Coty Inc. Q2 FY2026 earnings call

• For Consumer Beauty: Focus on iconic assets like CoverGirl and Rimmel, streamline innovation bundles with sharper SKUs, free up funds for working media via smaller bundles, and explore AI for cost reduction in asset creation. - For Prestige Beauty: Invest in new channels like Amazon and TikTok Shop with halo effects on brick-and-mortar, and have upcoming launches like Calvin Klein female initiative and Marc Jacobs makeup launch. - Internal controls: Focus on operational discipline, data and analytics to build a data lake for one source of truth, and investments in processes to shift focus from sell-in to sell-out.

Consumer Beauty is the main focus with initiatives to streamline the portfolio, improve innovation bundles, and leverage AI in color cosmetics. Prestige Beauty has initiatives like Calvin Klein and Marc Jacobs launches, with headwinds from promotional environment and inventory issues. Specific absolute revenue numbers weren't provided, but the focus is on driving growth and margin improvement through strategic actions.

• Consumer Beauty: Improvement expected in fiscal '27 with implementation of innovation and other initiatives. - Prestige Beauty: Sequential recovery expected in Q4 and fiscal '27 as headwinds like retailer inventory fade out. - Gross margin: Expectation of recovery in Q4 and fiscal '27 as actions to address fixed cost under absorption and promotional headwinds take effect.

• Promotional environment: Aggressive promotions by competitors causing markdowns and pressure on gross margin. - Inventory and sell-out: Consumer Beauty facing mid-single-digit sales decline in Q3 due to destocking, market share losses, and fixed cost under absorption. - Channel dynamics: Changes in route-to-market with drugstores and department stores being weak, while Amazon and TikTok Shop are growing but needing to balance with existing channels.

Q: Give more color on Color the Future performance improvement plan for Consumer Beauty and margin aspiration for Consumer Beauty.

A: Markus discussed focusing on iconic assets, streamlined innovation bundles, and AI use; Laurent mentioned actions to take effect in fiscal '27 with improvement in profitability.

Q: Talk about strategy in context of route-to-market changes and balancing SKU reduction with RTM footprint.

A: Markus said focus on sellout and market share, investing in new channels like Amazon and TikTok Shop with halo effects on existing channels.

Q: Views on managing business after Gucci license ends and newness in fragrances.

A: Markus mentioned focusing on big brand franchises, building new acquired brands, and ensuring innovation has halo effect on core.

Q: Assessment of internal controls and need for reinvestment.

A: Markus said need for operational discipline, data and analytics investment to shift focus from sell-in to sell-out.

Q: Granularity on Q3 sales decline and gross margin drivers.

A: Laurent discussed main drag from Consumer Beauty, headwinds in Prestige from promotions, tariff, ForEx, and fixed cost under absorption in Consumer Beauty.

Q: Whether Consumer Beauty will get worse before better and innovation focus.

A: Markus said things will get better, with good innovation on core franchises and upcoming bundles.

Q: Promotional environment and Prestige fragrances growth.

A: Laurent said competitors' aggressive promotions, but confident in fragrance category growth with new tools like TikTok.

Q: Experience managing brands at P&G and SKU rationalization impact.

A: Markus discussed defining brand equities and focusing on consumer understanding, with SKU rationalization impacting gross margin through top line growth.