Coty Inc. Class A

Good morning and good afternoon, everyone. My name is Ashley and I'll be your conference operator today. At this time, I would like to welcome everyone to Cody's third quarter fiscal 2024 question and answer conference call. As a reminder, this conference call is being recorded today, May 7, 2024, at 8.15 a.m. Eastern Time or 2.15 p.m. Central European Time. Please note that on May 6, at approximately 4.30 p.m. Eastern Time or 10.30 p.m. Central European Time, Cody issued a press release, and prepare a webcast, which can be found on our Investor Relations website. On today's call are Sue Nobby, Chief Executive Officer, and Laurent Messier, 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 in the reports filed with the SEC where the company lists facts that could cause actual results to differ materially from the forward-looking statements. In addition, except where noted, the discussion of COTI financial results and COTI 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 line for questions. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may withdraw your questions at any time by pressing star 2. Again, that is star and 1 for your questions, and we'll pause to allow any questions to queue. And we'll take our first question from Filippo Filorni with Citi. Please go ahead.

Hey, good morning, everyone, and good afternoon for you guys. So I have two quick questions. I understand that you're going to give guidance for fiscal 25 in August, but you mentioned the release that you expect a sequential acceleration for like sales in the first half of 25. So maybe you can give us some color of what drives that confidence and what are the drivers of the acceleration. And then the second one on the consumer beauty business, You called out some softness in U.S. mass cosmetics. How long do you think that softness can last, and what are the upsetting parts of the business that drop the like-for-like sales in the business? Thank you.

Again, thank you for giving us this opportunity to indeed comment on this 16th quarter of results that are in this time above expectations and above our guidance for the third time this year. Indeed, the performance we are seeing in Prestige, which is, as you know, growing double digits, is giving us confidence to see and to continue to see an acceleration in the first half sequentially from Q4. We've been outperforming the market during this quarter, Q3. The market is very dynamic, as you know it. The prestige fragrance market is even accelerating sequentially versus last quarter. And this is a global phenomenon, not just in the U.S. It's also seen in big markets like in Europe. So on a very dynamic market that we expect to continue to be dynamic because of the fragrance index structural drivers, we believe we are going to continue to outperform this market, which explains why we think we are going to sequentially accelerate from the Q4 numbers in terms of sell-in. So what gives us this confidence? Number one, the track record of the company. You know, we've been seeing a large number of our brands growing double digits last year, and this is continuing for most of these brands. I'm thinking about the top seven fragrance brands growing double digits last year. Most of them, the majority of them, continue to grow at this same rate. We have great highlights or great, I would say, superstars in the portfolio, such as Burberry. Burberry Goddess is indeed confirming its huge potential, more than a potential. It's today the number one innovation globally. It's today having a fantastic halo effect on the overall brand, pushing the other fragrance franchises, but also the color cosmetics performance. And on top of this Burberry Goddess that is continuing to build over time and with an increased penetration across the different markets around the world, we have also new stars arriving. I'm thinking about Cosmic Caligiana fragrance that started one month and a half ago, which is the second innovation, the number two innovation of the U.S. market this calendar year to date. And we have also another one that's the number one innovation in the U.S. market, which is Daisy Wild from Marc Jacobs. So this on top of other brands growing double digits. I'm thinking about Chloé. I'm thinking about Davidoff. And, of course, as I said before, Burberry. So this is really what gives us the confidence that we are building launchers. that are going to stand the test of time, that are going to amplify and hopefully continuing to increase the number of successes which we call the track record in this very competitive fragrance business. We are also accelerating in consumer beauty. Consumer beauty, as you remember, the story was about, you know, increasing the pace of innovation. This is happening now. The latest innovations are all becoming viral. They are potentially innovations that have this ability to speak to the influences around the world. I'm thinking about Covergirl Essence. I'm thinking about Covergirl Yemi Gloss from last year that's continuing to do very well. CoverGirl Lip Stain. I'm thinking about Rimmel Wonder Bond Mascara, which is the first bonding mascara of the color cosmetics industry. All these innovations are going to be amplified by other innovations. And I said to you in the previous earnings score that we are going to increase the pace of innovation. So, all these elements give us the confidence that things are going to get to continue to do well, and the beauty market, we believe, is going to continue to do well. Prestige is structurally driven to continue to grow very strongly, and mass We saw mainly in the U.S. that we see figures that are not where we want them to be. The rest of the world, mass market, especially color cosmetics, but also body care fragrances is booming. But in the U.S., last month's figures are a bit better than the months before, so we are optimistic and we think that This will improve after, you know, the shock of the inflation, the shock of the price increases, et cetera. We believe consumers are going to see a clearer picture, and hopefully they will continue to buy these premium innovations, new categories, et cetera. So what allowed us to offset this weakness in the U.S. market is indeed categories and regions. categories because we are growing very, very strongly behind mass fragrances and this globally. We are growing very strongly behind body skincare, as I love to call it. And this is also an area that is not only premiumizing but also accelerating its skincare for the body, if you want to name it differently. And we are also booming in other regions, you know, what we call the growth engine market. New regions that represent almost 20% is growing two times faster than the rest of the company. Last but not least, and I didn't propose a long answer so that the others also got maybe answers to the upcoming questions, travel retail is doing fantastically well, and also e-com. So if you add travel retail, e-com, new regions, Plus new categories, you have almost half of the business of the company that's growing two times faster than the more classical businesses, heritage businesses in mature markets.