COTY INC. Q3 FY2025 earnings call

Sue Nabi discussed Q4 sales outlook, noting Prestige division is cleaning up baseline due to cosmetics market pressure in Asia, travel retail, and China, while Consumer Beauty's Color Cosmetics has mid-single-digit decline and mass fragrances grow. Laurent Mercier talked about promotional environment, tariff impact (Prestige fragrance sourcing issues, actions to offset like inventory building, sourcing changes, pricing), and organizational changes for agility. Sue Nabi mentioned phasing of FY '26 performance with new blockbusters in Prestige Fragrance impacting Q1 and regional organizational changes in the U.S. and others to gain nimbleness.

No specific detailed financial performance for each product segment in absolute terms and revenue contribution % provided in the transcript.

Q4 sales deceleration in Prestige due to cleaning baseline, Consumer Beauty's Color Cosmetics mid-single-digit decline continuing. FY '26 expects gradual improvement in trends, with new blockbusters in Prestige Fragrance impacting Q1. Tariff impact phased for fiscal '26, mid-single-digit price increase on Prestige planned.

Pressure on Prestige cosmetics market, especially in Asia, travel retail, and China. Tariff impact on Prestige fragrance sourcing. Retailer inventory tightening affecting sell-in and sell-out.

Q: Sue, could you give more detail on Q4 sales outlet outlook, reason for sharp sales deceleration?

A: It's about Prestige division cleaning baseline as Cosmetics market under pressure in Asia, etc., and Consumer Beauty's Color Cosmetics mid-single-digit decline with some impact from marketing allocation.

Q: Follow-up on Prestige fragrance category growth, sustainability?

A: Mid-single-digit growth sustaining in U.S., strong in most European markets, China starting to improve but penetration low. Global fragrance growth strongest in beauty business.

Q: About Consumer Beauty business, rebalancing resources to profit, CoverGirl, promotional environment, Rimmel vs CoverGirl?

A: Consumer Beauty has diverging trends, Color Cosmetics under pressure, mass fragrances growing. Shifting resources to mass fragrances. Rimmel in UK example of right playbook. Laurent Mercier talked about protecting brands vs strong promotions.

Q: FY '26 phasing, gradual improvement in like-for-like trends, new blockbuster launch timing?

A: H1 fiscal '26 sales decline expected, trend better than Q4, gradually improving. New blockbusters will impact Q1.

Q: Tariff dynamic, progress of offsetting impact, pricing increase categories, elasticity?

A: Tariff impact in low $100M for fiscal '26, built inventory, sourcing changes, mid-single-digit price increase on Prestige, pricing inelastic.

Q: U.S. organizational changes, cost savings initiatives structural vs pulled forward?

A: Structural changes, adjusting organization for agility, leveraging technology. Cost savings structural, helping with current environment and refueling brands.

Q: Retail inventory levels by region, mid-single-digit price increases on Prestige?

A: Retailers tight on inventory, some disconnect in U.S. affecting decline, Europe healthy. Price increase on Prestige U.S. due to sourcing, confident inelasticity.

Q: U.S. Color Cosmetics, why difference between UK and U.S., cost saves flow through?

A: U.S. market more competitive, higher indie exposure. Testing in UK before U.S. $370M savings structural, part used to invest in brands.

Q: Current market conditions for Prestige vs Consumer Beauty, lower income tiers in U.S. Mass Beauty, slowdown in Prestige higher income?

A: Prestige division normalization from high to mid-single digits, Color Cosmetics pressure in Asia, travel retail. Consumer Beauty has two dynamics, Color Cosmetics negative, mass fragrances growing.