fragrance initiatives have diverted focus and resources from core brands, reinforcing the need to focus and streamline the portfolio.
In recent weeks, we launched next fragrance iteration cosmic Kylie Jenner intense and this innovation is off to an exceptional start well ahead of our expectations.
Speaker #1: off to an exceptional start, well ahead of our And this innovation is expectations. And as a further proof of the brand's global influence, Kylie Cosmetics ranked number resonance and Kylie's own two among all beauty brands in calendar 2025 and social media engagement through creator-led strategies.
Further proof of the brand's global resonance and pilots on influence Kylie cosmetic ranked number two among all beauty brands in calendar 2025, and social media engagement through create a lift strategies by both <unk> and cosmetics side.
Speaker #1: By both tracker and Moving to our mass fragrance cosmetic fly. business. A broader COTY issue of pursuing too many small projects adding complexity without moving the needle is Smaller lifestyle fragrance initiatives have also evident here.
Moving to a mass fragrance business.
The broader coty issue of pursuing too many small projects, adding complexity without moving the needle is also evident here.
Smaller lifestyle fragrance initiatives has diverted focus and resources from core brands reinforcing the need to focus and streamline the portfolio.
Speaker #1: diverted focus and resources from core brands reinforcing the need to focus and streamline the portfolio. We will discontinue small fragrance initiatives and halt new projects that have been in development, particularly as many of these projects did not resonate with retailers and consumers.
We will discontinue small fragrance initiatives and new projects that have been in development, particularly particularly as many of these projects did not resonate with retailers and consumers.
Marcus: We will discontinue small fragrance initiatives and halt new projects that have been in development, particularly as many of these projects did not resonate with retailers and consumers. Instead, our focus will be on amplifying core brands like Adidas, Bruno Banani, Mexx. In fact, Adidas fragrances grew at double-digit pace in Q2. The new Adidas scenting platform, Adidas Vibes, is performing well in a number of regions, particularly emerging markets like Central and Eastern Europe and Southeast Asia. But that strength is not yet consistent globally, and we are working to accelerate its performance across markets. Across Coty, our AI journey is accelerating, and we're already putting real foundations in place. So it's just the tip of the iceberg of what AI can do for our business.
Markus Strobel: We will discontinue small fragrance initiatives and halt new projects that have been in development, particularly as many of these projects did not resonate with retailers and consumers. Instead, our focus will be on amplifying core brands like Adidas, Bruno Banani, Mexx. In fact, Adidas fragrances grew at double-digit pace in Q2. The new Adidas scenting platform, Adidas Vibes, is performing well in a number of regions, particularly emerging markets like Central and Eastern Europe and Southeast Asia. But that strength is not yet consistent globally, and we are working to accelerate its performance across markets. Across Coty, our AI journey is accelerating, and we're already putting real foundations in place. So it's just the tip of the iceberg of what AI can do for our business.
Instead, our focus will be on amplify and core brands like Adidas Bruner <unk> mix.
Speaker #1: Amplifying core brands like Adidas, Bruna. Instead, our focus will be on Banani and Max. In fact, Adidas fragrances grew at a double-digit pace in Q2. The new Adidas scenting platform, Adidas Vibes, is performing well in a number of regions, particularly emerging markets like Central and Eastern Europe and Southeast Asia.
In fact, Adidas fragrances grew at double digit pace in Q2.
The new added ascending platform Adidas device is performing well in a number of regions.
<unk> really emerging markets like central and Eastern Europe, and Southeast Asia.
Well that strength is not yet consistent globally, and we are working to accelerate its performance across markets.
Speaker #1: not yet consistent globally, and we are But that strength is working to accelerate its performance across markets. Across COTY, our AI journey is accelerating, and we are already putting real foundations in place.
Across Cody our AI journey is accelerating and we are already putting a real foundations in place. So it's just the tip of the iceberg of what AI can do for our business building on our strong sizable AI partnership with Microsoft in service now our new strategic collaboration with open AI expense our AI.
Speaker #1: the iceberg of what AI can do for our So it's just the tip of business. Building on our with Microsoft and ServiceNow, strong sizable AI partnership our new strategic collaboration with OpenAI expands our AI ecosystem to support focused applications including advanced consumer persona insights.
Marcus: Building on our strong, sizable AI partnership with Microsoft and ServiceNow, our new strategic collaboration with OpenAI expands our AI ecosystem to support focused applications, including advanced consumer persona insights. We're actively creating digital assets using generative AI, helping us reduce spending, compress timelines, and generate more content. While still in the early stages of implementation, through AI, we've reduced the post-production asset costs for selected fragrance, cosmetics, and skin, skincare brands by 70% to 90%. We're also preparing for machine buying. With generative engine optimization, we're beginning to influence how our brands are represented and recommended across AI engines, an increasingly critical gateway for consumer discovery. But perhaps most importantly, AI at Coty isn't just about the tools, it's about our people.
Markus Strobel: Building on our strong, sizable AI partnership with Microsoft and ServiceNow, our new strategic collaboration with OpenAI expands our AI ecosystem to support focused applications, including advanced consumer persona insights. We're actively creating digital assets using generative AI, helping us reduce spending, compress timelines, and generate more content. While still in the early stages of implementation, through AI, we've reduced the post-production asset costs for selected fragrance, cosmetics, and skin, skincare brands by 70% to 90%. We're also preparing for machine buying. With generative engine optimization, we're beginning to influence how our brands are represented and recommended across AI engines, an increasingly critical gateway for consumer discovery. But perhaps most importantly, AI at Coty isn't just about the tools, it's about our people.
Ecosystem to support focused applications, including advanced consumer personae insights.
We are actively creating digital assessed using generative AI, helping us reduce spending compressed timelines and generate more content.
Speaker #1: We're actively creating digital reduce spending, compress assets using generative AI, helping us timelines, and generate more content. While still in the early stages of implementation, through AI, we've reduced the post-production asset costs for selected fragrance, cosmetics, and skincare brands by 70 to 90%.
While still in the early stages of implementation.
We've reduced the postproduction asset coast for selected fragrance cosmetics, and skincare brands by 70% to 90%.
Also preparing for machine buying.
Speaker #1: We also are preparing for machine buying. Through generative engine optimization, we're beginning to influence how our brands are represented and recommended across AI engines.
With generative engine optimization, we are beginning to influence how our brands are represented and recommended across AI engines and increasingly critical gateway for consumer discovery.
Speaker #1: And increasingly critical gateway for consumer discovery. But perhaps most importantly, AI at COTY isn't just about the tools. It's about our people. Through targeted training, hands-on workshops, and leadership engagement, we are building an organization where AI becomes part of our employees' day-to-day, strengthening execution today, and creating a future-ready COTY.
But perhaps most importantly, <unk> isn't just about the tools, it's about our people.
<unk> training hands on workshops and leadership engagement, we are building an organization the AI becomes part of our employees' day to day strengthened.
Marcus: Through targeted training, hands-on workshops, and leadership engagement, we are building an organization where AI becomes part of our employees' day-to-day, strengthening execution today and creating a future-ready Coty. Now that I've shared my very initial assessment of Coty's portfolio, capabilities, and playbook, it's fair to ask, now what? What does this mean for Coty's overall strategic direction? I don't have all the answers today, and I will come back to you in the coming quarters with a comprehensive strategic overview and financial roadmap for the coming years. But in the meantime, there are some decisions I've made with the support of the board. First, we will continue with our strategic review of consumer beauty.
Markus Strobel: Through targeted training, hands-on workshops, and leadership engagement, we are building an organization where AI becomes part of our employees' day-to-day, strengthening execution today and creating a future-ready Coty. Now that I've shared my very initial assessment of Coty's portfolio, capabilities, and playbook, it's fair to ask, now what? What does this mean for Coty's overall strategic direction? I don't have all the answers today, and I will come back to you in the coming quarters with a comprehensive strategic overview and financial roadmap for the coming years. But in the meantime, there are some decisions I've made with the support of the board. First, we will continue with our strategic review of consumer beauty.
Strengthening execution today, and creating a future ready Cody.
Now that I've shared my very initial assessment of cordis portfolio capabilities and playbook, It's fair to ask now what what.
Speaker #1: I shared my very initial assessment of, now that I've seen Coty's portfolio, capabilities, and playbook, it's fair to ask: now what? What does this mean for Coty's overall strategic direction?
Does this mean for cordis overall strategic direction.
I don't have all the answers today and I will come back to you in the coming quarters with a comprehensive strategic overview and financial roadmap for the coming years.
