Coty Inc. Class A

Good morning and afternoon, everyone. My name is Margo, and I'll be your conference operator today. At this time, I'd like to welcome everyone to COTI's second quarter fiscal 2025 question and answer conference call. As a reminder, this conference call is being recorded today, February 11, 2024, at 8 a.m. Eastern Time or 2 p.m. Central European Time. Please note that on February 10, at approximately 4.05 p.m. Eastern Time or 10.05 p.m. Central European Time, Cody issued a press release and prepared remarks webcast, which can be found on its investor relations website. On today's call are Sue Nobby, Chief Executive Officer, and Laurent Mercer, Chief Financial Officer. I would like to now 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 or the company list factors that could cause actual results to differ materially from these 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 line for questions. If you would like to ask a question, for a question please press star then 1 on your telephone keypad. If you would like to withdraw your question, please press star then 2 on your telephone keypad. And again, that is star 1 for a question. We'll take our first question from Oliver Chen with TD Cowen. Please go ahead.

Hi, Sue and Laurent. Thank you. On your commentary about a sell-in relative to sell-out, what are your thoughts about when retailers might undergo replenishment as that's an issue you're seeing? Also, on your comments on China, travel, retail, Asia, Australia, and consumer beauty. I mean, how would you characterize the magnitude of the issues relative to what you mentioned? China's not a large percentage of total, but it sounds like things are more cautious there. Thank you.

Yeah, thank you, Oliver. Thanks for the question. So just to give you, I would say, some, as you say, some magnitude. Indeed, as we flagged, indeed, during the last quarter, I mean, we discussed that we were seeing, you know, some pockets of the business, okay, where there were some challenges, and we were expecting that these pockets, I mean, would stabilize. And, in fact, we see that there are worsening in the Q2. In fact, we are talking about 20% of our business, which is China, but also travel retail Asia, Australia, ANZ, and also consumer beauty. So this is really the scope we are talking about. And indeed, so if combination of China, travel retail Asia, and Australia, are impacting your prestige business in terms of selling by roughly three points. This is really what you need to have in mind. And if we look at the consumer beauty side, indeed this is really on the US consumer beauty challenges, which is also impacting by three points. So these are really the two areas of disruption, if I can call them this way. At the same time, so indeed about retailers, indeed, I mean, we are good, you know, especially in prestige, especially in fragrance. I mean, we have good sellout. during the holiday season, but we are seeing low replenishment from retailers. So we are seeing that there is a global pattern that they are very cautious on their inventory management and indeed managing their inventories very, very cautiously. And this is indeed creating also the gap between the sell-out and the selling. And if I just take concrete example on fragrance, where indeed we have, I mean, the fragrance as a whole is performing well. I mean, we see our sellout, you know, being, you know, between the mid to high single digit, but indeed we are seeing selling below due to this very cautious behavior by the retailers. The sellout is very healthy.