Coty Inc. (COTY) Earnings Call Transcript & Summary

Hello, everyone. Good morning, good afternoon, and good evening. Thank you so much for joining us. We now welcome Coty to the conference. Coty is a leading beauty company with a number of marquee brands across fragrance, color cosmetics and skin and body care. Over the last year, the company has undergone significant changes, the highlight being the appointment of Sue Nabi as CEO. We're lucky to have Sue with us today and also Laurent Mercier, who recently stepped into the CFO role. With that, I will turn it over to Sue. Thank you, so we really appreciate you being here.

Thank you, Faiza. Thank you for inviting me. And Laurent, very happy to be today with you. Good morning, good afternoon, everyone. So let's start with this investors presentation. So again, what we would like to share with you today is our investment thesis. We have one of the most beautiful portfolio of the -- hold on, one second. I have something that's in my screen. Perfect. One of the most beautiful portfolio with 2 complementary brand portfolios, and we'll see during this presentation how much this portfolio of brands is really answering all the key needs, be it in terms of geographies, in terms of categories, price tiers or ages. The second point that I would like to share with you is the one about rapidly executing on all key strategic growth pillars, again, so there are. The third point is about gross margin and cost reduction that will fuel our growth plans. And the third one -- I'm sorry, there is something on my screen. I was hoping if someone can help me that really is hiding my slides. The third one is -- sorry, everyone. Technical is always the same story, but let's find a solution. Okay. Great. Fabulous. So again, #1, most portfolio -- most beautiful portfolio. The second one, rapidly executing on all key strategic growth pillars. And you see that we have very interesting results to share with you on both divisions. The third one is, of course, gross margin and cost reductions that are going to fuel our growth plan and our profitability also. And the last point is what we call the deleveraging of the company with multiple levers and a lot of opportunities to improve both free cash flow and our leverage through EBITDA growth, of course, working capital enhancements, asset monetization, including the stake in Wella. So let's go now to the next slide, to give you a quick overview of what is Coty, please, next slide. So as you can see, who are we today? We are a global leader in fragrance and color cosmetics. The company has had $4.2 billion of net revenues in fiscal '20, being #1 fragrance maker worldwide and the #4 color cosmetics maker. We have positions that are strong key markets in the world, the second prestige fragrance maker in America, the second mass cosmetics player in America, the first mass cosmetics player in U.K. The second one when it comes to prestige fragrances. And in Germany, to take another example, #1 in prestige fragrances and #4 in mass cosmetics. You can see the collection of brands, some of the key brands of the company such as Gucci, Hugo Boss, Calvin Klein, Burberry, Kylie Cosmetics, or on the other side, CoverGirl, Rimmel, Max Factor, Sally Hansen or adidas, to name a few brands. On the next slide, you can see that our sales are diversified across channels, with Luxury brick-and-mortar business representing 46% of our revenues; with mass brick-and-mortar representing 37% of our revenues; and e-com, that's been booming recently, representing 17% of our revenues. On the next slide, you can see that our sales are also diversified across categories, with prestige fragrances representing half of our business; mass cosmetics representing 26% of the business; skincare, only 5%, a lot of potential there; prestige cosmetics, only 3%, huge potential there, too; body care, 7%, another area of growth; and last but not least, mass fragrances, representing 6% of our business. On the next slide, you can see that our sales are also broadly diversified in terms of geographies. These are the third quarter fiscal year-to-date revenue mix. As you can see, America -- North America represents 32% of our turnover; Western Europe representing 26% of our turnover; Eastern Europe and Middle East, almost 20% of the revenues; Brazil and Latin America, 8% of our revenues; China representing 4%; and APAC, more broadly representing 7%. So there, again, huge potential in front of us; and global travel retail representing 4%. And this clearly is the latest figures that are, of course, as you can imagine, heavily depressed because of what's been happening for the last year. If you move to the next slide, you can see that we have also a portfolio of iconic brands that cover all key price tiers, from mass with, again, CoverGirl, Sally Hansen, Max Factor, Rimmel, Bourjois, adidas, or brands such as David Beckham; to premium brands such as Kylie, Lacoste, philosophy, Lancaster, Hugo Boss, Calvin Klein, Davidoff, Marc Jacobs, the