Speaker #1: I don't have all the answers today, and I will come back to you in the coming quarters with a comprehensive strategic overview and financial roadmap for the coming years.
But in the meantime, some decisions I've made with the support of the board.
Speaker #1: But in the meantime, there's some decisions I've made with the support of the board. First, we will continue with our strategic review of consumer beauty.
First we will continue with our strategic review of consumer beauty.
As shared last quarter under the leadership of Gordon from Britain, we're activating the calendar future performance improvement plan to return Coty consumer cosmetics business to growth and profit expansion over the next one or two years.
Marcus: As shared last quarter, under the leadership of Gordon von Bretten, we're activating the Color the Future performance improvement plan to return Coty's consumer cosmetics business to growth and profit expansion over the next one or two years. Laurent will share an update on Color the Future shortly. While delivering the full results of the plan will take some time, I believe this is the right strategic decision for Coty, as the successful execution of the plan will unlock shareholder value... regardless of the ultimate decision on the brand portfolio, we value opportunities in both the short and the long term. The second portfolio decision is around lifestyle scenting. While we will pursue closer coordination across our full fragrance portfolio in R&D and consumer insights, we have decided that lifestyle fragrances will remain under consumer beauty to ensure continuity in commercial activities and marketing support.
Markus Strobel: As shared last quarter, under the leadership of Gordon von Bretten, we're activating the Color the Future performance improvement plan to return Coty's consumer cosmetics business to growth and profit expansion over the next one or two years. Laurent will share an update on Color the Future shortly. While delivering the full results of the plan will take some time, I believe this is the right strategic decision for Coty, as the successful execution of the plan will unlock shareholder value... regardless of the ultimate decision on the brand portfolio, we value opportunities in both the short and the long term. The second portfolio decision is around lifestyle scenting. While we will pursue closer coordination across our full fragrance portfolio in R&D and consumer insights, we have decided that lifestyle fragrances will remain under consumer beauty to ensure continuity in commercial activities and marketing support.
Speaker #1: under the leadership of Gordon von A shared last quarter Breton, we're activating the Color the Future performance improvement plan to return COTY's consumer cosmetics business to growth and profit expansion over the next one or two years.
Paul will share an update on call it a future shortly.
Speaker #1: Laurent will share an update on Color the Future shortly. While delivering the full results of the plan will take some time, I believe this is the right strategic decision for COTY as a successful execution of the plan will unlock shareholder value regardless of the ultimate decision on the brand portfolio with value opportunities in both the short and the long term.
While delivering the full results of the plan will take some time I believe this is the right strategic decision for Coty as a successful execution of the plan will unlock shareholder value regardless of the ultimate decision on the brand portfolio with value opportunities in both the short and the long term the second portfolio decision is around lifestyle.
Speaker #1: The second portfolio decision is around lifestyle sensing. While we will pursue closer coordination across our full fragrance portfolio in R&D and consumer insights, we have decided that lifestyle fragrances will remain under consumer beauty to ensure continuity in commercial activities and marketing support.
Scenting.
While we will pursue closer coordination across our full fragrance portfolio in R&D and consumer insights, we have decided that lifestyle fragrances remain under consumer beauty to ensure continuity and commercial activities and marketing support.
Given our focus on scale reach and profitability we have.
Speaker #1: Third, given our focus on scale, reach, and profitability, we have made the decision to end our license with the Ovida skincare brand. And finally, in a similar vein, we will also be reviewing our tail fragrance initiatives with a focus on the smaller geographically dispersed activities.
Marcus: Third, given our focus on scale, reach, and profitability, we have made the decision to end our license with the Adidas skincare brand. And finally, in a similar vein, we will also be reviewing our tail fragrance initiatives with a focus on the smaller, geographically dispersed activities. Now, let me hand the call over to Laurent to discuss our financial results and outlook.
Markus Strobel: Third, given our focus on scale, reach, and profitability, we have made the decision to end our license with the Adidas skincare brand. And finally, in a similar vein, we will also be reviewing our tail fragrance initiatives with a focus on the smaller, geographically dispersed activities. Now, let me hand the call over to Laurent to discuss our financial results and outlook.
Made the decision to end our license with Davita skincare brand.
And finally in a similar vein, we will also be reviewing our tail fragrance initiatives with a focus on the smaller geographically dispersed activities.
Now, let me hand, the call over to law, we discuss our financial results and outlook.
Speaker #1: Now, let me hand the call over to Laurent to discuss our financial
Speaker #1: results and outlook. Thank you,
Marcus.
Laurent: Thank you, Marcus. As Marcus has discussed, we are navigating a complex external environment, while in parallel, working to instill greater focus and operational discipline across the organization. Let me provide some context on the broader beauty backdrop and our in-market performance. In Q2, the Prestige Beauty market grew approximately 5%. While still steady growth, this indicates some sequential slowing from the roughly 6% growth in Q1. The slower growth was evident in Prestige fragrances, with the category moderating from 5% growth in Q1 to 3% in Q2, with modest growth in both units and price mix. In Prestige fragrances, there was some incremental slowing in the US and in certain European markets like Germany and the UK.
Laurent Mercier: Thank you, Marcus. As Marcus has discussed, we are navigating a complex external environment, while in parallel, working to instill greater focus and operational discipline across the organization. Let me provide some context on the broader beauty backdrop and our in-market performance. In Q2, the Prestige Beauty market grew approximately 5%. While still steady growth, this indicates some sequential slowing from the roughly 6% growth in Q1. The slower growth was evident in Prestige fragrances, with the category moderating from 5% growth in Q1 to 3% in Q2, with modest growth in both units and price mix. In Prestige fragrances, there was some incremental slowing in the US and in certain European markets like Germany and the UK.
Speaker #2: Markus. As Markus has discussed, we are navigating a complex external instill greater focus and operational environment. While in parallel working to discipline across the organization.
Marcus as discussed we are navigating a complex external environment.
In parallel working to instill greater focus and operational discipline across the organization.
Let me provide some context on the broader beauty backdrop.
Speaker #2: Let me provide some context on the broader beauty backdrop and our in-market performance. In Q2, the prestige beauty market grew approximately 5%. While still solid growth, this indicates some sequential slowing from the roughly 6% growth in Q1.
Our in market performance in.
In Q2, so prestige beauty market grew approximately 5%.
Wireless still studied gross lease indicates some sequential slowing from the roughly 6% growth in Q1.
The slower growth was evident in prestige fragrances.
Speaker #2: The slower growth was evident in prestige fragrances, with the category moderating from 5% growth in Q1 to 3% in Q2, with modest growth in both units and price mix.
Category moderating from 5% growth in Q1, two 3% in Q2.
With modest growth in both units and price mix.
In prestige fragrances.
Speaker #2: In prestige fragrances, there was some incremental slowing in the US and in certain European markets like Germany and the UK. Again, this backdrop, our total sellout was broadly flattish, though this included weaker and category sellout in key markets like the US, Germany, and the UK.
There was some incremental slowing in the U S and in certain European markets like Germany and UK.
Against this backdrop, our total sellout was broadly flattish vote. These included weaker than category sellout in key markets like the U S, Germany and the UK.
Laurent: Against this backdrop, our total sell-out was broadly flattish, though this included weaker than category sell-out in key markets like the US, Germany, and the UK, largely balanced by strong sell-out in emerging regions like Asia Pacific, Middle East, Latin America, and travel retail. On the revenue side, our prestige net sales declined by 2% like-for-like. The gap between our relatively stronger sell-out and weaker selling was primarily driven by elevated promotionality in the market, which pressured our gross profit. On a gross sales basis, selling was broadly aligned with sell-out, indicating that the estimated inventory de-stocking headwinds we experienced over the past year meaningfully reduced this quarter. In consumer beauty, the market grew by 5% in the quarter.
Laurent Mercier: Against this backdrop, our total sell-out was broadly flattish, though this included weaker than category sell-out in key markets like the US, Germany, and the UK, largely balanced by strong sell-out in emerging regions like Asia Pacific, Middle East, Latin America, and travel retail. On the revenue side, our prestige net sales declined by 2% like-for-like. The gap between our relatively stronger sell-out and weaker selling was primarily driven by elevated promotionality in the market, which pressured our gross profit. On a gross sales basis, selling was broadly aligned with sell-out, indicating that the estimated inventory de-stocking headwinds we experienced over the past year meaningfully reduced this quarter. In consumer beauty, the market grew by 5% in the quarter.
