Financial Data and Key Metrics Changes - The company reported an 8% organic sales decline for fiscal 2025, with nearly two-thirds attributed to a 28% decrease in Travel Retail [7][8] - Gross margin expanded by 230 basis points to 74%, driven by the Profit Recovery and Growth Plan (PRGP) benefits [8][30] - Operating margin contracted to 4% in Q4 from 9% the previous year, influenced by sales declines and increased consumer-facing investments [30] - Diluted EPS decreased by 42% to $0.09 in Q4 compared to $0.64 last year [32] Business Line Data and Key Metrics Changes - Travel Retail represented approximately 15% of reported sales, down four percentage points from fiscal 2024 [8] - Online sales reached 31% of reported sales for fiscal 2025, up three percentage points from fiscal 2024, indicating a strong shift towards e-commerce [12] - The Ordinary and Clinique drove share gains in the U.S., while La Mer and Tom Ford contributed to growth in China [10][17] Market Data and Key Metrics Changes - The company gained prestige beauty share in China, Japan, and the U.S., with notable growth in online sales and retail channels [9][10] - Travel Retail in Asia saw a significant decline, but the company ended fiscal 2025 with healthier trade inventory [8][19] - Emerging markets represented only 10% of reported sales, indicating untapped potential for growth [20] Company Strategy and Development Direction - The company is committed to regaining Prestige Beauty leadership through the Beauty Reimagine strategy, focusing on operationalizing its strategic vision [6][9] - Plans for fiscal 2026 include low single-digit organic sales growth and a solid double-digit operating margin target [19][44] - The company aims to reduce discounts significantly and improve consumer coverage in markets with high department store penetration [20][39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to top-line growth in fiscal 2026, despite challenges in the broader retail environment [19][38] - The company anticipates modest global prestige beauty growth of 2% to 3% for fiscal 2026, with a focus on improving performance in North America and Europe [37][38] - Management highlighted the importance of aligning retail and net sales, with expectations for a narrowing gap in fiscal 2026 [60][66] Other Important Information - The company recorded $425 million in impairment charges related to Doctor Jard and Too Faced, reflecting challenges in key geographies [31] - The PRGP restructuring program has resulted in $610 million in cumulative charges, primarily in employee-related costs [33] - The company is focused on enhancing productivity and optimizing capital expenditures, with a target of approximately 4% of sales for capital expenditures in fiscal 2026 [45] Q&A Session Summary Question: Progress on organizational restructuring and cultural change - Management confirmed significant progress in simplifying the organizational structure and emphasized the importance of communication throughout the company [52][56] Question: Gap between retail sales and shipments - Management noted that inventory has been reduced across major markets, and they expect the gap between net sales and retail to narrow moving forward [60][63] Question: North America's channel balance and sales growth - Management highlighted the strong performance in online channels and Amazon, while acknowledging the need for continued work in traditional department stores [71][75] Question: Organic revenue growth excluding Travel Retail - Management indicated that organic revenue growth excluding Travel Retail was in the low single-digit decline range, with expectations for improvement in fiscal 2026 [81][84] Question: Operating margin guidance and interplay between gross margins and SG&A - Management provided insights into the expected interplay between gross margins and SG&A, indicating a focus on maintaining gross margin despite tariff impacts [92]