Coty Inc. Class A

Good morning and good afternoon, everyone. My name is Chloe, and I will be your conference operator today. At this time, I would like to welcome everyone to Cody's second quarter fiscal 2026 question and answer conference call. As a reminder, this conference call is being recorded today, February 6th, 2026, at 8 a.m. Eastern Time or 2 p.m. Central European Time. Please note that on February 5th at approximately 4.30 p.m. Eastern Time or 10.30 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 Marcus Stobel, Executive Chairman of the Board and Interim 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 earning 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 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'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star 2. Once again, that is star 1 to ask a question. We'll take our first question from Filippo Falorni with Citi. Your line is open.

Hi, good morning and good afternoon, everyone. Marcus, maybe can you give us a bit more color on the color, the future performance improvement plan for consumer beauty? You mentioned in the prepared remarks yesterday that there's a lot of different initiatives commercially, including streamlining the portfolio. What are you thinking those potential impacts are going to be on sales near term and then a little bit longer term and then laurent on the margin side consumer beauty has been significantly below corporate average do you have an aspiration of what their business uh operating margins can get back to thank you all right thanks filippo i'll take that on um there's about three three or four principles how we are addressing consumer um

to consumer business priorities and focus on our business building plan. It's imperative for us to get back to sell-out growth and to market share growth. We've got to be the masters of our industry and win in the market. That's our ambition. Now, how are we going to do that? Number one, we're going to focus on our most iconic assets. These are brands like CoverGirl, where we have assets in there like Lash Glass, Simply Ageless, and iconic brands like Rimmel. We started doing this in the last couple of weeks, and I'm very encouraged by the early results. We had seen declines on these franchises in the high single digits. Now they went down to the low single digit, to the mid single digit. So it's nothing to write home about, nothing that we are happy about, but we're going to see the power of focus on the key assets. Number two, you know that cosmetics is driven very much by the big innovation bundles that come in spring. In the past, we had gigantic innovation bundles with lots of SKUs Most of them didn't work, and they crowded out productive SKUs on the shelf. So you've got kind of the double vanity, and you've got returns from the trade. So we're avoiding this. We're going to bring our first bundle in fiscal 26, which is sharper, streamlined, with better SKUs, fast rotation, and we'll also protect our existing fast-rotating SKUs on the shelf. This leads me to the question you had, when do we see sellout? Obviously, if we sell in a smaller bundle, you're going to see initially less pipeline fill, and you're going to see this in Q3. But the focus we're getting with this and the sellout velocity on the shelf will improve sellout as we go along and hopefully get our business back on track. That's number two. Number three is that when we do these big bundles and these big advertising campaigns, we have a lot of money on asset creation. But we have very little money in what we call working ACP, wonderful assets to the consumers in digital, in advocacy via influencers and so on and so on and so on. So by having smaller, sharper bundles, we're going to free up asset creation money, put it into working media. And we also did a lot of exciting experiments with AI in color cosmetics to create assets in a much more efficient way. We have a couple of experiments that show us we can probably create assets at 70 to 80% cost reduction versus what we're doing now. And again, money we can reinvest into consumer, consumer-facing businesses. These three actions together will compound and beyond the Q3, which is the hump for us, right? You know, our expectations will get us into a much better future on color cosmetics.