Financial Data and Key Metrics Changes - The company reported a decline in adjusted EBITDA of 15% year-over-year, totaling $330 million, which was at the lower end of the guidance range [39] - Adjusted gross margin was 64.2%, reflecting a 260 basis point decline from the prior year, primarily due to an intensified promotional environment during the holiday period [37] - Free cash flow in the first half was $524 million, exceeding guidance and last year's performance, driven by better receivables performance [40] Business Line Data and Key Metrics Changes - In the Prestige segment, like-for-like sales declined by 2%, an improvement from a 6% decline in the previous quarter, with innovation contributing positively [31][32] - Consumer beauty saw like-for-like sales decline of 6%, improving from an 11% decline in Q1, indicating some recovery efforts are taking effect [33] - The company plans to streamline its innovation pipeline to focus on core brands, which is expected to improve productivity and drive margin accretion [34] Market Data and Key Metrics Changes - The prestige beauty market grew approximately 5% in Q2, showing a slowdown from 6% growth in Q1, particularly in the U.S. and certain European markets [29] - The U.S. market experienced significant pressure, with the prestige fragrance market growth slowing from 7% to 3% [16] - Emerging regions like Asia Pacific and Latin America showed strong sell-out performance, balancing weaker results in key markets [30] Company Strategy and Development Direction - The company is implementing a new strategic framework called "Coty Curated," focusing on making big brands bigger and stopping initiatives that dilute resources [8][9] - A performance improvement plan named "Color the Future" is being activated to return the consumer cosmetics business to growth and profit expansion [26] - The company is committed to operational discipline and prioritizing investments in core brands to drive sustainable growth [51] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that financial results over the past 18 months have been disappointing, indicating a need for improved operational performance [8] - The leadership transition is seen as an opportunity to provide a balanced view of the business and set realistic financial targets [50] - The company expects mid-single-digit declines in like-for-like revenue trends for Q3, driven primarily by consumer beauty [42] Other Important Information - The company ended its license with the Orveda skincare brand to focus on scale and profitability [27] - A strategic collaboration with OpenAI is being pursued to enhance AI capabilities within the organization [24] - The divestiture of Wella generated $750 million in upfront proceeds, aligning with the company's commitment to divest financial stakes [41] Q&A Session Summary Question: What are the expectations for the upcoming quarters? - The company expects like-for-like sales to decline mid-single digits in Q3, primarily due to consumer beauty challenges [42] - Management is focused on improving market share and operational discipline to drive future growth [51]

Financial Data and Key Metrics Changes - The company reported a decline in adjusted EBITDA of 15% year-over-year, totaling $330 million, which was at the lower end of the guidance range [39] - Adjusted gross margin was 64.2%, reflecting a 260 basis point decline from the prior year, primarily due to an intensified promotional environment during the holiday period [37] - Free cash flow in the first half was $524 million, exceeding guidance and last year's first half free cash flow of $411 million [40] Business Line Data and Key Metrics Changes - In the Prestige segment, like-for-like sales declined by 2%, an improvement from a 6% decline in the previous quarter, driven by reduced retailer destocking and stronger innovation contributions [31][32] - Consumer beauty saw like-for-like sales decline of 6%, improving from an 11% decline in Q1, with a focus on reallocating investments towards core brands [33][34] - The company plans to streamline the innovation pipeline to focus on high-potential launches, particularly in color cosmetics [35] Market Data and Key Metrics Changes - The prestige beauty market grew approximately 5% in Q2, showing a slowdown from 6% growth in Q1, with the prestige fragrance market moderating from 5% to 3% growth [29][30] - Emerging regions like Asia Pacific, Middle East, and Latin America showed strong sell-out performance, balancing weaker sales in key markets like the U.S., Germany, and the U.K. [30] - The U.S. market experienced significant pressure, with the prestige fragrance market slowing and aggressive promotional activity impacting overall growth [16][28] Company Strategy and Development Direction - The company is implementing a new strategic framework called "Coty Curated," focusing on making big brands bigger, scaling successful initiatives, and stopping projects that dilute resources [8][9] - A performance improvement plan named "Color the Future" is being activated to return the consumer cosmetics business to growth and profit expansion [26][33] - The company is committed to operational