future Kim Kardashian's skincare; or prestige with Chloé, Burberry, Gucci, Bottega Veneta, to name a few again. This portfolio of brands, if you can see it on the next slide, we're going to explain to you how we are going to animate it. So let's have a look at our strategy, that you start to know now well. Can we go to the next slide, please? So our strategic priorities are 6, as we've shared this with you a few times now. The first focus area, if I may say, is to stabilize our Consumer Beauty makeup brands and mass fragrance business. The second priority is to accelerate luxury fragrances. And we see that there is huge potential there, especially now that we are seeing fragrances becoming almost a self-care item, and of course, becoming a key player in the very profitable prestige makeup arena. Number 3, building skincare portfolio across both divisions. Number 4, building e-commerce and direct-to-consumer expertise and capabilities, and we've been doing a lot of progress recently on these areas. Number 5, as you can imagine, the 4 first points are going to be strongly helping us to expand in China on Luxury and on select Consumer Beauty brands. And last but not least, Coty intends to become a beauty leader in sustainability, using innovation as a key driver of sustainability and using sustainability as a key driver of innovation. If we move to the next slide, a few key consumer trends that we wanted to share with you as markets are emerging post-COVID. First, when it comes to emerging consumer behavior, you can see that there are 3 key trends that we would like to with you that are shaping not only the business, but also the way we are operating our brands. The first one is about trusted brands. Trusted brands are clearly becoming the name of the game. After 1 year, 1.5 years of uncertainty, anything that has to do with trust is highly valuable for consumers. It seems the #1 factor influencing beauty purchases. The second point, you can imagine and understand quite easily, is all about wellness, and moreover, I would say, mental health. This is clearly also the second factor influencing beauty purchases. The third element is fantasy and escapism. Beauty is becoming an antidote in English to anxiety, boredom, and of course, this 1.5 years fatigue that we've been all in. Coty's strategic alignment is perfect with these emerging consumer behaviors. Our core brands are really trusted brands. We are reanimating these key brands within prestige and Consumer Beauty. The second part is that we've been betting very, very quickly as soon as beginning of this -- of the year -- calendar year '20 on clean and the skinification of makeup. We've been leaning into clean, we've been leaning into sustainable innovation, that's all about clean formulations and sustainable packagings. And we started to build the skinification of our makeup and building skincare muscle. The third element, which is enlinked with fantasy, escapism, wellness and mental health, but also with trusted brands, is about fragrances and makeup playing a new role. Fragrances are appearing more and more at still good categories, I would say. They are probably today part of what we could call self-care. And of course, makeup specifically on the prestige side is becoming a great occasion and a great way for consumers to be creative, to express themselves and to explore new options, especially in China. Let's move to the next slide, so that we can have a look at how we are progressing on these key strategic pillars that I've been sharing with you now for a few times. #1, stabilizing our Consumer Beauty business. As you can see on this slide, cosmetics demand is accelerating as the markets are reopening. Cosmetics demand trends in key markets are improving, not only on a 1-year basis, but also on a 2-year basis. As you can see, it's at the bottom. From left to right, U.K., U.S. and China. So U.K. mass cosmetic sellout, as you've seen it, the progress versus last 12 months or last 3 months is clear. In the U.S., same kind of path. And in China, clearly, the last 12 months already growing. But what we are seeing since the last 3 months is outstanding in terms of sellout when it comes to cosmetics -- luxury cosmetics in this country. If you move to the next slide, you can see that on our side, we've been, in fact, repositioning. And this was clearly done at the speed of light between the end of calendar '20 and beginning of calendar '21, with each and every CB brand having today a distinctive sense of purpose and inventory. CoverGirl becoming the brand that's encompassing the uplifting power of makeup and healthy, clean makeup. Rimmel London, as the name says it, it's all about the freeing power of makeup. And last but not least, Max Factors, becoming the brand that's going to take our consumers from ordinary, probably from the fatigue of the last year, to anything that has to do with extraordinary products and extraordinary final looks. If we move to the next slide, you've seen recently that we've