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  Title	Q1 2025 Coty Inc Earnings Call
  ID	4025109
  External ID	105522534
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  Published Date	Nov. 8, 2024, 4:55 a.m.
  Summary	Q1 2025 Coty Inc Earnings Call Thomson Reuters StreetEvents Fri, Nov 8, 2024, 5:55 AM 35 min read In This Article: COTY -1.24% Participants Sue Nabi; Chief Executive Officer, Director; Coty Inc Lauren
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  Content ID	2302589
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  Content	Q1 2025 Coty Inc Earnings Call Thomson Reuters StreetEvents Fri, Nov 8, 2024, 5:55 AM 35 min read In This Article: COTY -1.24% Participants Sue Nabi; Chief Executive Officer, Director; Coty Inc Laurent Mercier; Chief Financial Officer; Coty Inc Sydney Wagner; Analyst; Jefferies Robert Ottenstein; Analyst; Evercore ISI Korine Wolfmeyer; Analyst; Piper Sandler Anna Lizzul; Analyst; Bank of America Oliver Chen; Analyst; TD Cowen Shovana Chowdhury; Analyst; JPMorgan Olivia Tong; Analyst; Raymond James Charles Scotti; Analyst; Kepler Filippo Falorni; Analyst; Citi Chris Carey; Analyst; Wells Fargo Securities Presentation Operator Good morning and good afternoon, everyone. My name is Angela and I'll be your conference operator today. At this time, I would like to welcome everyone to Coty's first quarter fiscal 2025 question-and-answer conference call. As a reminder, this conference call is being recorded today, November 7, 2024, at 10:30 AM Eastern Time or 4:30 PM Central European Time. Please note that on November 6, at approximately 4:30 PM Eastern Time or 10:30 PM Central European time, Coty issued a press release and prepared remarks webcast which can be found on its Investor Relations website. On today's call are Sue Nabi, Chief Executive Officer; and Laurent Mercier, Chief Financial Officer. I would like to remind you that many of the comments today may contain forward-looking statements. Please refer to Coty's earnings release and the reports filed with the SEC where the company lists factors that could cause actual results to differ materially from the forward-looking statements. In addition, except where noted, the discussion of Coty's financial results and Coty's expectations reflect certain adjustments as specified in the non-GAAP financial measures section of the company's release. With that, we will now open the line for questions. Question and Answer Session Operator Ashley Helgans, Jeffries. Sydney Wagner Hi, this is Sydney on for Ashley. Thank you for taking our question. I was just wondering, can you talk about the channel shift in outperformance online? Do you expect to see a continued shift? And do you feel that there is a higher level of trust for consumers to purchase online from platforms like Amazon? Thank you. Sue Nabi Sydney, this is Sue. Indeed, you're absolutely right to point out online as one of the (inaudible) of the company. Today, this has become almost the biggest channel for Coty -- as a channel for Coty in the company. And this indeed is fueled by retailers.com, but also by amazon.com, and pure players also that are acting on the beauty segment. So we believe this is -- has to do a lot, and we had this question already, I think in the previous earnings call. It has a lot to do with the fact that a lot of Gen Z, a lot of younger consumers are connecting online with their communities, with their favorite influencers, hence the importance of advocacy marketing and therefore, the conversion online between the advocacy ecosystem on one side, on which by the way, the company has been doing deep progress and I'll say a few words about this in a few minutes. So the conversion from this ecosystem of advocacy online to sales online is the most natural and the most obvious, in fact. So that's the reason why we believe this online channel can only grow. And by the way, this is one of the regions where we are also seeing disruptions in the mass channel, but also on other channels around the world because a lot of consumers today are using the convenience of shopping online. Coming now to Coty, you've seen that we've been working hard since two years and a half now to put in place a playbook which we started to implement behind Rimmel and CoverGirl with results that you have seen in our prepared remarks presentation that are outstanding. Number four for both brands, 40% of growth for Rimmel, 80% of growth for CoverGirl and this is exactly what we were working on. So remember, repositioning the brands creating products that have the ability to viralize, putting in place an ecosystem that surrounds advocacy, marketing, retail marketing -- retail.com marketing, sorry. And this explains our outperformance and the outperformance at large of the online channel in the US, but not only in the US, it's happening all around the world. Story Continues Operator Robert Ottenstein, Evercore ISI. Robert Ottenstein Great. Thank you very much. I'm picking up through some of the emails I'm getting from investors that there may be some confusion in some of your commentary about the medium-term outlook, that somehow maybe it's changed or the algorithm has changed, either explicitly or implicitly. So there's just some confusion there. So I was wondering if maybe you could just kind of reinforce what is the message? What is the outlook? Is there any real change that's going on here? Thank you very much. Sue Nabi Thank you very much for your question. So in fact, the reality is that we continue to say and see that the beauty market medium-term growth would be around 3% to 5%. We continue to see Coty outperforming