Coty Inc. (NYSE:COTY) Q2 2024 Earnings Call Transcript

Sue Nabi: Thank you, Laurent. Let me take a few minutes to discuss the progress we continue to make on our six strategic pillars. Starting with our first strategic pillar, which is, stabilizing and growing our Consumer Beauty business. In Q2, our Consumer Beauty revenues grew 5% like-for-like, bringing the growth in the first half to 7% like-for-like. This is in line with the global mass beauty market, which similarly grew in the mid-single digits percentage. We once again benefitted from the diversification of our Consumer Beauty portfolio, as we delivered solid growth across our categories: color cosmetics, lifestyle fragrances and skin and bodycare. Our presence across multiple mass beauty categories is allowing us to capitalize on the tailwinds in both mass fragrances and bodycare, contributing to double-digit percentage growth in our brands Beckham, Jovan, Monange and Bozzan.

We delivered solid revenue growth in color cosmetics, even as the market growth has been normalizing closer to the low-single-digit percentage growth seen in the pre-COVID period. Importantly, cosmetics category growth remains robust in the e-commerce channel, growing in the mid-teens. And in this outperforming channel, I am happy to share that our leading cosmetics brands are gaining market share, including CoverGirl, Rimmel and Sally Hansen. Now let me turn to disruptive innovation we’ve recently launched under CoverGirl. The CoverGirl Simply Ageless Skin Perfector Essence foundation marks a new milestone in CoverGirl’s leadership in skinified makeup, by offering a serum texture with skincare ingredients and pigmented foundation capsules.

This is the first-to-mass product whose distinctiveness is immediately visible. It is therefore the perfect launch to complement our significantly accelerated influencer strategy. As we discussed on the last quarter’s earnings call, we are actively step-changing our social media reach in order to drive our brands and build stronger community engagement, underpinned by disruptive innovation. While some of our previous Consumer Beauty launches included activations with hundreds of influencers, we really put our social media advocacy strategy into overdrive with CoverGirl’s Essence foundation, working with over 5,000 influencers of different scale and community reach. And the initial results are highly promising. The TikTok videpost you can see on this slide by macro influencer Meredith Duxbury has already reached over 95 million views, driving over $10 million of Earned Media Value for this post alone, which is multiple times above the EMV we generated on CoverGirl over a full year.

And we are forging deeper relationships with influencers through the influencer studios we’ve begun to open, including a major one in Miami, which is where the other TikTok posts that you see on this slide were filmed in December. And this is driving real results for the brand. While CoverGirl Essence is only now beginning to appear on shelf at key retailers, it has been available online for the past month or so, and I am proud to share that it has already become the number one new makeup launch on Amazon. Going forward, we will continue to overdrive on advocacy not just on this launch, but across our other Consumer Beauty disruptive innovations and hero products. As we continue to drive growth in our Consumer Beauty business, we are alssecuring our license portfoli.

In the past week we’ve announced long-term extensions for two key Consumer Beauty lifestyle fragrance brands, brunbanani and Mexx. This follows on the heels of the renewal of our license with Adidas, which we announced last year. Both brands have a strong presence in Europe, with brunbanani as the number one and Mexx the number three lifestyle fragrance brands in Germany. We are happy to extend these partnerships for over 20 years as we strengthen and broaden the portfoli. Turning to our second pillar, focused on accelerating our luxury fragrance business. The fragrance index maintained momentum, driven by strong demand for fragrances across the globe and ongoing premiumization, as consumers are seeking more concentrated, longer lasting and more sophisticated scents.

In Q2, the Prestige fragrance market continued its strong momentum, growing close to 10%, consistent with the growth trajectory of calender 2023. At the same time, our Prestige fragrance revenues grew 15% like-for-like in Q2. As I discussed at the start of the call, while the recovery in our service levels year-on-year represented an estimated low-to-mid single-digit percentage benefit to our Prestige sales, our underlying Prestige sell-in and sell-out grew in the low-teens percentage, outperforming the market. The strong broad-based momentum in our portfolio is confirmed by the fact that sales for each of our Top 7 Prestige fragrance brands grew by a double-digit percentage like-for-like in the first half. Within the strong momentum we are seeing across our Prestige fragrance portfolio, Burberry’s performance continues to be exceptional.

Consistent with the initial results we shared last quarter, Burberry Goddess Eau de Parfum remains the number on female fragrance launch in key markets. These exceptional results six months in to the launch position Burberry Goddess to be the biggest Coty fragrance launch evert. Importantly, the tremendous success of Goddess is elevating the sales of other Burberry fragrance icons, including Burberry Herand and Burberry Her, resulting in total Burberry fragrance revenues in the first half growing over 60% year-on-year. Such tremendous momentum has propelled Burberry to the number seven brand ranking across North America and Europe, which is a fantastic improvement from its number 21 brand rank last year. All of this reaffirms Coty’s position as a leading fragrance expert with best-in-class end-to-end capabilities, from developing a winning mixes which resonates with consumers across all regions, to activating distinctive marketing campaigns, and finally to disruptive in-store and online activations.

As we further strengthen our Prestige portfolio, I am excited to share that we have entered a license agreement with Marni, an Italian luxury brand founded in 1994. The license focuses on fragrances, with the option to extend into cosmetics. With the license extending beyond 2040, this really reinforces the long-term partnerships we forge in our portfoli. Marni is known for its’ premium, artistic collections and resonates strongly with young consumers in Asia and Europe. We are very excited about our partnership with Marni and the ways in which it complements our Prestige portfolio, with brands spanning different consumer territories, different geographies, and different price points We are also continuing to strengthen our Prestige makeup business.