Financial Data and Key Metrics Changes - The company is experiencing a mid-single-digit sales decline in Q3, primarily driven by the Consumer Beauty segment, which is still in a phase of addressing operational gaps [40][39] - Gross margin for Q2 was lower than expected, with a contraction of 200-300 basis points attributed to high promotional activity, tariffs, and foreign exchange impacts [44][46] Business Line Data and Key Metrics Changes - The Consumer Beauty segment is underperforming, with a focus on streamlining the portfolio and improving sell-out growth [5][9] - The Prestige division is seeing a sequential recovery, with improved synchronization between sell-in and sell-out, although challenges remain in the U.S. market [41][42] Market Data and Key Metrics Changes - The company has reported over 30% sales growth in its Prestige portfolio on Amazon, indicating a successful strategy in new channels [14] - The promotional environment has intensified, with competitors increasing markdowns, which is expected to continue into Q3 [60] Company Strategy and Development Direction - The company is focusing on its most iconic brands and streamlining its product offerings to drive market share growth [5][13] - There is a clear emphasis on improving operational discipline and aligning marketing efforts with consumer needs to enhance sell-out performance [31][69] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that recent financial performance has not met expectations and emphasizes a commitment to transparency and focused execution moving forward [69] - The company is optimistic about future improvements, with plans for sharper priorities and resource allocation to key areas [69] Other Important Information - The company is investing in AI to enhance marketing asset creation efficiency, potentially reducing costs by 70%-80% [8] - There are significant growth opportunities identified in brands like Hugo Boss and Marc Jacobs, with new initiatives planned for the coming years [20][21] Q&A Session Summary Question: Future performance improvement plan for Consumer Beauty - Management is focusing on iconic brands and streamlining product offerings to improve sales and market share [5][9] Question: Changes in channel strategy - The company is investing heavily in online and e-commerce channels while maintaining focus on traditional retail [17] Question: Managing business after Gucci license ends - The company plans to drive growth in existing big brand franchises and explore new initiatives to compensate for the Gucci exit [20][22] Question: Impact of SKU rationalization on top line and gross margin - SKU rationalization is expected to improve productivity and gross margin over time, with a focus on driving top line growth [67] Question: Promotional environment and its impact - The promotional environment is expected to remain challenging, but the company is confident in its innovation and market strategies to mitigate these effects [60][61]

Financial Data and Key Metrics Changes - The company is experiencing a mid-single-digit sales decline in Q3, primarily driven by the Consumer Beauty segment, which is still in a phase of addressing operational gaps [34][38] - Gross margin for Q2 was lower than expected, with a contraction of 200-300 basis points attributed to high promotional activity, tariffs, and foreign exchange impacts [44][46] Business Line Data and Key Metrics Changes - Consumer Beauty is underperforming, with significant declines in iconic brands like COVERGIRL, although recent initiatives have shown early signs of improvement [5][40] - The Prestige division is seeing a sequential recovery, with improved synchronization between sell-in and sell-out, although challenges remain in the U.S. market [41][46] Market Data and Key Metrics Changes - The company has reported over 30% sales growth in its prestige portfolio on Amazon, indicating a successful adaptation to changing consumer purchasing behaviors [14][15] - The promotional environment has intensified, with competitors increasing markdowns, which is expected to continue into Q3 [59][60] Company Strategy and Development Direction - The company is focusing on streamlining its portfolio by prioritizing iconic brands and reducing SKU proliferation to enhance market share and sell-out growth [5][13] - Future initiatives include launching sharper, more focused product bundles and leveraging AI for cost-effective asset creation [8][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that recent financial performance has not met expectations and emphasizes a commitment to transparency and disciplined execution moving forward [69] - There is confidence that the changes being implemented will lead to improved performance over time, although it will not happen overnight [69] Other Important Information - The company is actively investing in new channels such as TikTok and e-commerce to capture emerging consumer segments, particularly Gen Z [17][62] - The exit from the Gucci license in 2028 is prompting the company to focus on building its existing brand franchises and exploring new growth opportunities [20][22] Q&A Session Summary Question: Future performance improvement plan for Consumer Beauty - Management is focusing on iconic brands and streamlining product offerings to improve sales and market share, with expected benefits materializing in fiscal 2027 [4][9] Question: Changes in channel strategy - The company is investing heavily in online and e-commerce channels while also protecting existing retail channels to cater to diverse consumer demographics [17][19] Question: Managing business after Gucci license ends - The company plans to drive growth in existing franchises and explore new brand opportunities while adjusting cost structures as needed [20][22] Question: Impact of SKU rationalization on top line and gross margin - SKU rationalization is expected to improve operational efficiency and gross margins over time, with a focus on driving top line growth as a priority [66][67]