these levels of growth for the beauty market. And we continue to see a steady growth for our growth margin, for our EBITDA margin, and our EPS growth. So this is really -- to say it again and again, this is really what we are seeing and we believe this fiscal '24 is a transition year mainly due to all the changes, mainly channel changes, and changes that are happening in consumers' shopping behaviors, including the question I just had recently on the online performance. And by the way, where Coty is gaining market share in both divisions. So this year, we believe is a transition year, but once this transition and the different blocks will be in place all around the world, but also in the US. The 3 to 5% medium-term vision for the beauty market, which we believe is going to continue to be the most resilient market among all industries are going to give us this ability to have the full confidence in our fiscal '25 profit delivery and free cash flow. And therefore, looking at shareholder returns and of course, continued deleveraging of the company. All the fiscal '26 and beyond growth drivers, such as new licenses, we are about to announce a new signature in the coming weeks or months. Skincare has a new category, new regions, and we were very wise to not bet on one country and to open the scope to many different regions, namely, what we call growth engines regions. All these together plus fragrances, which is the number one growth driver of the company and now extending to ultra-premium where we have a huge amount of white space, but also to mass fragrances where we have also as well, a huge amount of white space including in terms of diluted profitability for the [consolidated] division. This is what gives us this confidence that we are going to continue to deliver on our commitments. Laurent, do you want to add something? Laurent Mercier Absolutely. We need to build on those [commands]. Definitely, number one, basically confidence to deliver our profit and cash into '25. So this is really number one. And definitely, we are going to improve our EBITDA margin this year, close to 100 basis points. It's going to bring our EBITDA margin close to 19%So it means that in the last three, four years, in fact, we are growing our EBITDA margin above 250 basis points. And looking ahead, we continue to overperform the beauty market and we continue to improve our gross margin and EBITDA margin. So all the actions that we are putting in place, so definitely all the levers in terms of gross margin as we have over the last year, now we are above 65% and we are going to continue thanks to all the actions in terms of productivity, mix, pricing. And also, we are working definitely on to continue to optimize our SG&A. And this is exactly what I shared during the call, that we are accelerating our productivity initiatives and we have already a lot of actions in time and we are doing some new initiatives. And as you know, I mean, Coty is demonstrating the ability and the teams we needed to accelerate this kind of positive program. So indeed, there is full confidence in the algorithm on all metrics, P&L and balance sheet. Sue Nabi And by the way, should I add that we are continuing to outperform all our comparative peers? You've seen this in the last 9 out of the last 13 quarters. And this is really what we intend to continue to do. Operator Korine Wolfmeyer, Piper Sandler. Korine Wolfmeyer Hey, good morning. Thanks for taking the question. I'd love to hear a little bit about some of the early signals that you've seen here in fiscal Q2 from a sell-in perspective across both mass and prestige? Any color you can give on what you're seeing between that sell-in versus sell-out differential and how you're thinking about that for the remainder of the year? And then additionally, as we talk about -- as you think about your partners with your various retail partnerships, how are you viewing the risk of those partnerships as we head into the back half of the year? Especially as some of them are rightsizing their store fleets and going through some of their own challenges themselves? Thanks. Laurent Mercier Yeah, thank you. Thank you, Korine for your questions. So first of all, let me remind you, on the Q1 platform. And so indeed, we indicated a few weeks ago that we will be between 4% and 5%. So that is very important. And number one is, as you can see, I mean, we are overperforming most of our peers. So again, it's a clear demonstration that even in a volatile environment, Coty continues to overperform. So that's really very important. Number two, which I really want to highlight, this is also on a high base from last year. As you remember last year, we are growing at 18%, one, eight; and prestige was 22%. So it shows again what we see several times is that last year, we had significant growth thanks to (inaudible), but we are able really to bring some incremental growth on this high base. So this is very important again to at least in mind. So now, if we go a little deeper, so we indicated indeed that Q1 and some of our peers also indicated that some retailers indeed anticipated some [fragrant set ordering]. So indeed -- so this is really also driving some acceleration in prestige. And you see that prestige is growing 7%. Prestige fragrance grew by 9% in Q1. So there is definitely now moving from Q1 to Q2, there is a selling impact on the fragrance business. So this is also why we are indicating indeed that our selling on fragrance would be lower versus the sell-out. But definitely, on H1 it's neutral. So this is basically, but definitely on prestige and this is the standard and the category