discipline and prioritizing investments in core brands to drive sustainable growth [10][51] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that financial results over the past 18 months have been disappointing, with a need for improved operational discipline and focus [7][8] - The leadership transition is seen as an opportunity to refine strategic priorities and align with the board for future growth [41][50] - The company expects mid-single-digit declines in like-for-like revenue trends for Q3, primarily driven by consumer beauty [42][45] Other Important Information - The company ended its license with the Aveda skincare brand to focus on scale and profitability [27] - The divestiture of Wella generated $750 million in upfront proceeds, aligning with the company's commitment to divest its financial stake [41] - The company is leveraging AI to enhance operational efficiency and reduce costs in content creation [24] Q&A Session Summary Question: What are the expectations for the upcoming quarters? - The company expects like-for-like sales to decline mid-single digits in Q3, driven by consumer beauty challenges and a highly promotional environment [42][45] Question: How is the company addressing underperformance in the U.S. market? - Management is focusing on reallocating investments towards core brands and improving execution in key markets to close market share gaps [18][33] Question: What is the outlook for gross margins? - The company anticipates gross margins to decline by 200-300 basis points in Q3, influenced by lower sales and a highly promotional environment [46][47]

Financial Data and Key Metrics Changes - The company reported a decline in adjusted EBITDA of 15% year-over-year, totaling $330 million, which was at the lower end of guidance for a low- to mid-teens decline [37] - Adjusted gross margin was 64.2%, reflecting a 260 basis point decline from the prior year, with expectations for continued margin pressures in the second half of fiscal year 2026 [36][44] - Free cash flow in the first half was $524 million, exceeding guidance and last year's performance, driven by better receivables performance [38] Business Line Data and Key Metrics Changes - In the Prestige segment, like-for-like sales declined by 2%, an improvement from a 6% decline in the previous quarter, with innovation contributing positively [31][32] - Consumer beauty saw like-for-like sales decline of 6%, improving from an 11% decline in Q1, with a focus on reallocating investments to core brands [33][36] - The company plans to streamline its innovation pipeline to focus on high-potential launches, particularly in the color cosmetics segment [34] Market Data and Key Metrics Changes - The prestige beauty market grew approximately 5% in Q2, indicating a slowdown from 6% growth in Q1, with the prestige fragrance market moderating from 5% to 3% growth [28][29] - The company experienced a gap between sell-out and market performance, particularly in key markets like the U.S., U.K., and Germany, while emerging markets showed strong sell-out performance [30][31] Company Strategy and Development Direction - The company is implementing a new strategic framework called "Coty Curated," focusing on making big brands bigger, scaling successful initiatives, and stopping those that dilute resources [9][10] - A performance improvement plan named "Color the Future" is being activated to return the consumer cosmetics business to growth and profit expansion [26][33] - The company is prioritizing operational discipline and focused investment to enhance market share and profitability [18][49] Management's Comments on Operating Environment and Future Outlook - Management acknowledged disappointing financial results over the past 18 months and emphasized the need for operational discipline and focused execution to leverage the company's strengths [8][9] - The outlook for Q3 includes expectations for mid-single-digit declines in like-for-like revenue trends, particularly in consumer beauty, while the prestige fragrance market is expected to grow low to mid-single digits [40][41] - Management is committed to protecting marketing investments behind core brands and expects to see improvements in sell-out trends in focus brands [46][44] Other Important Information - The company ended the quarter with net debt of $2.6 billion and leverage of 2.7x, the lowest levels in over nine years, with a commitment to reduce leverage closer to 2x over time [39] - The divestiture of Wella generated $750 million in upfront proceeds, aligning with the company's strategy to streamline its portfolio [38] Q&A Session Summary Question: What are the expectations for the upcoming quarters? - The company expects like-for-like sales to decline mid-single digits in Q3, driven primarily by declines in consumer beauty, while the prestige fragrance market is anticipated to grow low to mid-single digits [40][41] Question: How is the company addressing the underperformance in the U.S. market? - The company is focusing on reallocating investments to core brands and improving execution in key markets, with a specific plan to narrow the sell-out gap with the market over time [33][41]