Coty(US:COTY)2023-05-09 19:25Financial Data and Key Metrics Changes - Coty reported a 15% like-for-like growth in core revenues for Q3, adjusted for the exit from Russia, bringing fiscal year-to-date growth to 10%, exceeding the original guidance of 6% to 8% [7][36] - The company raised its fiscal '23 revenue guidance to 9% to 10% growth, while maintaining EBITDA guidance of $955 million to $965 million [6][36] - Adjusted EPS guidance was increased to $0.52 to $0.53, reflecting over 85% growth, and excluding equity swap benefits, adjusted EPS is expected to be $0.38 to $0.39, a 35% year-on-year increase [6][37] Business Line Data and Key Metrics Changes - Consumer Beauty saw a 12% like-for-like revenue growth in Q3, with fiscal year-to-date growth at 11%, driven by low single-digit volume growth and double-digit price and mix [8][36] - Fragrance division growth was reported at 20%, contributing to a 16% growth in the Beauty division overall [15][19] - CoverGirl's new product, Yummy Gloss, became a viral hit, indicating strong performance in the cosmetics segment [21] Market Data and Key Metrics Changes - Travel Retail sales grew over 30% in Q3, representing approximately 8% of overall business, consistent with pre-COVID levels [34] - The company noted strong momentum in China, particularly in skincare, with Lancaster's early results being very promising [27][29] - Coty achieved a top 5 ranking for its prestige fragrance brands on LazMall in Southeast Asia, indicating strong e-commerce performance [33] Company Strategy and Development Direction - Coty is focused on building a balanced portfolio across multiple categories and regions, with a strategic emphasis on skincare and digital expansion [38][132] - The company aims to double its skincare business in the coming years, leveraging technological know-how and patents [112] - Sustainability initiatives are being prioritized, with a goal for the majority of the fragrance portfolio to be produced using carbon-captured ethanol by the end of 2023 [45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the beauty category's attractiveness and the longevity of the fragrance index, with optimism about growth potential in skincare and travel retail [38] - The company is monitoring service levels and inventory management closely, with expectations for continued improvement in cash flow generation [41][80] - Management acknowledged the challenges posed by inflation and supply chain issues but remains focused on strategic investments to drive growth [9][56] Other Important Information - Coty launched the UndefineBeauty campaign to address outdated definitions of beauty, positioning itself as a thought leader [35] - The company confirmed its deleveraging targets, aiming for a leverage ratio of 3x by the end of 2023 and 2x by the end of 2025 [130] Q&A Session Summary Question: Follow-up on fragrances and Consumer Beauty momentum - Management confirmed strong acceleration in fragrances, driven by consumer demand and service level improvements, with double-digit growth across major brands in Consumer Beauty [15][16] Question: Clarification on pricing strategy - Management indicated that price increases are necessary to mitigate cost inflation and are synchronized with value creation efforts, particularly in sustainability [55][56] Question: Insights on cash flow generation - Management expressed confidence in achieving cash flow above $400 million for the year, despite Q3 being seasonally weaker [41][80] Question: Comments on skincare investment and revenue expectations - Management acknowledged that while skincare investments require upfront costs, the strong performance in other segments supports overall profitability [90][93] Question: Concerns about trade down trends - Management reported no signs of trade down, emphasizing that all categories are experiencing growth, particularly in premium segments [68][70] Question: Insights on the Lancaster launch in China - Management highlighted positive early results for Lancaster in China, with a focus on building consumer awareness and conversion rates [105][106]