remains very high. And we have very strong initiatives which are moving in a different speed and now they are really -- definitely n the acceleration. So definitely, very healthy [equation] on prestige. Consumer beauty, definitely we see Q2 same pattern as Q1. All the headwinds that we described in some retailers, either destocking or being very tight on their inventory and cash management. We see pattern continuing in Q2. So definitely, what's driving now our equation for Q2 and definitely, we are seeing very important is that we are not overexposed to any major retailer or channel. So we are seeing low-single digit to mid-single digit in US pharma, low-single digit in the US department stores, and low-single-digit percentage for both China and for the retail for APAC in H2. So it will bring the H2 to the same level of growth as we have in H1. Operator Anna Lizzul, Bank of America. Anna Lizzul Hi, good morning and thank you so much for the question. I was wondering if you could talk a bit about the broader vision for Coty at this point. Where are you at now in terms of executing on your six strategic initiatives that you outlined about three years ago? And just how would you rank your progress on each at this point? And then also with the lower expected growth going forward or more normalized growth, are you still expected to be on track here with your deleveraging goals? Thank you. Sue Nabi And I'm going to start the answer and maybe, Laurent, you can complement on the deleveraging path. Again, vision is unchanged. It's the vision we have presented to all of you in 2021 -- for 2021, which was about number one, at that time, it was about stabilizing and growing the consumer beauty division, which we are doing. I can tell you that the color cosmetics results we're having behind our key brands such as CoverGirl and Rimmel are very, very good. In fact, if you look at what's happening in the US market, you've seen it on the slide of the presentation, it's the only brand and most traditional heritage brand that is almost stable on an omnichannel basis versus [else] to name them. If we zoom in, and this was done by Evercore, I think recently on the data for numerator, the two only brands that are growing at Amazon and Target are indeed (inaudible) and CoverGirl, and all the others are losing and some of them are losing quite big. So the contract that I shared with you two years ago, which is to say, we are going to fix these brands, we are going to put them back to growth or to stability. It's exactly what is happening right now. And you can expect an acceleration because we are not only implementing this playbook in bigger, we mastered the way to do it now, we are going to put the means behind it, but also we are plugging in Agile Beauty, which is something new that we've been working on since 18 months now, testing here and there on different brands, how to make it happen to allow us to really beef up the level of innovation from this division, specifically behind [for our] cosmetics. Second thing, still on the number one priority which is around diversifying the division into other categories and this is happening behind mass fragrances which are growing in double digits in '24 and in '25. Expected to grow in '25 double digit, in fiscal '25, of course. So that's the number one point. The number two point is around prestige where we have explained that we will not only accelerate but diversify our prestige fragrance business. We don't ever have to say in an outstanding way, putting on the market for blockbusters in the last fiscal year. Goddess, Kylie Cosmic, Marc Jacobs Daisy Wild, Hugo Boss, and [Gucci] and many more to come in the coming quarters, I have to say, without revealing anything to our competitors. So this was done and we started the first steps into niche fragrances including with the creation of an in-house brand (inaudible) whose stuff is very, very good. Number two, adding two other legs to this prestige division. The first one is color cosmetics, which is, I would say around 3% to 4% of the net revenues of the company. And this is thanks to of course, Gucci makeup, Burberry makeup, Kylie Cosmetics. But we are also preparing a big launch behind Marc Jacobs Beauty. That's going to give us this ability to have a culture of [slash indie] brand positioning inside our portfolio. And number three is skincare, and we are continuing to play on the marathon of skincare, as I like to call it with three brands that are all progressing in the right direction. Changes happen in the meantime, because China, that was supposed to be the growth engine behind the skincare brands, it's not anymore the growth engine it used to be. There are changes here and there, we are adapting our strategy to make the company very resilient. So the skincare brands we are playing with, the positioning of the brands, the productivity we are seeing there in each and every brand is increasing and this is exactly what we were looking for. So the strategy around the two divisions is still valid, still delivering results. And that's what we have seen during this quarter in CoverGirl and Rimmel being the two brands that resist the most, with a stable market share in their homelands on consumer beauty. But also, as Laurent said it, a continued growth of our prestige fragrance business. 