Largely balanced by strong sellout in emerging regions like Asia Pacific Middle East Latin America Untroubled retain.
Speaker #2: Largely balanced by strong sellout in emerging regions like Asia Pacific, Middle East, Latin America, and travel retail. On the revenue side, our prestige net sales declined by 2% like for like.
On the revenue side, our prestige niche sales declined by 2% like for like.
The gap between our relatively stronger sellout and weaker Sterling was primarily driven by elevated promotional it in the market, which pressured our gross to net.
Speaker #2: The gap between our relatively stronger sellout and weaker selling was primarily driven by elevated promotionality in the market, which pressured our growth to net.
On a gross spend as David said, it was broad airline, which set out indicating that the estimated inventory destocking headwinds, we experienced over the past year meaningfully reduced this quarter.
Speaker #2: On the gross sales basis, selling was broadly aligned with sellout, indicating that the estimated inventory restocking headwinds we experienced over the past quarter. In consumer beauty, the market grew by 5% in the quarter.
In consumer beauty zama.
The market grew by 5% in the quarter.
And as recent as in recent quarters of challenge in consumer beauty remains a sizeable gap between offset out in the market, while offsetting remains broad year line, which obviously helped.
Speaker #2: At this recent quarters, our challenge in sizable gap between our sellout and the market, while our selling remains broadly aligned with our sellout. Our total Q2 like for like sales improved sequentially to down 3% at the better end of our minus 3% to minus 5% guidance.
Laurent: And as in recent quarters, our challenge in Consumer Beauty remains a sizable gap between our sell-out and the market, while our sell-in remains broadly aligned with our sell-out. Our total Q2 Like-for-Like sales improved sequentially to down 3% at the better end of our minus 3% to minus 5% guidance. We estimate that we have significantly reduced Prestige trade inventory in Q2 and are tightening the gap between sell-in and sell-out. At the same time, top line was held back by slower category growth and continued market share underperformance in several of our key markets, including the US, UK, and Germany. In Prestige, Like-for-Like sales were down 2%, an improvement from down 6% last quarter. As discussed, several counteracting forces are at play.
Laurent Mercier: And as in recent quarters, our challenge in Consumer Beauty remains a sizable gap between our sell-out and the market, while our sell-in remains broadly aligned with our sell-out. Our total Q2 Like-for-Like sales improved sequentially to down 3% at the better end of our minus 3% to minus 5% guidance. We estimate that we have significantly reduced Prestige trade inventory in Q2 and are tightening the gap between sell-in and sell-out. At the same time, top line was held back by slower category growth and continued market share underperformance in several of our key markets, including the US, UK, and Germany. In Prestige, Like-for-Like sales were down 2%, an improvement from down 6% last quarter. As discussed, several counteracting forces are at play.
Our total Q2 like for like sales improved sequentially to down 3% at the better end of a minus 3% to minus 5% guidance.
We estimate that we have significantly reduced prices trading inventory in Q2 and are tightening the gap between selling and sellout.
Speaker #2: We estimate that we have significantly reduced prestige trade inventory in Q2 and are tightening the gap between selling and was held back by slower category growth and continued market share underperformance in several of our key markets, including the US, UK, and Germany.
At the same time topline was held back by slower category growth and continued market share underperformance in several of our key markets, including the U S UK and Germany.
In prestige Nitro like sales were down 2% an improvement from down 6% last quarter.
Speaker #2: In Prestige, like-for-like sales were down 2%—an improvement from down 6% last quarter. As discussed, several counteracting forces are at play.
As discussed several counteracting forces are at play.
Although one hand, we estimated impact from retailer Destocking has significantly reduced.
Speaker #3: On the one hand, we estimated impact from retailer restocking has significantly reduced and our innovation offer is contributing more strongly to the top line, growing double digits versus last year.
Laurent: On the one hand, we estimated impact from retailer de-stocking has significantly reduced, and our innovation overall is contributing more strongly to the top line, growing double digits versus last year. On the other hand, the prestige fragrance market growth has slowed by a couple of percentage points, while simultaneously becoming more promotional with aggressive discounting activity during the holiday season. It is also worth noting that the complexity in the business, driven by too many launches and initiatives, contributed to service issues in the prestige business during Q2. To address this, we are increasing our inventory behind core SKUs to improve service in the coming months. In consumer beauty, Like-for-Like sales declined 6%, an improvement from an 11% decline in Q1. We are orienting our innovation pipeline towards the highest growth phase sub-segment, including highlighters, bronzers, and tints.
Laurent Mercier: On the one hand, we estimated impact from retailer de-stocking has significantly reduced, and our innovation overall is contributing more strongly to the top line, growing double digits versus last year. On the other hand, the prestige fragrance market growth has slowed by a couple of percentage points, while simultaneously becoming more promotional with aggressive discounting activity during the holiday season. It is also worth noting that the complexity in the business, driven by too many launches and initiatives, contributed to service issues in the prestige business during Q2. To address this, we are increasing our inventory behind core SKUs to improve service in the coming months. In consumer beauty, Like-for-Like sales declined 6%, an improvement from an 11% decline in Q1. We are orienting our innovation pipeline towards the highest growth phase sub-segment, including highlighters, bronzers, and tints.
Our innovation are already contributing more strongly to the top line growing double digits versus last year.
On the other hand, the prestige fragrance market growth has slowed by a couple of percentage points, while simultaneously, becoming more promotional with aggressive discounting activity during the holiday season.
Speaker #3: On the other hand, the prestige fragrance market growth has slowed by a couple of percentage points, while simultaneously becoming more promotional with aggressive discounting activity during the holiday season.
It is also worth noting that the complexity in the business driven by too many launches and initiatives.
Speaker #3: It is also worth noting that the complexity in the business, driven by too many launches and initiatives, contributed to service issues in the prestige business during Q2.
Contributed to service issues in the prestige business during Q2.
To address this we are increasing our inventory behind core skus to improve service in the coming months.
Speaker #3: To address this, we are increasing our inventory behind core SKUs to improve service in the coming months. In consumer beauty, like for like sales declined 6%.
In consumer beauty like for like sales declined 6% an improvement from an 11% decline in Q1.
Speaker #3: An improvement from an 11% decline in Q1. We are orienting our innovation pipeline toward the highest growth phase subsegment, including highlighters, bronzers, and tints.
We are orienting, our innovation pipeline towards the highest gross a subsegment, including highlights.
Bronzer and teams.
Our market share gaps in the U S and Europe continue to weigh on city.
Laurent: Our market share gaps in the US and Europe continue to weigh on sell-in. And while we are focused on turning around our color cosmetics business, this work and closing our share gaps will take time. Specific to consumer beauty cosmetics, as Marcus mentioned, we have begun implementing our Color the Future performance improvement plan. With the consumer beauty leadership team now in place and fully accountable for the P&L, the team has begun to put the plan into action, including, first, reallocating ANCP from non-working media and asset production to consumer engagement investments behind core parts of the business like CoverGirl US and Rimmel UK. Second, streamlining the fiscal year 27 innovation pipeline to ensure a tighter, better supported, and more targeted innovation bundle designed to halo on our core brands, improve door productivity, and drive margin accretion.
Laurent Mercier: Our market share gaps in the US and Europe continue to weigh on sell-in. And while we are focused on turning around our color cosmetics business, this work and closing our share gaps will take time. Specific to consumer beauty cosmetics, as Marcus mentioned, we have begun implementing our Color the Future performance improvement plan. With the consumer beauty leadership team now in place and fully accountable for the P&L, the team has begun to put the plan into action, including, first, reallocating ANCP from non-working media and asset production to consumer engagement investments behind core parts of the business like CoverGirl US and Rimmel UK. Second, streamlining the fiscal year 27 innovation pipeline to ensure a tighter, better supported, and more targeted innovation bundle designed to halo on our core brands, improve door productivity, and drive margin accretion.
Speaker #3: US and Europe Our market share gaps in the continue to weigh on selling. And while we are focused on turning around our color cosmetic business, this work and closing our share gaps will take time.
And while we are focused on turning around our color cosmetic business. This work and closing of sharing gaps will take time.
Specific to consumer beauty cosmetics as Marcus mentioned, we have begun implementing a core loss of future performance improvement plan.
Speaker #3: Specific to consumer beauty cosmetics, as Markus begun implementing our Color of the mentioned, we have Future performance improvement plan. leadership team now in place, With the consumer beauty and fully accountable for the P&L, the team has begun to put the plan into action.
