Core Insights - Coty Inc. reported fourth-quarter fiscal 2025 results with net revenues of $1,252.4 million, an 8% decline year-over-year, and an adjusted loss of 5 cents per share, missing the Zacks Consensus Estimate of adjusted earnings of 1 cent [1][3][4] Financial Performance - The adjusted gross margin was 62.3%, down 190 basis points from the previous year, reflecting a normalization from elevated levels [5] - Adjusted operating income was $67.7 million, a 37% decline year-over-year, with an adjusted operating margin of 5.4%, down 250 basis points [6] - Adjusted EBITDA decreased 23% year-over-year to $126.7 million, with an adjusted EBITDA margin of 10.1%, down 200 basis points [7] Segment Performance - Prestige segment net revenues were $760.6 million, a 5% decline, with a 7% decline on a like-for-like basis, primarily due to underperformance in the U.S. market [8][10] - Consumer Beauty segment net revenues amounted to $491.8 million, a 12% decline on both reported and like-for-like basis, driven by weakness in color cosmetics and body care categories [12][13] Regional Revenue Results - Americas segment reported net revenues of $511.2 million, a 12% decline, with a 10% decline on a like-for-like basis, mainly due to lower Prestige revenues [15] - EMEA segment generated net revenues of $574.2 million, a 4% decline, with a 9% decline on a like-for-like basis [16] - Asia Pacific segment reported net revenues of $167 million, an 8% decline, with a 9% decline on a like-for-like basis, although sell-out in most markets grew significantly [17] Future Outlook - Coty is entering fiscal 2026 with a focus on innovation and expansion, expecting gradual improvement in sales trends, with like-for-like sales forecasted to decline 6-8% in the first quarter and 3-5% in the second quarter [20][21] - The company anticipates a return to adjusted EBITDA growth in the second half of fiscal 2026, supported by multiple product launches and geographic expansion [23]

Financial Data and Key Metrics Changes - Fiscal year 2025 net revenues declined by 2% like for like, with Q4 revenues declining by 9% [17] - EBITDA grew at a CAGR of 9% from CHF 760 million in fiscal year 2021 to CHF 1.08 billion in fiscal year 2025, with an EBITDA margin expansion of 190 basis points to 18.4% [8][21] - Adjusted EPS for fiscal year 2025 was $0.50, reflecting a 4% growth despite lower operating income [22] - Free cash flow for fiscal year 2025 was CHF 278 million, slightly below the target of CHF 300 million [22] Business Line Data and Key Metrics Changes - Prestige Fragrance business grew to a £3.5 billion segment with a CAGR of 10% from fiscal year 2021 to fiscal year 2025 [6] - Consumer Beauty business achieved a 2% CAGR from fiscal year 2021 to fiscal year 2025, recovering from previous declines [7] - In Q4, Prestige sellout grew low single digits, while Consumer Beauty sellout declined high single digits against a modestly positive market [20] Market Data and Key Metrics Changes - The U.S. Prestige beauty market grew by approximately 4% in fiscal year 2025, but the company experienced a mid-single-digit percentage decline in like-for-like sales [13] - The mass beauty market in the U.S. declined by roughly 1% in fiscal year 2025, with the company's like-for-like sales declining by a mid-teen percentage [13] - In Asia, excluding China, sellout grew approximately four times ahead of market growth [58] Company Strategy and Development Direction - The company is refocusing on core strengths in fragrances, which represent over 60% of revenues, and aims to drive growth in structurally profitable beauty categories [36][37] - A strategic shift is underway to prioritize investment in high-return areas while rebalancing resources away from less profitable segments like mass cosmetics [45][66] - The company is implementing the "All in to Win" program to deliver CHF 130 million in annual fixed cost savings through fiscal year 2027 [23] Management's Comments on Operating Environment and Future Outlook - The management acknowledged challenges in fiscal year 2025, including retailer inventory buildup and execution weaknesses, which impacted performance [11] - There is an expectation of sequential improvement in sales and profit trends in fiscal year 2026, with a return to growth anticipated in the second half [30][73] - The company is actively preparing for multiple scenarios regarding tariffs and geopolitical uncertainties, with mitigation strategies in place [29][25] Other Important Information - The company has received 12 consecutive debt rating upgrades, positioning it just one notch below investment grade [9] - The company is committed to sustainability, achieving a Grand EcoVadis rating placing it in the top 5% of companies globally for sustainability performance [71] Q&A Session Summary Question: What are the expectations for sales trends in fiscal year 2026? - The company anticipates a like-for-like decline of 6% to 8% in Q1 and a decline of 3% to 5% in Q2, with sequential improvement expected throughout the year [31] Question: How is the company addressing the challenges in the U.S. market? - The company is taking decisive actions, including new leadership and a more agile regional structure, to address underperformance in the U.S. market [58] Question: What are the key initiatives for cost savings? - The company is targeting approximately CHF 200 million in combined fixed costs and productivity savings in fiscal year 2026 [50]