9% of growth on top of the 22% of growth last year. This, I have to say, is an outstanding result. Last but not least it's channels. E-com, I've commented on e-com at the very beginning of the Q&A. I've commented -- I have not commented yet on travel retail which has been growing very, very fast in the last I would say, two years. Today, there is a disruption happening mainly in Korea and in China in the Asian travel retail. The two other centers of travel retail are doing very, very well. So there are all these on top of the geographic diversification. So with the normalization of the growth, are we still on track with the deleveraging path? And I'll give the answer to Laurent. Laurent Mercier Absolutely. So let's be very clear, the delevering agenda is unchanged. I keep repeating, I repeated many times that number one, priority is deleveraging the company, and we are on track. In fact, as you saw end of Q1, I mean, we are [0.4%] below previous year. So this is basically confirming the great progress. And indeed, even with the tight inventory management that we shared by retailers, which is (inaudible) volatility on cash flow timing and we are absolutely on track with this calendar year '24. We leverage below 3 times and we continue to target leverage close to 2.5 times, exiting calendar '24. And then second, we absolutely confirm, moving towards 2 times leverage ratio, end of calendar '25. So again, we have all the labors, all the actions in place and I'm insisting this is not counting on any of the large divestitures. So this is really pure organic. So it means that now in 12 months, the company will be deleveraging the ratio at 2 times and this is what you saw from the rating agency, consequently in the third (inaudible) the rating agency. So we are absolutely on the path for deleveraging. Operator Oliver Chen, TD Cowen. Oliver Chen Hi, Sue and Laurent. Holiday remains key to second half. How are you planning this year versus prior years? And what do you expect for the holiday given a lot of the dynamics you've spoken to? And I know you had a lot of great comments on what's happening in prestige fragrance earlier. But what are your thoughts on the moderation and the normalization? And as you do anniversary, Burberry Goddess, some of your main innovation catalyst there. And finally, and third, the demand planning program sounds very good, just what's ahead with that and also the opportunity and managing the risk as you implement that program as well? Thank you. Laurent Mercier Yeah, absolutely, and thank you, Oliver. So definitely, we indicated and you saw the numbers, I mean, there is a prestige category and it remains very healthy and very dynamic. And you see the market category, and the category run by 10%. So this is very, very important as you see, [exiting] the fragrance category as we are at full speed. So the fragrance (inaudible) so many times is at play. So basically, what we are seeing is that we are very confident in the holiday season. And we have again, very strong ammunitions. You saw talking about Burberry, as you find (inaudible) Burberry grew by 17% in Q1. So it means that definitely, it's a momentum that we have on Burberry Goddess -- now with Burberry Goddess Intense, Burberry Hero, Burberry (inaudible) is we are at full speed. We have very small plans on growing, really strong innovation, which is really a very, very good start. We accelerate the innovation that we launched last year in the second half like (inaudible), Kylie Cosmic, so there is really a long list of innovations which are fully supported and it definitely was a very good relative momentum from the retailers and the consumers. I want to also mention (inaudible) which is really number one now that we are expanding to full distribution in Q2. So again, it's very, very important to see that -- and we keep growing in penetration and we are also we are raising new markets. I mean, our growth engines market are also accelerating on prestige fragrance. But as you saw also, we have seen fragrance accelerating big time in the consumer beauty segment, okay? So this is also definitely an acceleration. So that's today, what we are seeing on the category and our sell-out in the future. And then second question, which is about the new demand planning program. So absolutely, I mean, this is a program that we started now a while ago and we are currently in full implementation. So as I indicated, it's really that we are consolidating two planning hubs into one global planning hub, which is based in Barcelona. I can tell you that there are a lot of benefits by doing this. And number one is basically that we are using technology to improve significantly our forecast system. So having this knowledge of the technology, leveraging AI in one hub and that basically, we have a clear control tower on planning and this will bring significant savings in terms of cost, number one. But also when we are improving the accuracy, it has immediate effect on what we described several times which we are calling excess and obsolescence. Excess and obsolescence is really when I know you have too much inventory because you build too much inventory on the SKUs and in fact, which are over forecast and then it's becoming a hurt in terms of cash. And so this is going to reduce significantly. But on the other hand, it's also to make sure that when we have great innovation, great start, we're also improving significantly our service level. And by doing this, it's going to optimize our net revenue and also optimize the gross margin and also improve the collaboration with our retailers. There is also dimensions by doing this. We are also now improving significantly in the relation with these retailers. So we will keep you posted on the progress, but you will hear from us, definitely this is the beginning that there will be a lot of knock-on effect, positive effect from this new approach that we are working. Operator Andrea