Financial Data and Key Metrics Changes - The company reported a gross margin expansion of close to 200 basis points, reaching approximately 67% by the end of Q2 [36] - The EBITDA margin is expected to grow by 70 to 90 basis points in fiscal '25, aiming for a close to 19% EBITDA margin by the end of the fiscal year [41][122] Business Line Data and Key Metrics Changes - The Prestige business is impacted by challenges in China, Travel Retail Asia, and Australia, contributing to a decline of roughly 3 points in sales [12][31] - The Consumer Beauty segment is facing challenges in the U.S., also contributing to a 3-point impact on sales [12] Market Data and Key Metrics Changes - Retailers are exhibiting cautious inventory management, leading to a gap between sell-out and sell-in, particularly in the Prestige and Fragrance categories [14][68] - The U.S. market is showing strong sell-out growth, with some weeks reaching 50% to 60% growth prior to the holiday season [60] Company Strategy and Development Direction - The company plans to launch two major blockbuster products in fiscal '26 to drive organic sales growth [28] - There is a focus on expanding distribution for key brands in the Prestige division, particularly in the U.S. and emerging markets [30][97] - The company is shifting resources from Asia to the U.S. and European markets to capitalize on growth opportunities [60] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that the current sales trend is unsatisfactory but remains optimistic about the long-term growth potential of the beauty category, particularly in Fragrances [121] - The company is committed to outperforming the beauty market despite macroeconomic uncertainties and regional challenges [92] Other Important Information - The company is evaluating its portfolio for long-term opportunities and return on investment, considering potential divestitures or M&A to enhance exposure to faster-moving categories [111] - The gross margin reached a record level of approximately 70%, indicating strong operational performance [122] Q&A Session Summary Question: Thoughts on retailer replenishment and issues in China - Management noted that 20% of the business is facing challenges, particularly in China and Travel Retail, with cautious inventory management from retailers impacting sales [11][14] Question: Structural and competitive challenges in U.S. color cosmetics - Management highlighted that the U.S. color cosmetics market is facing structural challenges, with a need for both heritage and new brands to drive growth [20][21] Question: Sales growth expectations for fiscal '26 - Management expects improvement in sales growth in fiscal '26, driven by retailer inventory normalization and significant product launches [26][31] Question: Margin outlook and cost structure - Management confirmed a healthy P&L with gross margin expansion and a focus on maintaining discipline in cost management while supporting brand initiatives [36][40] Question: Performance of Prestige Fragrances - Management indicated that Prestige Fragrances are holding up better due to their unique offerings and higher entry barriers compared to other categories [44][45] Question: Travel Retail performance outside Asia - Management acknowledged that Travel Retail in Asia is lagging, but the Americas and Europe are performing well, with a strategic shift in resources to capitalize on these markets [60][62] Question: Retail channel shifts and online competition - Management confirmed that e-commerce, particularly through platforms like Amazon, is growing rapidly for both Consumer Beauty and Prestige brands [70][71] Question: Pricing strategy amid FX impacts - Management plans to implement moderate price increases in the low single digits while monitoring market elasticity [74][75] Question: Inventory levels and sell-in versus sell-out - Management noted ongoing adjustments in inventory levels at wholesalers and retailers, with positive sell-in for Fragrances expected to continue [81][82]