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][28] - Gross margin expanded by 230 basis points to 74%, driven by the Profit Recovery and Growth Plan (PRGP) benefits [7][29] - Operating margin contracted to 8%, down 220 basis points due to sales declines and increased consumer-facing investments [8][29] - Diluted EPS decreased by 42% to $0.09 in the fourth quarter compared to $0.64 last year [31] Business Line Data and Key Metrics Changes - Travel Retail represented approximately 15% of reported sales, down 4 percentage points from fiscal 2024 [7] - Online sales reached 31% of reported sales for fiscal 2025, up 3 percentage points from fiscal 2024, indicating a strong shift towards e-commerce [11] - The Ordinary and La Mer gained market share in key markets, with La Mer achieving double-digit organic sales growth in Mainland China [9][12] Market Data and Key Metrics Changes - The company gained prestige beauty share in China, Japan, and the U.S., indicating a recovery in key markets [8][9] - Travel Retail sales were significantly impacted, with a noted decline in conversion rates [17][28] - Emerging markets represented only 10% of reported sales, highlighting untapped potential [18] Company Strategy and Development Direction - The company is committed to regaining Prestige Beauty leadership through the Beauty Reimagine strategy, focusing on five key action priorities [6][26] - Plans include reducing discounts, enhancing consumer coverage, and expanding in high-growth emerging markets [18][19] - The company aims to achieve low single-digit organic sales growth in fiscal 2026, with a focus on improving margins and profitability [17][34] 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 retail environment [17][34] - The company anticipates modest global prestige beauty growth of 2% to 3% in fiscal 2026, with a focus on improving performance in North America and Europe [36][37] - Management acknowledged ongoing challenges in travel retail and consumer sentiment in Western markets but noted early signs of stabilization in Mainland China [36][37] Other Important Information - The company recorded $425 million in impairment charges related to Doctor Jard and Too Faced, reflecting challenges in key geographies [30] - The effective tax rate for the full year was 38.8%, up from 31% the previous year, due to a higher rate on foreign operations [31] - The company generated $1.3 billion in net cash flow from operating activities, down from $2.4 billion last year, primarily due to lower earnings [32] Q&A Session Summary Question: Progress on organizational restructuring and cultural change - Management confirmed significant progress in restructuring, including the collapse of seven regions into four and the establishment of a new leadership team [52][55] - Communication has been emphasized throughout the organization to ensure alignment with the Beauty Reimagine strategy [56][59] Question: Gap between retail sales and shipments - Management indicated that inventory has been reduced significantly across major markets, and they expect the gap between retail and net sales to narrow moving forward [61][64] Question: North America's channel balance and sales growth - Management highlighted strong market share gains in North America, particularly through Amazon, while acknowledging ongoing challenges with department stores [72][75] - The company is focused on diversifying its channel mix and enhancing consumer engagement across various platforms [79][81] Question: Organic revenue growth excluding Travel Retail - Management reported that organic revenue growth excluding Travel Retail was in the low single-digit decline range, with expectations for improvement in fiscal 2026 [83][86] - The company is optimistic about growth in China and emerging markets, aiming for positive growth overall by the end of fiscal 2026 [90][91] Question: Operating margin guidance and cost structure - Management expects operating margins to improve primarily through SG&A reductions, with a focus on non-consumer facing expenses [95][96]