We saw consumer beauty leadership team now in place and fully accountable for the P&L.
The team has begun to put the plan into action, including first.
Speaker #3: Including: first, reallocating ANCP from non-working media and asset production to consumer engagement investments, behind core parts of the business like cover girl US and retail UK.
Reallocating agent CP from non working media and asset production.
Consumer engagement investments.
Behind core parts of the business quicker.
And remodel UK.
Second.
Streamlining so fiscal year 'twenty seven innovation pipeline to ensure tighter.
Speaker #3: streamlining the fiscal year 27 Second, innovation pipeline to ensure a tighter better supported and more targeted innovation bundle designed to halo on our core brands, improve door productivity, and drive margin accretion.
Better supported and more targeted innovation vendor designed to highlight on our core brands improve door productivity and driving margin accretion.
Third doubling down on procurement savings initiatives across various categories, including merchandising and media.
Speaker #3: Third, doubling down on procurement savings initiatives across various categories, including merchandising and media. Fourth, refining brand equities and positioning across the entire color cosmetics portfolio to ensure each brand has a clear, differentiated point of view with its core consumers.
Laurent: Third, doubling down on procurement savings initiatives across various categories, including merchandising and media. Fourth, refining brand equities and positioning across the entire color, color cosmetics portfolio to ensure each brand has a clear, differentiated point of view with its core consumers. And finally, executing more locally relevant, disruptive 360-degree activations to strengthen brand visibility and engagement in our key markets. Next steps in the coming months include reinvesting behind key icons, activating evolved brand equities, leveraging AI to scale content creation at a fraction of the cost, and reexamining the full value chain. It is worth noting that some of these actions were part of our consumer beauty turnaround five years ago, including revamping brand equities, platforming innovation, and streamlining SKU count.
Laurent Mercier: Third, doubling down on procurement savings initiatives across various categories, including merchandising and media. Fourth, refining brand equities and positioning across the entire color, color cosmetics portfolio to ensure each brand has a clear, differentiated point of view with its core consumers. And finally, executing more locally relevant, disruptive 360-degree activations to strengthen brand visibility and engagement in our key markets. Next steps in the coming months include reinvesting behind key icons, activating evolved brand equities, leveraging AI to scale content creation at a fraction of the cost, and reexamining the full value chain. It is worth noting that some of these actions were part of our consumer beauty turnaround five years ago, including revamping brand equities, platforming innovation, and streamlining SKU count.
For us refining brand equities.
Positioning across the entire colors color cosmetics portfolio to ensure each brand has a clear differentiated point of view with its core consumers.
And finally executing more locally relevant disruptive shrimp that 60 degree activations to strengthen brand visibility and engagement in our key markets.
Speaker #3: And finally, executing more locally relevant disruptive 360-degree activations to strengthen brand visibility and engagement in our key markets. Next steps in the coming months include reinvesting behind key icons activating evolved brand equities leveraging AI to scale content creation at a fraction of the cost and reexamining the full value chain.
Next steps in the upcoming months include reinvesting behind key icons.
<unk> evolved brand equities.
Leveraging AI to scale content creation at a fraction of the cost and re examining the full value chain.
It is worth noting that some of these actions were part of our consumer beauty turnaround five years ago.
Speaker #3: It is worth noting that some of these actions were part of our consumer beauty turnaround five years ago, including revamping brand equities, platforming innovation, and streamlining SKU count.
Including revamping brand equities.
Farming innovation.
Streamlining SKU count.
While these interventions helped stabilize and grow consumer beauty several years ago.
Speaker #3: While these interventions helped stabilize and grow Consumer Beauty several years ago, operational discipline has slipped across the organization over the past two years. For example, the number of SKUs in our annual CoverGirl innovation bundle has almost doubled in recent years, significantly increasing cost.
Laurent: While these interventions helped stabilize and grow consumer beauty several years ago, operational discipline has slipped across the organization over the past 2 years. For example, the number of SKUs in our annual CoverGirl innovation bundle has almost doubled in recent years, significantly increasing cost. We have already materially reduced the SKU count in the fiscal year 2026 spring innovation bundle to focus on the highest potential launches, and our fiscal year 2027 plans include further streamlining in the CoverGirl innovation SKU count. With Gordon leading end-to-end, the goal is to reinstate the operational discipline and introduce more transformational, full value chain change so that progress is durable. While still early in the transformation plan, we have seen some early green shoots. For CoverGirl, we have focused marketing activation and investment behind the top franchises, Simply Ageless and LashBlast.
Laurent Mercier: While these interventions helped stabilize and grow consumer beauty several years ago, operational discipline has slipped across the organization over the past 2 years. For example, the number of SKUs in our annual CoverGirl innovation bundle has almost doubled in recent years, significantly increasing cost. We have already materially reduced the SKU count in the fiscal year 2026 spring innovation bundle to focus on the highest potential launches, and our fiscal year 2027 plans include further streamlining in the CoverGirl innovation SKU count. With Gordon leading end-to-end, the goal is to reinstate the operational discipline and introduce more transformational, full value chain change so that progress is durable. While still early in the transformation plan, we have seen some early green shoots. For CoverGirl, we have focused marketing activation and investment behind the top franchises, Simply Ageless and LashBlast.
Or DCP has slipped across the organization over the past two years.
For example, the number of Skus in our annual Covergirl innovation bundle has almost doubled in recent years significantly increasing cost.
We are already materially reduced the SKU count in fiscal year, 'twenty six spring innovation vendor to focus on the highest potential launches.
Speaker #3: We have already materially reduced the SKU count in the fiscal year 26 spring innovation bundle to focus on the highest potential launches and our fiscal year 27 plans include further streamlining in the cover girl innovation SKU count.
And our fiscal year 'twenty seven plans include further streamlining.
Innovation is skewed count.
We've got leading end to end the goal is to reinstate the operational discipline and introduce more transformational full value chain change. So it is a progressive durable.
Speaker #3: With Gordon leading end-to-end, the goal is to reinstate the operational discipline and introduce more transformational, full value chain change so that progress is durable.
While still early in the transformation plan, we have seen some early green shoots.
Speaker #3: While still early in the transformation plan, we have seen some early green shoots. For cover girl, we have focused marketing activation and investment behind the top franchises.
Our current yield we are focused marketing activation and investment behind the top franchisees.
Simply agilis enlarge blast and as a result, these franchisees have seen improved retail sales trends.
Speaker #3: Simply edgeless and lash blast. And as a result, these franchises have seen improved retail sales trends. Sellout has improved from the high single-digit decline in the last 12 months to a low to mid-single-digit months.
Laurent: And as a result, these franchises have seen improved retail sales trends. Sell-out has improved from a high single-digit decline in the last 12 months to a low- to mid-single-digit decline in the past 3 months. For Rimmel, with culturally relevant, locally executed activation, sell-out has improved from a mid-single-digit decline in the last 12 months to a low-single-digit decline in the past 3 months, and closing the gap to the category. Our adjusted gross margin was 64.2%, a 260 basis point decline from the prior year. While we expected adjusted gross margins to decline more sharply in Q2 than in Q1, the decline was worse than anticipated. In prestige, the promotional environment intensified as we moved through the holiday period, creating a more significant headwind than expected.
Laurent Mercier: And as a result, these franchises have seen improved retail sales trends. Sell-out has improved from a high single-digit decline in the last 12 months to a low- to mid-single-digit decline in the past 3 months. For Rimmel, with culturally relevant, locally executed activation, sell-out has improved from a mid-single-digit decline in the last 12 months to a low-single-digit decline in the past 3 months, and closing the gap to the category. Our adjusted gross margin was 64.2%, a 260 basis point decline from the prior year. While we expected adjusted gross margins to decline more sharply in Q2 than in Q1, the decline was worse than anticipated. In prestige, the promotional environment intensified as we moved through the holiday period, creating a more significant headwind than expected.
Set out has improved from the high single digit decline in the last 12 months.
Low to mid single digit decline in the past three months.
Arena with culturally relevant locally executed activations.
Speaker #3: For retail, with culturally relevant, locally executed activations, sellout has improved from a mid-single-digit decline in the last 12 months to a low-single-digit decline in the past three months, and is closing the gap to the category.
<unk> has improved from a mid single digit decline in the last 12 months to a low single digit decline in the past three months and closing the gap to the category.
Our adjusted gross margin was 64, 2%.
Speaker #3: Our adjusted gross margin was 64.2%, a 260 basis point decline from the prior year. While we expected adjusted gross margins to decline more sharply in Q2 than in Q1, the decline was worse than anticipated.
