COTY 3Q FY25 EARNINGS CALL May 6, 2025 CURRENT BACKDROP SUE NABI CHIEF EXECUTIVE OFFICER CHALLENGES FROM SLOWER CATEGORY TRENDS, ELEVATED PRESTIGE COMPARISONS AND RETAILER DESTOCKING, AND RECALIBRATED CB EQUATION COTY FOCUSED ON PROTECTING PROFITABILITY, CASH FLOW AND DELEVERAGING PATH COTY MORE STRONGLY POSITIONED TO WEATHER CURRENT TARIFF AND MACRO UNCERTAINTY 2 3 Q3 SALES -2.5% WITH LFL VOLUMES -3%, INCLUDING FRAGRANCES +1% -4.8% PRESTIGE CONSUMER BEAUTY WITH VOLUMES FLAT Notes: All figures refer to LFL ...

Core Insights - The event "2025 China Listed Company Brand Value List Release Conference" aims to explore brand elevation paths amid digital transformation, emphasizing the role of international brands in enhancing consumer experience and stimulating market vitality in China [1][9] - Coty, a global beauty company, has been actively expanding in the Chinese market, representing a successful case of foreign brands growing alongside China [1][9] Company Overview - Mathieu Dufresne, the General Manager of Coty China, has extensive experience in the beauty and fragrance industry, focusing on understanding the evolving Chinese consumer landscape and enhancing brand influence [6][7] - Under Dufresne's leadership, Coty is prioritizing high-end fragrance product development, digital engagement, and retail expansion to achieve growth in the competitive Chinese beauty market [6][7] Market Dynamics - Coty's financial report for the first half of fiscal year 2025 shows a net revenue of $3.341 billion (approximately 24.1 billion RMB), with a year-on-year growth of 2%, driven by the performance of high-end and mass fragrance segments [9] - The global beauty market is experiencing slower growth compared to previous years, but fragrance products are outperforming other categories, indicating resilience in this segment [9][10] - The Chinese fragrance market, characterized by low penetration, is becoming increasingly competitive, with both international and local brands vying for market share [9][10] Strategic Approaches - Coty has developed three effective methodologies for localizing its brand in China: connecting brand spirit with local culture, creating emotional resonance, and leveraging local ambassadors to drive consumer engagement [7][8] - The rise of domestic beauty brands and changing consumer preferences pose challenges for international high-end beauty brands, necessitating a shift towards localized competition strategies [10]

Core Insights - Coty reported $1.3 billion in revenue for the quarter ended March 2025, reflecting a year-over-year decline of 6.2% and an EPS of $0.01 compared to $0.05 a year ago, indicating a significant drop in earnings [1] - The revenue fell short of the Zacks Consensus Estimate by -0.43%, while the EPS surprise was -80.00% against the consensus estimate of $0.05 [1] Financial Performance Metrics - Coty's shares returned +5.3% over the past month, underperforming the Zacks S&P 500 composite's +11.5% change, with a Zacks Rank 4 (Sell) suggesting potential underperformance in the near term [3] - Geographic revenues showed varied performance: - Americas: $529.70 million, down -10.1% year-over-year and below the estimated $546.01 million [4] - Asia Pacific: $159.40 million, a -5.5% change year-over-year, exceeding the estimate of $146.69 million [4] - EMEA: $610 million, a -2.9% change year-over-year, slightly below the estimate of $617.96 million [4] - Net revenues by segment: - Prestige: $829.40 million, down -4.4% year-over-year, slightly below the estimate of $833.25 million [4] - Consumer Beauty: $469.70 million, down -9.4% year-over-year, also below the estimate of $471.58 million [4] - Adjusted Operating Income (Loss) metrics: - Consumer Beauty: -$10.90 million, better than the estimate of -$11.85 million [4] - Prestige: $158.80 million, exceeding the estimate of $141.62 million [4] - Corporate: -$169.60 million, significantly worse than the estimate of -$69.77 million [4]