been communicating a lot around how we are rebuilding CoverGirl. Chapter 1 of CoverGirl rebirth started in calendar '20 with the launch of Clean Fresh makeup. That was a huge success in America. Then we continued beginning of year '21 with Lash Blast Clean, that has been huge success in America and one of the best selling in terms of our SKUs, be it in stores or online. And the third chapter is about putting again into the limelight one of the key assets of CoverGirl, which is the Simply Ageless line that happens to be the #1 complexion product -- anti-aging complexion product in America. And with a very simple yet very strong idea that's really behind the new image of CoverGirl and with something that helped us to reconnect with consumers, taking advantage of the power of nostalgia using Niki Taylor. As you can see it on the left side of the image, she used to be the face of clean makeup in the '90s. She's been using Simply Ageless for years and years. And today, she's making a testimonial to explain to women her age and women younger or older why this product is absolutely fabulous, with a fabulous tagline, that's once a CoverGirl, always a CoverGirl. So if we see on the next slide, that the results have been huge when it comes to the revamp of this line. After the clean franchise, the Simply Ageless franchise is now rebuilding CoverGirl credibility sales also. 757 million impression when it comes to the PR results; plus 45%, the weekly sales average in May versus the ones we have seen in Jan. And this franchise gained 2.5 points in May versus January. And the overall result, if you can see it on the next slide, on CoverGirl is absolutely outstanding. It's the first time that CoverGirl is growing in the last 4 years. It's the first time that CoverGirl is growing for 9 straight weeks of market share gains, as you can see it on the slide here. And it's not only progressing versus 2020, but also growing versus 2019. This is really the first time we are seeing the brand responding so strongly to anything we are doing on this brand, probably since more than 4 years, probably since before the acquisition of the brand by Coty. So this is really a great result that we wanted to share with you today. If we move to the next slide, we are moving now to the second priority. So this second priority is about accelerating our luxury fragrances business, and of course, building our prestige makeup portfolio that's booming in areas such as China and APAC. So if we move to the next slide. You can see that we are -- of course, when it comes to fragrances, we are focused in terms of approach, with a portfolio management that's very, very precise. We are clearly concentrating our efforts, our investments and our innovations behind the top 6 brands that represent 80% of our prestige fragrance sales, namely, of course, Gucci, Burberry, Calvin Klein, Hugo Boss or Marc Jacobs and Chloé. Why are we concentrating our investments and attention around this 80% of sales in these 6 brands? It's clearly because these are all fashion-driven brands that can become fragrance powerhouses. If you look to the top 10 of the fragrances worldwide, 9 out of 10 are fashion-driven powerhouses in terms of fragrances. The second reason why we are concentrating on this line -- on these brands is that they all have multi-category potential, some of them already being double access such as Gucci and Burberry operating ready makeup. And last but not least, the third reason for us to concentrate on this is that these brands all strongly resonates in key focus markets like China. Now if we move to the second part of why this prestige fragrance growth is clearly big news for this year, outpacing beauty category in the U.S. but also in China. As you can see on the slide here, these 2 countries are seeing double-digit growth in prestige demand on a 2-year basis, outpacing skincare category and cosmetics category. On the left, the U.S. prestige beauty growth versus 2 years ago, and you can see that there is a huge, huge growth happening there. And same thing happening in China. That's becoming, I think, the sixth country in the world when it comes to fragrances, growing very, very strongly, including and moreover, I would say, recently. If we move to the next slide, you can see that we also are going to continue, of course, this strong success story behind our luxury portfolio of fragrances with a very, very intense, I would say, first half of fiscal '22 innovation plan with first, Gucci with the revamped female fragrance pillar; second, on Burberry with a new male fragrance pillar; 3, on Calvin Klein with a new male fragrance pillar; and 4, on Kylie, with a refreshed cosmetics product portfolio and an integrated direct-to-consumer new website. If you move to the next slide, you can clearly understand how we are also building our prestige cosmetics portfolio. Starting with the entry prestige with Kylie Cosmetics competing against brands such as Glossier or Anastasia, or on the premium side with brands