Financial Data and Key Metrics Changes - The company reported a mid-single-digit sales decline expected in Q3, primarily driven by the Consumer Beauty segment, which has been underperforming [33][36] - Gross margin contraction of 200-300 basis points was noted, influenced by input cost inflation, promotional activities, and geographic mix [42][45] Business Line Data and Key Metrics Changes - Consumer Beauty is significantly below corporate average margins, with a focus on iconic brands like COVERGIRL and Rimmel to drive sell-out growth [4][8] - The Prestige division is experiencing a sequential recovery, with improved synchronization between sell-in and sell-out, although challenges remain [38][39] Market Data and Key Metrics Changes - The company has seen over 30% sales growth on Amazon for its prestige portfolio, indicating a successful adaptation to changing consumer purchasing behaviors [12][13] - The promotional environment has intensified, with competitors increasing markdowns, impacting gross margins [58][60] Company Strategy and Development Direction - The company is focusing on streamlining its portfolio by prioritizing key brands and reducing SKU proliferation to enhance market performance [4][12] - There is a clear emphasis on leveraging new channels like TikTok and e-commerce to reach consumers effectively while maintaining presence in traditional retail [15][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that recent financial performance has not met expectations, emphasizing a commitment to transparency and disciplined execution moving forward [70] - The company is optimistic about future improvements, with plans for sharper priorities and focused execution to drive growth [70] Other Important Information - The company is investing in AI to enhance asset creation efficiency, potentially reducing costs by 70-80% [6] - Upcoming product launches, including a significant Calvin Klein initiative and a Marc Jacobs beauty line, are expected to drive growth [55] Q&A Session Summary Question: Future performance improvement plan for Consumer Beauty - Management highlighted a focus on iconic brands and streamlined innovation bundles to improve sales and market share [4][8] Question: Impact of SKU rationalization on top line and gross margin - Management indicated that SKU rationalization will positively impact gross margin over time, with a focus on driving top line growth [66][68] Question: Changes in channel strategy - The company is investing in online and e-commerce channels while ensuring traditional retail channels remain strong [15][60] Question: Promotional environment and its impact - Management noted that increased promotional activity from competitors is expected to continue into Q3, affecting gross margins [58][60] Question: Assessment of internal controls and operational discipline - Management acknowledged the need for improved operational discipline and is investing in data analytics to enhance decision-making [29][31]

Core Insights - The cosmetics industry is experiencing a significant downturn, with many brands being sold or shut down rather than achieving sales success during promotional events [1][22] - Over 50 beauty brands have been categorized as "abandoned" this year, with notable examples including L'Oréal, Estée Lauder, and Unilever [1][5] - The trend indicates a shift from large-scale brand coverage to a focus on optimizing brand portfolios among international beauty giants [8][13] Brand Sales and Closures - International beauty giants have sold over 30 brands this year, including Unilever's sale of the high-end skincare brand CeraVe and Kering's sale of its beauty division to L'Oréal for €4 billion (approximately ¥331.96 billion) [3][5] - The majority of these "abandoned" brands were acquired at high valuations between 2014 and 2020, with some, like Avon, being sold for $3.7 billion (approximately ¥263.45 billion) after struggling to perform [6][7] - In 2025 alone, 16 international brands have been shut down due to operational difficulties and strategic misalignment, with L'Oréal closing three brands [14][18] Reasons for Brand Abandonment - The primary reasons for brand sales include the need for international beauty companies to streamline operations and focus on profitable segments, as seen with Unilever's efforts to make CeraVe profitable [7][18] - Many brands are facing challenges such as declining performance, increased marketing costs, and the inability to adapt to market demands, leading to closures [21][27] - The trend of brand closures is not limited to international brands; domestic brands are also facing similar pressures, with eight brands shutting down in 2025 due to strategic adjustments and profit pressures [23][26] Market Trends and Future Outlook - The industry is witnessing a shift towards strategic restructuring and value rediscovery rather than mere expansion, indicating a potential ongoing consolidation phase [13][32] - The focus is now on leveraging technology and innovation to create competitive advantages, with companies encouraged to find niche markets and enhance product offerings [31][32] - The ongoing challenges suggest that the beauty industry will continue to experience a wave of brand eliminations, with survival dependent on strategic adaptability and resource management [22][32]