Teixeira, JPMorgan. Shovana Chowdhury Hi, this is Shovana Chowdhury on for Andrea. Thank you for taking our question. We wanted to ask you about, can you please parse out how much of your 3% to 4% LFL growth in the second half is from actual underlying growth expectations versus due to easier comps as compared to the front half? And how much confidence do you have in this updated outlook for second half? Given that it really depends on a few factors like retailer inventory levels, including the holidays and assuming -- we are assuming that fiscal third quarter may have lower sales of consumers hunker down posts overset during the holidays. And of course, consumers have been challenged for some time. Thank you. Laurent Mercier So I want to remind on H2, is number one, that in terms of pricing, definitely, H1 is benefiting from pricing effect, which is carryover from some price increase we implemented last year. And this carryover is going to fade away in H2. So it accounts for about two points if you want to compare the H2 to the H1. So that's number one. Number two, I want also to remind that last year, especially in prestige, we made some big launches in Q3 and Q4. I refer to it as Daisy Wild and also Kylie Cosmic, which were really a breakthrough approach really to launch (inaudible) that holiday season, (inaudible). So we have also these higher comps in terms of prestige, but now they when we are taking all the elements and you're right that so overall, you know, having easier comps in H2, I mean, this is giving us the full confidence they need the H2 growth algorithm. And we made it really in reality, but also I would say prudent manner because at the same time, they think we are the new initiatives which are going to combinate soon. So we have a strong pipeline on innovation, you know, I can, you know, for example, I refer to Masss definitely we have a strong pipeline on innovation and it is going to accelerate big time. And in H2 and second, as I refer, we are seeing in this H1, you know, these, you know, normalization or you know, retailer inventory adjustment. And definitely we are considering that H2 is going to be, you know, more stable from this. So then we we really build this H2, taking all the assumptions that we are very confident on this algorithm. Operator Olivia Tong, Raymond James. Olivia Tong Great. Thank. You. Just two questions around your sales growth. Outlook both medium and long term for the long term, maybe a bit of clarification of Robert's question earlier. But your target for mid single digit growth in fiscal '26 for fiscal '26 and beyond that, you just yesterday, can you talk about what's driving that deceleration versus 6 to 8 long term target you provided in the past? And then more closely if you could provide some detail around the GAAP between selling and sell through and what's reflected in your expectation for the Q2 slowdown and then the acceleration into the second half. Basically, why, why do you expect such a substantial second half snap back for this year? Thank you. Laurent Mercier Mm So maybe I can start with, you know, with the second half, which is really and I, I can, I can say to them that again between the Q1 and Q2, there is definitely an impact that there is anticipation of, you know, and this was really require, you know, from the anticipated orders end of one. So this is was driving mostly the saving between Q1. And so this is all elements I would say more or less the same either you know, on retailers behaviors either in the US but also in China, travel retail, Asia, travel retail, and also what we shared about Australia where we have really won when we tailor the which is also adjusting its its inventory now that H2, this as as you know, just explained, we are now on the easier comp adding new initiatives and this again and this is what's really giving, you know, on, on, on the, on the H2, on the H2 plan. Sue Nabi And on the second part of the question regarding the, the, you know, what's driving as you, what you see as an implied deceleration in the growth of new single digit, high, single digit, the 6 to 8% higher. I agree. And I think the answer is quite simple. This depends on where in the 3 to 5% rent, the beauty market will land. And this is something that we don't know. And of course, any further China disruption like we see this year specifically in the Asian region where for the moment, the visibility is quite low. So that's the way I would answer it very, very simply. Operator Charles Scotti, Kepler. Charles Scotti Yes. Good, good afternoon, good morning. Thank you for taking my questions. I have three, the first one. Could you give us some details about your market share online versus offline and whether this channel shift could have an impact on your overall growth market share? Secondly, can you please give us more color on your growth in, in China and the travel regional Asia in Tijuana as you were, you know, fairly underindexed and quite immune to the turmoil so far? But it seems to be no longer the case. And finally, third question, what do you think could be the impact of the potential 10 to 20% custom tax on imported product to the US? As I guess most of the prestige products are made in Europe. And is there any plan to move production to your, to us or brazilian facilities? Thank you. Laurent Mercier Yeah, thank you. Thank you, Charles and so on online off line. And we started the experience that we are accelerating big time on online. So we are getting back to share. It's now about 20% of our, of our business. Basically with about 20% in prestige about DJ but definitely strong acceleration. We have