Coty(COTY)2025-02-11 16:55Financial Data and Key Metrics Changes - The company reported a gross margin expansion of approximately 200 basis points, reaching close to 67% by the end of Q2 [36] - The EBITDA margin is expected to grow by 70 to 90 basis points in fiscal '25, targeting 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 was 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 faced challenges in the U.S., also impacting sales by approximately 3 points [12] Market Data and Key Metrics Changes - The company noted that the Asian Travel Retail market is lagging behind other regions, with the Americas and Europe performing significantly better [61] - The Prestige Fragrance category continues to grow in the high single digits, while the Color Cosmetics category is facing more significant challenges [60][62] Company Strategy and Development Direction - The company aims to return to growth in fiscal '26 through major product launches and expanding distribution of key brands [30][31] - There is a focus on innovation in the Color Cosmetics category to create higher entry barriers and attract consumers back to the market [48][49] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about stabilization in retailer inventory levels, which have been affected by overreactions to past supply chain issues [26][27] - The company is committed to outperforming the beauty market despite current macroeconomic challenges and uncertainties [90][92] Other Important Information - The company is evaluating its portfolio for long-term opportunities and return on investment, particularly in the Consumer Beauty segment [111][112] - The gross margin reached a record level of 68% during the quarter, indicating strong financial health [122] Q&A Session Summary Question: Concerns about retailer replenishment and market conditions in China - Management acknowledged challenges in China and other regions, noting that these areas represent about 20% of the business and are impacting sales [11][12] Question: Structural and competitive challenges in U.S. color cosmetics - Management highlighted the need for a balance between heritage and new brands to revitalize the color cosmetics market [20][21] Question: Expectations for sales growth in fiscal '26 - Management anticipates improvement in sales growth driven by new product launches and stabilization in retailer inventory levels [26][30] 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 [36][41] Question: Performance of Prestige Fragrances compared to other categories - Management noted that the uniqueness of Prestige Fragrances contributes to their resilience in the market [44][45] Question: Travel Retail performance outside Asia - Management confirmed a strategic shift of resources from Asia to the U.S. and European markets to capitalize on growth opportunities [60] Question: Pricing strategy in light of inflation - Management indicated that pricing increases will be more moderate moving forward, focusing on maintaining volume growth [74][75] Question: Inventory levels at wholesalers and retailers - Management acknowledged ongoing adjustments in inventory levels and the competitive landscape affecting sell-in and sell-out dynamics [81][82] Question: Long-term growth algorithm and business strategy - Management emphasized the importance of outperforming the market and highlighted several growth drivers, including expanding fragrance offerings and online sales [90][94]