Core Viewpoint - Coty reported quarterly earnings of $0.01 per share, missing the Zacks Consensus Estimate of $0.05 per share, representing an earnings surprise of -80% [1]. Financial Performance - The company posted revenues of $1.3 billion for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.43%, and down from $1.39 billion a year ago [2]. - Over the last four quarters, Coty has not surpassed consensus EPS estimates and has consistently missed revenue estimates [2]. Stock Performance - Coty shares have declined approximately 25.9% since the beginning of the year, compared to a -3.9% decline in the S&P 500 [3]. - The current Zacks Rank for Coty is 4 (Sell), indicating expected underperformance in the near future [6]. Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.05 on revenues of $1.3 billion, and for the current fiscal year, it is $0.36 on revenues of $5.95 billion [7]. - The trend for estimate revisions ahead of the earnings release has been unfavorable, which may impact future stock performance [6]. Industry Context - The Cosmetics industry, to which Coty belongs, is currently ranked in the bottom 5% of over 250 Zacks industries, suggesting a challenging environment for stock performance [8].

Coty Reports Q3 Results And Shares Multi-Pronged Plan of Attack to Fuel Momentum in FY26 and Beyond 2025 remains a transition year for Coty. In Prestige, we are absorbing the triple-headwind of a slowing fragrance market, lapping a blockbuster innovation year, and depleting elevated retailer inventory, all of which was particularly acute in the U.S. We are laser focused on entering FY26 with alignment between sell-in and sell-out, to create a healthy baseline for growth. In Consumer Beauty, we have begun re ...

Core Viewpoint - Coty Inc. is expected to report a decline in revenues for the third quarter of fiscal 2025, with estimates at $1.3 billion, reflecting a 5.8% decrease from the previous year [1] Revenue and Earnings Estimates - The consensus estimate for earnings has decreased by one cent to 5 cents per share, consistent with the same quarter last year [2] - Coty has experienced a trailing four-quarter negative earnings surprise averaging 65.7% [2] Business Challenges - Coty is facing significant challenges in key markets, including China, Travel Retail Asia, Australia, and Consumer Beauty in the U.S., with expectations of continued pressure into the upcoming quarter [2] - Organic like-for-like revenues are anticipated to decline by 1.5% for the third quarter of fiscal 2025 [2] Currency and Cost Pressures - Currency headwinds are expected to impact results, with a projected foreign exchange headwind of approximately 3% to 4% in the second half of the fiscal year [3] - Increased advertising and consumer promotions (A&CP) spending has been noted, with A&CP costs remaining in the high 20s percentage-wise, which may further affect margins and profitability [4] Strategic Initiatives - Despite challenges, Coty's strategic priorities, such as expanding its prestige fragrance portfolio and enhancing digital and direct-to-consumer capabilities, are expected to support performance and margin resilience [5] Earnings Prediction - The current model does not predict an earnings beat for Coty, with a Zacks Rank of 4 (Sell) and an Earnings ESP of -41.20% [6]

An updated edition of the February 26, 2025 article.The beauty and cosmetics space has evolved from ancient natural remedies to today's advanced, science-backed skincare and makeup solutions. Beauty standards and preferences have changed over time, shaped by cultural influences, technological innovations and shifting societal values. Now a multi-billion-dollar global industry, beauty continues to redefine self-expression and personal identity through a diverse range of products — from skincare and makeup to ...

Industry Overview - The Zacks Cosmetics industry is facing a challenging macroeconomic environment, with sluggish sales and rising production costs impacting profitability and efficiency [1][4] - Companies in this sector manufacture and market a variety of beauty and personal care products, including skincare, fragrance, makeup, and hair care [3] Current Trends - Economic conditions are creating a difficult demand landscape, as consumers are prioritizing essential purchases over discretionary items like cosmetics due to elevated living costs and reduced savings [4] - Rising operational costs for packaging, ingredients, and logistics are tightening profit margins and intensifying competition [4] - International risk factors, such as currency fluctuations and geopolitical tensions, are affecting revenues and operational continuity for global cosmetic companies [5] Innovation and Digital Transformation - Innovation and digitization are crucial for growth, with consumers seeking unique products that combine technology and scientific formulations [6] - Companies are enhancing e-commerce capabilities and expanding product portfolios through strategic acquisitions and partnerships to remain competitive [6] Industry Performance - The Zacks Cosmetics industry currently ranks 213, placing it in the bottom 14% of over 250 Zacks industries, indicating dull near-term prospects [7] - The industry's aggregate earnings estimate has decreased by 11.7% since February 2025, reflecting a loss of confidence in earnings growth potential [8] Stock Market Performance - The Zacks Cosmetics industry has underperformed the S&P 500 and the broader Consumer Staples sector, declining 59.6% over the past year compared to the S&P 500's growth of 6.4% [10] - The industry is currently trading at a forward P/E of 19.21X, slightly lower than the S&P 500's 19.71X and the sector's 17.4X [13] Company Highlights - **The Estee Lauder Companies**: Focused on restoring profitability through its Profit Recovery and Growth Plan, with a strong online presence and AI integration [16][17] - **Coty Inc.**: Building sustainable growth through brand strength and digital acceleration, with a focus on its fragrance business [20][21] - **Helen of Troy Limited**: Driving growth through its Leadership Brands and a global restructuring initiative aimed at improving margins [24][25] - **European Wax Center, Inc.**: Positioned for long-term expansion with a focus on guest acquisition and operational productivity [28][30]