<unk> hundred 60 basis point decline from the prior year.
We expected adjusted gross margins to decline sharply in Q2 than in Q1.
The decline was worse than anticipated.
In prestige and the promotional environment. It does see side as we move through the holiday period, creating a more significant headwinds unexpected.
Speaker #3: In prestige, the promotional environment intensified as we moved through the holiday period, creating a more significant headwind than expected. In consumer beauty, we faced fixed cost under absorption from lower volumes and mixed headwinds from weakness in the highest higher gross margin US business coupled with stronger growth in the lower gross margin Brazil business.
In consumer beauty, we faced fixed cost under absorption from lower volumes and.
Laurent: In consumer beauty, we faced fixed costs under absorption from lower volumes and mixed headwinds from weakness in the higher gross margin US business, coupled with stronger growth in the lower gross margin Brazil business. Tariff impacts were also higher than in Q1, though broadly in line with our expectations. Importantly, based on the current external environment, we expect each of these pressures on our gross margins to persist in the second half of fiscal year 2026. As these margin pressures flow through the P&L, we made some adjustments to our ANCP investments, though not to the same extent as the decline we saw in our underlying revenue trends. In Q2, ANCP was approximately 27% of net revenues, consistent with the prior year, demonstrating our ongoing commitment to invest behind core brands.
Laurent Mercier: In consumer beauty, we faced fixed costs under absorption from lower volumes and mixed headwinds from weakness in the higher gross margin US business, coupled with stronger growth in the lower gross margin Brazil business. Tariff impacts were also higher than in Q1, though broadly in line with our expectations. Importantly, based on the current external environment, we expect each of these pressures on our gross margins to persist in the second half of fiscal year 2026. As these margin pressures flow through the P&L, we made some adjustments to our ANCP investments, though not to the same extent as the decline we saw in our underlying revenue trends. In Q2, ANCP was approximately 27% of net revenues, consistent with the prior year, demonstrating our ongoing commitment to invest behind core brands.
And mix headwinds from weakness in the highest higher gross margin U S business, coupled with stronger growth was a lower gross margin Brazil business.
Tariff impacts were also higher than Q1 brought in line with our expectations.
Speaker #3: Tariff impacts were also higher than in Q1, though broad in line with our expectations. Importantly, based on the current external environment, we expect each of these pressures on our gross margins to persist in the second half of fiscal year 26.
Importantly, based on the current external environment, we expect each of these pressures on our gross margins to persist in the second half of fiscal year 2000 seats.
As these margin pressures that flowed through the P&L.
Speaker #3: As these margin pressures flowed through the P&L, we made some adjustments to our ANCP investments, though not to the same extent as the decline we saw in our underlying revenue trends.
We made some adjustments to our agency investments, though not to the same extent as the <unk>.
Decline, we saw in our underlying revenue trends.
In Q2.
Speaker #3: In Q2, ANCP was approximately 27% consistent with the prior year, of net revenues demonstrating our ongoing commitment to invest behind core brands. Adjusted EBITDA was 330 million, down 15% year over year at the lower end of our guidance range for a low to mid-teens decline.
<unk> was approximately 27% of net revenues.
Systems with the prior year, demonstrating our ongoing commitment to invest behind core brands.
Adjusted EBITDA was $350 million down 15% year over year at the lower end of our guidance range.
Laurent: Adjusted EBITDA was $330 million, down 15% year-over-year, at the lower end of our guidance range for a low to mid-teens decline. The decline primarily reflected top-line pressure and lower gross margins. The quarter also included a few million dollar expense related to the CEO transition. Our adjusted EPS, excluding the equity swap, was in line with expectation at $0.33 for the first half and $0.18 in Q2. In Q2, we generated fixed cost savings of over $10 million, in addition to approximately $40 million in productivity savings. We continue to expect about $200 million in cumulative savings in fiscal year 2026. These savings provide us with the flexibility to reinvest in growth and offset inflation and other cost pressures.
Laurent Mercier: Adjusted EBITDA was $330 million, down 15% year-over-year, at the lower end of our guidance range for a low to mid-teens decline. The decline primarily reflected top-line pressure and lower gross margins. The quarter also included a few million dollar expense related to the CEO transition. Our adjusted EPS, excluding the equity swap, was in line with expectation at $0.33 for the first half and $0.18 in Q2. In Q2, we generated fixed cost savings of over $10 million, in addition to approximately $40 million in productivity savings. We continue to expect about $200 million in cumulative savings in fiscal year 2026. These savings provide us with the flexibility to reinvest in growth and offset inflation and other cost pressures.
Low to mid teens decline.
The decline primarily reflected topline pressure and lower gross margins.
Speaker #3: decline primarily reflected The top-line pressure and lower gross margins. The quarter also included a few million dollar expense related to the CEO transition. Our adjusted EPS, excluding the equity swap, was in line with expectation at 33 cents for the first half and 18 cents in Q2.
The quarter also included a few million dollars expense related to the CEO transition.
Adjusted EPS, excluding the equity swap was in line with expectation at 53 cents for the first half and 18 cents in Q2.
In Q2, we generated fixed cost savings of over $10 million. In addition to approximately $40 million in productivity savings.
Speaker #3: In Q2, we generated fixed cost savings of over 10 million, in addition to approximately 40 million in productivity savings. We continue to expect about 200 million in cumulative savings in fiscal year 26.
We continue to expect about 200 million cumulative savings in fiscal year 2006.
These savings provide us with the flexibility to reinvest in growth and offset inflation and also cost pressures.
Speaker #3: provide us with the flexibility These savings to reinvest in growth and offset inflation and other cost pressures. Despite the challenged top-line and profitability landscape, we delivered significantly higher free cash flow in the first half of 524 million which was well above our guidance of more than 350 million and above last year's first half free cash flow of 411 million.
Despite the challenged top line and profitability landscape, we delivered significantly higher free cash flow in the first half of 524 million, which was well above our guidance of more than $350 million and above last year's first half free cash flow of 400.
Laurent: Despite the challenged top line and profitability landscape, we delivered significantly higher free cash flow in the first half of $524 million, which was well above our guidance of more than $350 million, and above last year's first half free cash flow of $411 million. The stronger-than-guided free cash flow was driven by better receivables performance and the phasing of working capital, which benefited Q2 and will reverse in Q3. On a year-over-year basis, free cash flow also benefited from the absence of cash bonus payments tied to fiscal year 2025 company results. We also completed the divestiture of Wella Company, right in line with our original commitment to divest our financial stake by the end of calendar year 2025.
Laurent Mercier: Despite the challenged top line and profitability landscape, we delivered significantly higher free cash flow in the first half of $524 million, which was well above our guidance of more than $350 million, and above last year's first half free cash flow of $411 million. The stronger-than-guided free cash flow was driven by better receivables performance and the phasing of working capital, which benefited Q2 and will reverse in Q3. On a year-over-year basis, free cash flow also benefited from the absence of cash bonus payments tied to fiscal year 2025 company results. We also completed the divestiture of Wella Company, right in line with our original commitment to divest our financial stake by the end of calendar year 2025.
$11 million.
The stronger than guided free cash flow was driven by better receivables performance and the phasing of working capital, which benefited Q2 and will reverse in Q3.
Speaker #3: The stronger than guided free cash flow was driven by better receivables performance and the phasing of working capital which benefited Q2 and will reverse in Q3.
On a year over year basis free cash flow also benefited from the absence of cash bonus payments tied to fiscal year 'twenty five company results.
Speaker #3: On a year-over-year basis, free cash flow also benefited from the absence of cash bonus payments tied to fiscal year '25 company results. We also completed the divestiture of Vela, right in line with our original commitment to divest our financial stake by the end of calendar year '25.
We also completed the divestiture of data right in line with our original commitment to divest our financial state by the end of calendar year 2000 sites.
We generated 750 million of upfront proceeds with a potential to receive proceeds from a sale or an initial public offering of the business of Turkey chaos pre shareholder return has been met.
Speaker #3: This generated 750 million of upfront proceeds with a potential to receive proceeds from a further sale or an initial public offering of the business after KKR's preferred return has been met.
