Coty Inc. Class A

Good day. My name is Chelsea, and I'll be your conference operator. At this time, I would like to welcome everyone to Cody's fourth quarter and fiscal 2022 question and answer conference call. As a reminder, this conference call is being recorded today, August 25th, 2022. Please note that earlier this morning, Cody issued a press release and prepared remarks webcast, which can be found on his investor relations website. On today's call are Sue Nobby, Chief Executive Officer, and Laurent Mercier, Chief Financial Officer. I would like to remind you that many of the comments today may contain forward-looking statements. Please refer to Cody's earnings release and the reports filed with the SEC where the company lists factors that could cause actual results to differ materially from those forward-looking statements. In addition, except where noted, The discussion of Cody's financial results and Cody's expectations reflect certain adjustments as specified in the non-GAAP financial measures section of the company's release. With that, we will now open the lines for questions. If you would like to ask a question, please press the star and one keys on your touchtone phone. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. And our first question will come from Stephanie Wissink with Jefferies. Please go ahead.

Thank you. Good day, everyone. We have two questions. The first is just on travel retail, China, and e-commerce. Those really stood out to us in the quarter and the year as big drivers of growth. So can you talk about your expectations for those drivers in your fiscal 23 guidance, specifically China, if you can give us some sense of what you're assuming is And then, Sue, I'm going to ask you a tough question I'm hoping you're willing to answer, but there's been a lot made about the caring relationship and that portfolio of brands. And I'm hoping you can share a little bit about, since you've arrived at Cody, how that relationship has changed, the commitment you have to those brands, and maybe some of the performance indicators that you're looking at to reinforce that relationship. Thank you.

Yes, good morning. Thank you so much for your questions. So first, let me start with the first part, which is around the strength of the business. Indeed, the travel, retail, e-commerce, and China, and I will say a few words about China later, are clearly for travel, retail, and e-commerce key contributors to this industry. I would say, best-in-class performance that we had in Q4 and in fiscal 22. I really hope that everyone will recognize today and now that these eight quarters of results empower ahead of expectations of our guidances and, of course, most of our peers. is clearly hopefully going to be recognized as a great achievement. That's a very important point. When it comes to travel retail, and the fact that travel retail has been a key contributor, it's true that for all of us, specifically those who've been traveling, we've seen there is a huge surge in terms of travel worldwide. And this surge of travel, of course, translates into, you know, beauty figures, if I may say, specifically at Coty. Our travel retail channel has been doing fantastically well during the quarter. In EMEA, to take one example, it's three times triple digit growth, sorry, in terms of what we are seeing there. This is across the full board of categories. Our fragrances, and specifically our highest-end fragrances and more artisanal or niche fragrances, are doing fantastically well, gaining market share, thanks to the level of innovations. our, you know, new category, because we entered the, you know, before the pandemic, Traveritel was a one category channel, it was mainly fragrances. Now Traveritel is fragrances, prestige makeup, and of course skincare. And on prestige makeup there, we've been doing also fantastic figures, thanks to, you know, the different brands, be it Burberry makeup, Gucci makeup, or more recently, Kylie Cosmetics, which had fantastic results in the top airports around the world. And last but not least, this channel is now fully benefiting from the repositioning of Lancaster from a sun care to a skin care brand that started first in Hainan, but that's currently spread into mainland China at Sesora as an exclusive partnership. And we've seen that this brand has been posting a double-digit growth in fiscal 22. which overall also had to do a lot with the travelability performance. Eclonaf is clearly doing very, very well. This is clearly, I would say, the case in the prestige division. It's even more the case on the consumer duty division. And this, honestly, I have to say, it's a big satisfaction for us because our brands are becoming darling brands on social media, specifically, you know, Carole Girl, of course, but also we know. We've done a recent launch called Food Seeker that happened at the end of the quarter and beginning of Q1. That's doing fantastically well, 100% co-created with TikTokers. So clearly, this part of the business is a key contributor. And you can imagine that in the coming quarter, it's going to continue to be a key contributor. When it comes to the China topic, China, of course, like everyone, we've been impacted by the lockdowns at the end of Q3 and during Q4. But what we are seeing in Q1, now two months into Q1, is that China has, for 30 at least, strongly rebounded. You know, we are seeing a double-digit growth, not at the level of what we had inside, prior to the first, I would say, slowdown because of the restrictions, but very, very strong performance. And overall, China had a plus 11% performance in fiscal 2022 to be compared to a market that was minus one. So that's what I can tell you on the business side. Now, concerning the second part of your question, you know, first of all, I'm not going, as you can imagine, to do a lot of comments on speculations. But what I can tell you is that our long-term partnerships with our top fashion houses are continuing to be of great quality. And the other thing that I would like also to stress, now that you're asking me the question, is that I'm taking, again, this opportunity to repeat that no key license is up to renewal before five years. So everything else is speculation. But these are the two key elements I wanted to share with you today.