definitely a very strong team with a full pay and working hand in hand with the commercial team. So now we have really, I mean, the only channel approach which is really at full speed and economy is accelerating. We are seeing we are we are the only channel that is really at some speed but also with the players, we are definitely we are very strong, very strong partnership and we refer to Amazon. Amazon is is accelerating and as you know, we were really pioneering these partnerships. So we have very strong position and it is a case in prestige consumer duty. So definitely this is, I mean, there is very strong potential for faculty and we work on this in his own channel approach. Okay. So making sure that online and offline and we speak together and are complementary. So the very, very very good dynamic that we are going to continue on your second question, travel retail Asia we we we shared during the call that indeed this is the this is declining in one why travel retail Europe and America are really, you know, are really Asia is really part of this whole China ecosystem which is indeed currently under tension. But and China is indeed likely to given the current tension. And I need to insist again, China is only 3% of our net revenue. So I would say despite I mean, the current return, I mean, we have limited exposure in this, in this current context. And this is also the same for retail Asia. But we are working on initiative as you know what accelerating in China is really high where we have very strong positions and we are also great initiative in skin care. So I keep repeating currently with the resistance but you know, the impact faculty is limited, okay, there is an impact that is limited and if we keep seeing some some, I'm sure. So the third your third question on on Paris. So this is absolutely something that we have on the and that we have been working for for a while. But what's very important number one in terms of components, resource, you know, very limited components from China, we need to be. So there is very very limited exposure now about Europe and us, the strength of and we keep repeating is really this global foot. So we factories in Europe, but we have also factories in the US consumer beauty and also on farm. So these are exactly the kind of hedging that we can create in terms of localizing some some production, either in terms of fed food, but also in terms of complements where we have the. So, so basically, I mean, the point is helping at the same time and indeed in this firm and you know, our peers may be more exposed. We may, you know, it may imply, you know, some small price increase we mitigate and we need to keep the question intact. Sue Nabi And to complement what Laurence said, it's very important to say it again and again, we are the least exposed company to China and to travel retail Asia. And that's very important among the comparative players skip today. Operator Filippo Falorni, Citi. Filippo Falorni Hi. Hi, everyone. On margins, you guys have delivered very strong performance both on growth and the margins. And you raised the target on cost savings to 120 million over 120 million. Can you talk a bit about like what are the incremental cost saving initiatives that you found that you're finding in the in the P&L and you talked about having momentum into fiscal '26. So maybe you can also give some color on what is going to continue and what's the pipeline on, on cost savings going forward? Thank you. Laurent Mercier Yeah, thank you Philippo. Absolutely. So MJ is really a key focus for the company. So I mean, we are delivering about 200 babies on Gross Malten in Q1. So I really want to highlight this because it shows that all the actions that we are putting in place are strongly deliver. So it's really a combination as I indicated, the pricing where there is really strong carryover on pricing, there is more moderate inflation. Indeed, we are improving significantly the level of excess and obsolescence. I I was referring to to it before, you know, with the plan and procurement and supply chain is working on very strong productivity initiatives. We share many times and we continue all the work we are doing and platforming. We are reviewing all the products, all the formula and the creating some formula synergies which you know, is helping and also helping our suppliers. So recently, strong partnership with our suppliers with very strong initiatives and this is so gross margin is basically we are now above 65% and this is what we had indicated three years ago. We at that time, we were below 60%. So definitely we continue. Now looking ahead the current environment, we had a long list of initiatives in our pipeline. So some are already in motion and we are accelerating this is exactly what I explained about the planning implementation and how we are going to significantly improve our planning and our forecast model, which will bring savings but also really improve our pipeline and relation with the retailers, which is absolutely absolutely key. The second element I can bring to you. And you know, we we we refer to it and there was a question about ecommerce online and off line channel. We are seeing that now the landscape is really moving to the omni channel world. And definitely, and we are seeing also some retailer centralization. This is definitely a fact. So which is blurring also and these offline online. So we are assessing also the changes to the structure, how to adapt to this. And we need to create some synergies and we need to gain to gain some efficiency. Also so expensive in terms our new model of the speed to market, the