Laurent: This generated $750 million of upfront proceeds, with the potential to receive proceeds from a further sale or an initial public offering of the business after KKR's preferred return has been met. As a result, we ended the quarter with net debt of $2.6 billion and leverage of 2.7x, the lowest levels for both metrics in more than 9 years. We remained committed to bringing leverage closer to 2x over time through both organic and inorganic levers. Now, let me discuss our near-term outlook. With Marcus new to Coty and only 1 month into the role, he needs time to fully immerse himself in the business, understand the underlying dynamics, refine our strategic priorities, and align with the board. Given this leadership transition, it will be premature to issue full second half of fiscal year 2026 guidance at this stage.
Laurent Mercier: This generated $750 million of upfront proceeds, with the potential to receive proceeds from a further sale or an initial public offering of the business after KKR's preferred return has been met. As a result, we ended the quarter with net debt of $2.6 billion and leverage of 2.7x, the lowest levels for both metrics in more than 9 years. We remained committed to bringing leverage closer to 2x over time through both organic and inorganic levers. Now, let me discuss our near-term outlook. With Marcus new to Coty and only 1 month into the role, he needs time to fully immerse himself in the business, understand the underlying dynamics, refine our strategic priorities, and align with the board. Given this leadership transition, it will be premature to issue full second half of fiscal year 2026 guidance at this stage.
As a result, we ended the quarter with net debt of $2 6 billion and leverage of two seven turns at the lowest levels for both metrics in more than nine years.
Speaker #3: As a result, we ended the quarter with net debt of 2.6 billion and leverage of 2.7 terms the lowest levels for both metrics in more than nine years.
We remain committed to bringing leverage closer to two turns over time through both organic and inorganic levers.
Speaker #3: We remained committed to bringing leverage closer to two terms over time through both organic and inorganic levers. Now, let me discuss our near-term outlook.
Now, let me discuss our near term outlook.
With markets, new to Coty, and only one month into the world in its time to fully immerse himself in the business.
Speaker #3: With Marcus new to QOTY and only one month into the role, he needs time to fully immerse himself in the business, understand the underlying dynamics, refine our strategic priorities, and align with the board.
Given his leadership transition it will be premature to issue full second half of fiscal year 2020 guidance at this stage.
Speaker #3: Given his leadership transition, it will be premature to issue full second half of fiscal year 2026 guidance at this stage. As a result, we are withdrawing full fiscal year guidance which had been previously given for EBITDA and free cash
Speaker #3: Given his leadership transition, it would be premature to issue full second half of fiscal year 2026 guidance at this stage. As a result, we are withdrawing full fiscal year guidance which had been previously given for EBITDA and free cash flow.
As a result.
Laurent: As a result, we are withdrawing full fiscal year guidance, which had been previously given for EBITDA and free cash flow. However, we do want to offer visibility for Q3. For Q3, we expect like-for-like revenue trends to decline mid-single digits, driven primarily by bigger declines in consumer beauty. We see differing drivers across prestige and consumer beauty. In prestige, we estimate the fragrance market will grow low to mid-single digits, consistent with Q2 and in line with the broader beauty market. While we estimate that the headwinds from retailer de-stocking significantly reduced in the quarter, the promotional environment intensified as we moved through the holiday period and remains elevated, which is a headwind to net sales and by extension, gross margin. We are refining investment allocation behind key priorities and strengthening execution playbooks as we work to improve market share over time in several key markets.
Laurent Mercier: As a result, we are withdrawing full fiscal year guidance, which had been previously given for EBITDA and free cash flow. However, we do want to offer visibility for Q3. For Q3, we expect like-for-like revenue trends to decline mid-single digits, driven primarily by bigger declines in consumer beauty. We see differing drivers across prestige and consumer beauty. In prestige, we estimate the fragrance market will grow low to mid-single digits, consistent with Q2 and in line with the broader beauty market. While we estimate that the headwinds from retailer de-stocking significantly reduced in the quarter, the promotional environment intensified as we moved through the holiday period and remains elevated, which is a headwind to net sales and by extension, gross margin. We are refining investment allocation behind key priorities and strengthening execution playbooks as we work to improve market share over time in several key markets.
We are withdrawing full fiscal year guidance, which had been previously given for EBITDA and free cash flow.
We do want to offer visibility for Q3 for Q3, we expect like for like revenue trends to decline mid single digits drill.
Speaker #2: However, we do want to offer visibility for Q3. For Q3, we expect like-for-like revenue trends to decline mid-single digits. Driven primarily by bigger beauty, we see differing drivers across prestige and consumer beauty.
Driven primarily by bigger declines in consumer beauty.
We see deferring drivers across prestige in consumer beauty.
In prestige, we estimate the fragrance market.
Speaker #2: In prestige, we estimate the fragrance market will grow low to mid-single digits consistent with Q2 and in line with a broader beauty market. While we estimate that the headwinds from retailer distorting significantly reduced in the quarter the promotional environment intensified as we moved through the holiday period and remained elevated, which is a headwind to net sales and by extension gross margin.
Grew low to mid single digits, consistent with Q2 and in line with the broader beauty market.
While we estimate that the headwinds from retailer destocking significantly reduced in the quarter so promotional.
Lola environment intensified as we move through the holiday period, and remained elevated which is a headwind to net sales and by extension on gross margin.
We are refining investment allocation behind key priorities and strengthening execution playbooks as we work to improve market share overtime in several key markets.
Speaker #2: We are refining investment allocation behind key priorities and strengthening execution playbooks as we work to improve market share over time in several key markets.
Finally in the key in the coming weeks, we will be launching a key female fragrance initiative under Calvin Klein.
Speaker #2: Finally, in the key in the coming weeks, we will be launching a key female fragrance initiative under Calvin Klein. For consumer beauty, we expect the mass beauty category to be flattish to up low single digits driven by e-commerce.
Laurent: Finally, in the coming weeks, we will be launching a key female fragrance initiative under Calvin Klein. For consumer beauty, we expect the mass beauty category to be flattish to up low single digits, driven by e-commerce. At Coty, we are beginning to implement the Color the Future performance improvement plan for color cosmetics, which will narrow our sellout gap with the market over time. This includes accelerating in e-commerce, where Coty is currently underrepresented. In the near term, our sellout gap to the cosmetics category will weigh on our results. With shelf space broadly stable through spring resets, we are seeing early green shoots in sellout trends in focus brands like Rimmel globally, and CoverGirl franchises. At the same time, we anticipate weakness in lifestyle fragrances as we streamline small initiatives.
Laurent Mercier: Finally, in the coming weeks, we will be launching a key female fragrance initiative under Calvin Klein. For consumer beauty, we expect the mass beauty category to be flattish to up low single digits, driven by e-commerce. At Coty, we are beginning to implement the Color the Future performance improvement plan for color cosmetics, which will narrow our sellout gap with the market over time. This includes accelerating in e-commerce, where Coty is currently underrepresented. In the near term, our sellout gap to the cosmetics category will weigh on our results. With shelf space broadly stable through spring resets, we are seeing early green shoots in sellout trends in focus brands like Rimmel globally, and CoverGirl franchises. At the same time, we anticipate weakness in lifestyle fragrances as we streamline small initiatives.
For consumer beauty, we expect the mass beauty category to be flattish.
Low single digits, driven by economics at Coty, we are beginning to implement a collage of future performance improvement plan for color cosmetics, which will narrow offset out gap with the market over time.
Speaker #2: At Coty, we are beginning to implement the Colors of Future performance improvement plan for Color Cosmetics, which will narrow our sell-out gap with the market over time.
These include accelerating E Commerce, where coty is currently underrepresented.
Speaker #2: This includes accelerating in e-commerce, where QOTY is currently underrepresented. In the near term, our sell-out gap to will weigh on our results. We share space broadly stable through spring resets we are seeing early green shoots in sell-out trends in focus brands like Rimmel globally and Kick Over Girl franchises.
In the near term of settled gaps to the cosmetics category.
Will weigh on our results.
With shelf space broadly stable through spring resets, we are seeing early green shoots in sales trends.
Our focus brands like remote globally and Kiko, Dr. Gail franchises.
At the same time, we anticipate weakness in lifestyle fragrances as we streamline small initiatives.
Speaker #2: At the same time, we anticipate weakness in lifestyle fragrances as we streamline small initiatives. Considering the mid-single digit decline in like-for-like sales, we expect a more significant decline in profitability.
Considering the mid single digit decline in like for like sales, we expect more significant decline in profitability.