Core Insights - Coty Inc. has sold its 20% stake in SKKN by Kim to SKIMS, ending its partnership with Kim Kardashian's beauty brand, allowing SKIMS to unify its beauty and lifestyle ventures under one brand [1] - The divestment is part of Coty's strategy to streamline its portfolio, invest in innovation, and strengthen its financial position through deleveraging efforts [1][2] Coty's Strategic Rationale - The decision to divest from SKKN reflects Coty's ongoing evaluation and optimization of its diverse brand portfolio, aiming to drive growth in key categories such as prestige and mass beauty, fragrance, and skincare [2] - Proceeds from the sale will support Coty's deleveraging strategy and fuel innovation across its broader brand portfolio [2] Historical Context - Coty initially invested in Kim Kardashian's beauty business in 2020, completing the transaction in 2021, leveraging its R&D capabilities and global distribution network [3] - Despite exiting SKKN, Coty retains a majority stake and perpetual license in Kylie Cosmetics, which has grown 1.5 times in the past two years under Coty's leadership [3] Market Position and Performance - Coty continues to solidify its leadership in the fragrance industry, achieving high-single-digit sell-out growth in its prestige fragrance portfolio during the first half of fiscal 2025, despite challenges in markets like China and travel retail [4] - The company's cosmetics brands are gaining momentum, supported by strong social media advocacy and an agile innovation strategy [5] Transformation and Operational Strategy - Coty is advancing its "All In to Win" transformation program, focusing on cost reduction, margin expansion, and revenue growth, with recent operational streamlining efforts strengthening cash flow for future investments [6] Challenges and Market Headwinds - Coty faces challenges in the Chinese mainland and Asia Travel Retail markets, where weak demand persists, leading retailers to adjust their orders [7] - The company is managing higher advertising and consumer promotions spending, with A&CP expenses remaining in the high 20% range, reflecting a year-over-year increase [8] Future Outlook - With the sale of the SKKN stake, Coty is reinforcing its focus on core brands and long-term strategic vision, committed to driving sustainable growth and expanding its presence in key global markets [10]

Core Insights - Coty Inc. is facing challenges due to rising costs and weaker-than-expected demand in key markets such as China, Travel Retail Asia, and the United States [1] - The company reported a decline in both top and bottom-line results for the second quarter of fiscal 2025, missing the Zacks Consensus Estimate despite strong holiday sales [1][4] - Coty's share price has dropped by 25.7% over the past three months, underperforming the industry and broader market indices [2] Financial Performance - In the second quarter of fiscal 2025, Coty's Asia Pacific segment reported net revenues of $191.5 million, reflecting an 11% decline due to tough market dynamics in China and the regional Travel Retail channel [5] - The company anticipates LFL sales trends in the second half of fiscal 2025 to remain consistent with the second quarter, projecting a decline of 1% to 2% [7] - A significant foreign exchange headwind of approximately 3% is expected to impact reported sales for fiscal 2025, leading to a low single-digit percentage decline [7] Cost Pressures - Coty has been experiencing increased advertising and consumer promotions (A&CP) spending, with A&CP costs remaining in the high 20s percentage range [6] - The ongoing rise in A&CP expenses, if not effectively managed, could further pressure Coty's margins and profitability in the upcoming quarters [6] Market Outlook - The beauty market is transitioning into a more normalized phase, with ongoing challenges in Asia and Travel Retail affecting Coty's performance [4] - Management forecasts a similar challenging market environment for fiscal 2026, indicating that recovery may take longer than anticipated [8]