beauty is also here to bring some savings and also acceleration and last three months which I want to insist on is on technology I explained in July that we have successful implementation. Now we are leveraging this technology where we can and a very, very strong savings and improving also on the support function, how we can work on this. So you see that there are all these initiatives that are in the pipe that we are accelerating, they are all connected. And it's definitely part of the two program that we we we initiated. So that's indeed what's giving us confidence to continue to improve our our margin. So your second point which is now looking ahead for fiscal '26 indeed, we have also a strong pipeline of growth initiatives. So we have fragrance launches across price points as we explained. And we spend several times of course strong innovations in the background, but we have also now stronger initiatives in the mass programs. So we are covering, you know, the full price spectrum mist is definitely a great opportunity for us. So skin care, we are accelerating geographic expansion basically with the growth engines which are really accelerating and we saw the numbers and they grow double digits. So they grow faster than the the metro market. And last but not least the beauty initiative in school, it will really bring some additional initiatives. So again, in a growing market dynamic, we have again, a lot of initiatives in the pipeline to go faster. Operator Chris Carey, Wells Fargo Securities. Chris Carey Hi everyone. So there's been a few questions on the algorithm. So I won't go there on the on the top line per se. But I think what I'm hearing is basically that pre previously it was it was 6 to 8. But now we we have to be mindful that the category growth is a key foundation to be able to deliver that outcome. And if the and if that category growth is lower, then you know, that outcome could be lower, which, which by the way, I think makes sense. But correct me, if, if you heard anything there, which which doesn't make sense to you said another way, the category will do what it do does and you'll gain share on top of category. But then connected to that is the 9 to 11% ebida growth. Obviously, this year, you have a pretty substantial step up in back half Ebida to kind of stay in that range. But over time, how like how should we be thinking about how sturdy 9 to 11, I mean, should, should, should that IDA growth range also also fluctuate somewhat depending on, on category or do you view that as, as really firm because perhaps it's more connected to your leverage target? So thanks. Thank you for entertaining any of that and responding how, how you see it. Thanks. Sue Nabi Maybe I'll start with the first part, you know, around the growth of the company. I think you understood that indeed, we are playing in markets and the level of growth of the beauty market will be a part of how we are going to build our growth ourselves. But we are an author of business, you know, and beauty is one of the most resilient, if not the most resilient businesses. And Turkey has been outperforming this market since now four years or so. It's really, it's really a combination of both how the market will be. And indeed, our medium term outlook is to see the market between three and 5%. It is also going to be a question of how fast we are going to accelerate with our new growth engines. Be it regions, categories. Don't forget the new licenses, Army Jacobs Beauty, a new license to be announced soon and we are continuing to work on this topic. So all these elements together are going to give us the right number when it comes to the ability to be exactly in the algorithm that we did three years ago or close to this algorithm depending on all these elements altogether. And the second part, you can complement on the ATA. Laurent Mercier Absolutely. I mean, so first of all, I want remember that over the last three years, I mean, we are constantly, you know, over deliver these, you know, these 9 to 11% ebida growth. So that's really today, we are even ahead of our initial plan indeed, as I indicated leverage ratio. I mean, we will get, we definitely, we we explained a few a few years ago now, definitely looking ahead, it's the number one focus that we continue to deliver significantly on the top line growth. So this is this is a no brainer and all the savings initiatives that I just explained. In fact, they are going to even accelerate in fiscal '26. So it will give us the munition to fuel all the great initiatives that we have. But also of course, to keep going A B dam much faster than the net revenue and continue to expand our ebida margin. And you know, this year, in fact, our ebida margin is going to go close to 100 basis funds. So we will be close to 19% Abita margin and then starting from these days, yes, we will continue to expand significantly our Abida margin. So I want to make it very clear that I mean, even if we are reaching our two times leverage ratio, we are going to continue all this work to significantly expand our bigger margin. Operator This does conclude today's question and answer period. I will now turn the call back over to our presenters for any additional or closing remarks. Sue Nabi No, no closing your mark. Thank you very much for your questions. Again and see you next doctor. Operator This does conclude Cody's first quarter, fiscal 2025 question and answer conference call. Thank you for your participation. You may disconnect at any time we. View Comments Terms and Privacy Policy Privacy Dashboard Recommended Stories
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