Laurent: Considering the mid-single-digit decline in like-for-like sales, we expect a more significant decline in profitability. Specifically, we see EBITDA declining to $100 to 110 million in Q3 fiscal 2026, compared to $204 million in Q3 fiscal 2025. This decline reflects both external factors and our deliberate decision to protect the marketing investments needed to reignite our market share in both divisions. First, we expect the lower sales at constant currency to drive approximately 1/3 of the EBITDA decline. Next, another 1/3 of the EBITDA decline is driven by the expected 200 to 300 basis points gross margin decline, similar to Q2. This is driven by the same factors: lower sales and unit volumes, negative mix, as key profit regions remain under pressure, a highly promotional environment, tariff impacts, and Forex headwinds on costs.
Laurent Mercier: Considering the mid-single-digit decline in like-for-like sales, we expect a more significant decline in profitability. Specifically, we see EBITDA declining to $100 to 110 million in Q3 fiscal 2026, compared to $204 million in Q3 fiscal 2025. This decline reflects both external factors and our deliberate decision to protect the marketing investments needed to reignite our market share in both divisions. First, we expect the lower sales at constant currency to drive approximately 1/3 of the EBITDA decline. Next, another 1/3 of the EBITDA decline is driven by the expected 200 to 300 basis points gross margin decline, similar to Q2. This is driven by the same factors: lower sales and unit volumes, negative mix, as key profit regions remain under pressure, a highly promotional environment, tariff impacts, and Forex headwinds on costs.
Specifically, we see EBITDA declining to $100 million to $110 million in Q3 fiscal 'twenty six.
Speaker #2: Specifically, we see EBITDA declining to 100 to 110 million in Q3 fiscal 26 compared to 204 million in Q3 fiscal 25. This decline reflects both external factors and our deliberate decision to protect the marketing investments needed to reignite our market share in both divisions.
Compared to $204 million in Q3 fiscal 'twenty.
This decline reflects both external factors and our deliberate decision to protect the marketing investments needed to reignite our market share in both divisions.
First we expect lower sales at constant currency to drive approximately one third of the EBITDA decline.
Speaker #2: sales at constant currency to drive First, we expect the lower approximately one-third of the EBITDA decline. Next, another third of the EBITDA decline is driven by the expected 200 to 300 basis points gross margin decline similar to Q2.
Next another third of the EBITDA decline is driven by the expected 200 to 300 basis points gross margin decline similar to Q2.
This is driven by the same factors lower sales and unit volumes negative mix as key profit regions remain under pressure.
Speaker #2: This is driven by the same volumes, negative mix, as key profit regions remain under pressure, a highly promotional environment, tariff impacts, and forex headwinds on COGS.
A highly promotional environment tariff impacts and forex headwinds on Cogs.
We continue to expect net impact of under $40 million from tariffs in fiscal year 2000 seats.
Speaker #2: We continue to expect a net impact of under 40 million from tariffs in fiscal year 26. Third, another sizable headwind to profit relates to fixed costs where ongoing progress on fixed cost reductions is more than offset by the mechanical impact from last year's variable compensation accrual release something we had anticipated and have highlighted in recent quarters.
Laurent: We continue to expect a net impact of under $40 million from tariff in fiscal year 2026. Third, another sizable headwind to profit relates to fixed costs, where ongoing progress on fixed cost reductions is more than offset by the mechanical impact from last year's variable compensation accrual release, something we had anticipated and have highlighted in recent quarters. The final major driver is our decision to protect our marketing investments behind our key brands and to sustain support for recent and upcoming launches. As we reach media sufficiency on these key franchises, we will reallocate investment away from smaller projects that have added complexity without benefiting the Coty P&L. We will be disciplined and pragmatic in the pace of these reallocations. Inevitably, we expect this to result in some lost sales and higher returns in the near term, which is part of the sales equation for the coming quarters.
Laurent Mercier: We continue to expect a net impact of under $40 million from tariff in fiscal year 2026. Third, another sizable headwind to profit relates to fixed costs, where ongoing progress on fixed cost reductions is more than offset by the mechanical impact from last year's variable compensation accrual release, something we had anticipated and have highlighted in recent quarters. The final major driver is our decision to protect our marketing investments behind our key brands and to sustain support for recent and upcoming launches. As we reach media sufficiency on these key franchises, we will reallocate investment away from smaller projects that have added complexity without benefiting the Coty P&L. We will be disciplined and pragmatic in the pace of these reallocations. Inevitably, we expect this to result in some lost sales and higher returns in the near term, which is part of the sales equation for the coming quarters.
Further another sizable headwind to profit relates to fixed cost where ongoing progress on fixed cost reduction is more than offset by the mechanical impact from last year's variable compensation accrual release, something we had anticipated and have highlighted in recent quarters.
The final major driver is our decision to protect our marketing investments behind our key brands and to sustain and support our recent and upcoming launches.
Speaker #2: The final major driver is our decision to protect our marketing investments behind our key brands and to sustain support for recent and upcoming launches.
As we reach media sufficiency on these key franchisees, we will reallocate investment away from smaller projects.
Speaker #2: As we reach media sufficiency on these key franchises, we will reallocate investment away from smaller projects that have added complexity without benefiting the Q2 P&L.
That has added complexity without benefiting zuccotti PMA.
We will be disciplined and pragmatic.
Speaker #2: We will be disciplined and pragmatic in the pace of these reallocations. Inevitably, we expect these to result in some lost sales and higher returns in the near term, which is part of the sales equation for the coming quarters.
These reallocations.
Inevitably we expect this to result in some lost sales and higher returns in the near term.
As part of the sales equation for a second quarters.
It is also worth flagging that Forex is expected to be brought in to our Q3 EBITDA as a benefit on sales will be broadly offset by a headwind 12 cost.
Speaker #2: It is also worth flagging that forex is expected to be broadly neutral to our Q3 EBITDA as a benefit on sales will be broadly offset by a headwind to our cost.
Laurent: It is also worth flagging that Forex is expected to be broadly neutral to our Q3 EBITDA, as the benefit on sales will be broadly offset by a headwind to our cost. With these various moving parts across the PNL, let me give our precise outlook for Q3. We expect like-for-like sales to decline by a mid-single digit percentage, primarily due to weakening trends in consumer beauty. At current exchange rates, we expect Forex to be a benefit of low to mid-single digits. We see gross margins declining between 200 to 300 basis points year-over-year, consistent with what we saw in Q2. Given the declining gross margin, the mechanical impact to fixed cost, and our commitment to protect ANCP, we expect EBITDA of $100 to 110 million.
Laurent Mercier: It is also worth flagging that Forex is expected to be broadly neutral to our Q3 EBITDA, as the benefit on sales will be broadly offset by a headwind to our cost. With these various moving parts across the PNL, let me give our precise outlook for Q3. We expect like-for-like sales to decline by a mid-single digit percentage, primarily due to weakening trends in consumer beauty. At current exchange rates, we expect Forex to be a benefit of low to mid-single digits. We see gross margins declining between 200 to 300 basis points year-over-year, consistent with what we saw in Q2. Given the declining gross margin, the mechanical impact to fixed cost, and our commitment to protect ANCP, we expect EBITDA of $100 to 110 million.
With these various moving parts across the P&L.
Speaker #2: With these various moving parts across the P&L, let me give our precise outlook for Q3. We expect like-for-like sales to decline by a mid-single digit percentage primarily due to weakening trends in consumer beauty.
Let me give a precise outlook for Q3.
We expect like for like sales to decline by a mid single digit percentage, primarily due to weakening trends in consumer beauty.
At current exchange rates, we expect Forex.
Speaker #2: At current exchange rates, we expect forex to be a benefit of low to mid-single digits. We see gross margins declining between 200 to 300 basis points year over year consistent with what we saw in Q2.
To be a benefit of low to mid single digits.
We see gross margins declining between 200 to 300 basis points year over year consistent with what we saw in Q2.
Given the decline in gross margin the mechanical impact to fixed cost and our commitment to protecting and CP, we expect EBITDA of $100 million to $110 million.
Speaker #2: declining gross margin, the Given the mechanical impact to fixed cost, and our commitment to protect ANCP, we expect EBITDA of 100 to 110 million.
We are upholding our commitment to protect agency investments, especially behind our core franchises, including continued support of both bottle beyond strong support for the upcoming launch in Calvin Klein and the exciting launch of makeup and Marc Jacobs beauty in mid calendar year.
Speaker #2: We are upholding our commitment to protect ANCP investment, especially behind our core franchises, including continued support for Boss Bottled Beyond, strong support for the upcoming launch under Calvin Klein, and the exciting launch of makeup and the Marc Jacobs Beauty in mid-calendar year '26.
Laurent: We are upholding our commitment to protect ANCP investment, especially behind our core franchises, including continued support for BOSS Bottled Beyond, strong support for the upcoming launch under Calvin Klein, and the exciting launch of makeup under Marc Jacobs Beauty in mid-calendar year 2026. In Q3, we expect interest expense to be in the low $40 million level, and we remain on track to reduce fiscal year 2026 interest expense by close to $40 million versus last year to the low $170 million level. With significant debt reductions executed to date, we expect interest expense to decline further in fiscal year 2027. Altogether, this translate to approximately breakeven Q3 adjusted EPS, excluding the impact from the equity swap.
Laurent Mercier: We are upholding our commitment to protect ANCP investment, especially behind our core franchises, including continued support for BOSS Bottled Beyond, strong support for the upcoming launch under Calvin Klein, and the exciting launch of makeup under Marc Jacobs Beauty in mid-calendar year 2026. In Q3, we expect interest expense to be in the low $40 million level, and we remain on track to reduce fiscal year 2026 interest expense by close to $40 million versus last year to the low $170 million level. With significant debt reductions executed to date, we expect interest expense to decline further in fiscal year 2027. Altogether, this translate to approximately breakeven Q3 adjusted EPS, excluding the impact from the equity swap.
2006.
In Q3, we expect interest expense to be in the low $40 million level and we remain on track to reduce fiscal year 'twenty six interest expense by close to $40 million versus last year.
Speaker #2: In Q3, we expect interest expense to level and will remain on track to reduce fiscal year '26 interest expense by close to $40 million versus last year, to the low $170 million level.
To the low $170 million level.
With significant debt reductions executed to date, we expect interest expense to decline further in fiscal year 2007.
Speaker #2: With significant debt reductions executed to date, we expect interest expense to decline further in fiscal year 27. Altogether, this translates to approximately break-even Q3 adjusted EPS excluding the impact from the equity swap.
Altogether. This translates to approximately breakeven Q3, adjusted EPS, excluding impacts from the equity swap.
We expect cash outflow in Q3, reflecting normal seasonality of the business the phasing of working capital, which benefited Q2 at the expense of Q3, and roughly $50 million in cash taxes related to the Vela sale in December.
Speaker #2: Finally, we expect cash outflow in Q3 reflecting normal seasonality of the business, the phasing of working capital which benefited Q2 at the expense of Q3, and roughly 30 million in cash taxes related to the Vela sale in December.
Laurent: Finally, we expect cash outflow in Q3, reflecting normal seasonality of the business, the saving of working capital, which benefited Q2 at the expense of Q3, and roughly $30 million in cash taxes related to the Wella sale in December. Please note that we anticipate the remaining approximately $30 million in cash taxes related to the Wella divestiture to be paid in Q4. With that, let me turn it back to Marcus for concluding remarks.
Laurent Mercier: Finally, we expect cash outflow in Q3, reflecting normal seasonality of the business, the saving of working capital, which benefited Q2 at the expense of Q3, and roughly $30 million in cash taxes related to the Wella sale in December. Please note that we anticipate the remaining approximately $30 million in cash taxes related to the Wella divestiture to be paid in Q4. With that, let me turn it back to Marcus for concluding remarks.
Please note that we anticipate the remaining approximately $40 million in cash taxes related to the dealer divestiture to be paid in Q4.
Speaker #2: Please note that we anticipate the remaining approximately 30 million in cash taxes related to the Vela divestiture to be paid in Q4. With that, let me turn it back to Marcus for concluding remarks.
With that let me turn it back to markers for concluding remarks.
Thank you Laura let.
Speaker #1: Thank you, Laurent. Let me briefly summarize what you've heard today. One month into the role, I am convinced that QOTY has amazing initiative, amazing assets, and amazing people.
Marcus: Thank you, Laurent. Let me briefly summarize what you've heard today. 1 month into the role, I'm convinced that Coty has amazing initiatives, amazing assets, and amazing people, and it's equally true that we are not yet performing at the level we need to be. Coty has missed expectations for the past 18 months. Both things are true. With this leadership transitioning, opening a new chapter in Coty's storied history, I'm committed to a few core principles. First, we will provide a realistic and balanced view of the business, sharing what's working, what's not working, but where we are making progress, and what's not working, and we will cease. Second, we will provide realistic and balanced short- and long-term financial targets, which should, today means our Q3 guidance, but will become long, longer term in nature over time.
Markus Strobel: Thank you, Laurent. Let me briefly summarize what you've heard today. 1 month into the role, I'm convinced that Coty has amazing initiatives, amazing assets, and amazing people, and it's equally true that we are not yet performing at the level we need to be. Coty has missed expectations for the past 18 months. Both things are true. With this leadership transitioning, opening a new chapter in Coty's storied history, I'm committed to a few core principles. First, we will provide a realistic and balanced view of the business, sharing what's working, what's not working, but where we are making progress, and what's not working, and we will cease. Second, we will provide realistic and balanced short- and long-term financial targets, which should, today means our Q3 guidance, but will become long, longer term in nature over time.
Let me briefly summarize what you've heard today.
One month into the role I am convinced that Coty is amazing initiative amazing assets and amazing people.
And it's equally true that we are not yet performing at the level, we need to be.
Speaker #1: And it's equally true that we are not yet performing at the level we need to be. QOTY has missed expectations for the past 18 months.
<unk> expectations for the past 18 months things.
Things are true.
Speaker #1: Both things are true. With this leadership transitioning opening a new chapter in QOTY's storied history, I'm committed to a few core principles. First, we will provide a realistic and balanced view of the business, sharing what's working and what's not working, but where we are making progress, and what's not working and we will cease.
With this leadership transition in opening a new chapter in <unk> storied history.
I am committed to a few core principles.
Yes.
We will provide a realistic and balanced view of the business sharing what's working what's not.
Not working but where we are making progress and what's not working and be received.
Second we will provide realistic and pellets short and long term financial targets.
Speaker #1: Second, we will provide realistic and balanced short and long-term financial targets, which today means our Q3 guidance, but will become longer-term in nature over time.
Today, it means our Q3 guidance, but will become long longer term in nature over time.
First we refocused the business make deliberate choices and optimize investments all of the goal of delivering consistent profitable growth over the medium term.
Speaker #1: Third, we will focus the business, make deliberate choices, and optimize investments, all with the goal of delivering consistent, profitable growth over the medium term.
Marcus: Third, we will focus the business, make deliberate choices, and optimize investments, all with the goal of delivering consistent, profitable growth over the medium term. Our North Star will be consumer demand, with a relentless focus on sell-out and market share. Finally, we will continue to review the portfolio to identify the best ways to unlock shareholder value, both in the near and the long term, complemented by other value-driving opportunities. We will follow up by the end of fiscal 2026 to share an initial, more detailed view of our strategy, our focus brands and markets, and our portfolio. I look forward to meeting many of you in the coming months and quarters. To conclude, I'm confident that things at Coty will get better. It won't happen overnight, but it will happen.
Markus Strobel: Third, we will focus the business, make deliberate choices, and optimize investments, all with the goal of delivering consistent, profitable growth over the medium term. Our North Star will be consumer demand, with a relentless focus on sell-out and market share. Finally, we will continue to review the portfolio to identify the best ways to unlock shareholder value, both in the near and the long term, complemented by other value-driving opportunities. We will follow up by the end of fiscal 2026 to share an initial, more detailed view of our strategy, our focus brands and markets, and our portfolio. I look forward to meeting many of you in the coming months and quarters. To conclude, I'm confident that things at Coty will get better. It won't happen overnight, but it will happen.
North Star will be consumer demand with a relentless focus on sell out in market share.
Speaker #1: Our North Star will be consumer demand, with a relentless focus on sellout and market share. And finally, we will continue to review the portfolio to identify the best ways to unlock shareholder value both in the near and the long term.
And finally, we will continue to review the portfolio to identify the best ways to unlock shareholder value both in EMEA and a long term complement to other value driving opportunities.
Speaker #1: Complemented by other value-driving opportunities. We will follow up by the end of fiscal 26 to share an initial, more detailed view of our strategy, our focus brands and markets, and our portfolio.
We will follow up by the end of fiscal 'twenty six to share initial more detailed view of our strategy, our focus brands and markets in our portfolio.
I look forward to meeting many of you in the coming months and quarters.
Speaker #1: I look forward to meeting many of you in the coming months and quarters. To conclude, I'm confident that things at Coty will get better.
To conclude I am confident that things that coty will get better.