such as Burberry or Gucci competing in front of brands such as Chanel or Dior. On the next slide, you can see that this prestige expansion is happening under your eyes, with very strong performance of Gucci and Burberry makeup across the globe. In the U.S., to take one example, Gucci makeup sellout is up triple digits in fiscal year-to-date, with a very strong support from bronzing powder. And you can imagine why bronzing powder is so successful after 1 year of lockdown; or shiny lipstick, which is the most recent launch of the brand. In APAC, both Gucci and Burberry makeup sellout are growing triple digits in the third quarter, clearly led by China, and with the introduction of 2 new highly successful innovations specifically designed for Asia, that are the first Gucci foundation, liquid foundation or the first Burberry cushion foundation. In Europe, last but not least, Gucci makeup ranking in the top 10 prestige makeup brands in all Sephora stores where the brand is present. If we move to the next slide, clearly, you can imagine the potential ahead of us when it comes to Gucci makeup expansion plans. First, in terms of number of doors, you can see here that we are about almost double the doors in North America, highly exclusive, luxurious selected doors. Same thing in Europe, more than doubling. In Asia Pacific, we'll be doing almost 1.5 in terms of new openings. And in travel retail, we'll be almost doubling the number of doors via brick-and-mortar or dotcom. And the other information I can share with you is that the number of SKUs of Gucci versus makeup leading prestige brands, we have the potential to double or maybe triple this number of SKUs. So both together give you an idea of the potential of these brands when it's going to be fully available worldwide. Again, highly, highly distributed in terms of selectivity, I would say, but also in terms of number of relevant SKUs per region. If we move to the next slide, you can see that it's exactly the same kind of excitement we are seeing today with Kylie Cosmetics. The engagement remains absolutely exceptional with Kylie that's been relaunching recently its lip balm set at $35. This happened a few days ago on June 2. In the first hour, we sold 300 orders per minute. This is huge and unseen up to now. With a very strong and balanced mix between new and returning customers, these results clearly reinforce our -- the continued consumer excitement around Kylie and her beauty brand, heading into the launch of the refreshed Kylie Cosmetics product assortment that's going to happen this summer. If we move to the next slide, we are now moving the third part of our priorities, which is about building a skincare portfolio in both divisions. If you can see on the slide after that we are -- we have the possibility and ability to build a very comprehensive skincare portfolio, mapping each key needs, each regions and also in its each price tier. So on the bottom to the top, you'll see that we'll be working on skincare on some select CB brands in front of brands such as Neutrogena or NIVEA, Kylie Cosmetics that's going to become the Gen Z glam box destination in front of brands such as Glossier or The Ordinary. philosophy skin that's going to become the green and ceutical reference of the market in front of brands such as Kiehl's. Kim Kardashian's skincare that's going really to democratize the best derm-inspired ingredients in front of brands such as Drunk Elephant. Lancaster, that's going to become the regenerative medicine expert, heavily building on its history and heritage in front of the other 2 Ls that are Lancome and Lauder. And last but not least, you can imagine the potential of designer brand in front of Chanel or Dior in the area of skincare. So if we move to the next slide, showing you again under your eyes how we are starting to build this portfolio, starting to build the first Lancaster counters. But before building this first Lancaster counter that you are seeing on the right, I can share with you that before this, sales in Hainan Dufry were on parity with top 20 skincare brands in China and over China in March. And these sales increased 2x in April. And this was despite initial generic fixture and no media support. The second point is that the beautiful counter that you have just seen, it was leaked a few seconds ago. This beautiful counter is really the first of many, and this one is the small version. The biggest version is going to open in the next days, opening in Hainan during this June month. And we'll be having 4 dedicated Lancaster counters opening in Hainan in calendar '21. If we move to the next slide. The other big skincare authority in Coty's portfolio, that's philosophy. Maybe you don't know it, but philosophy is now the second luxury skincare brand on Amazon, with triple-digit sellout growth in March, ahead of a lot of leading indie brands. The second point I wanted to share with you is that philosophy's purity remains the best selling cleanser in America. The third element I wanted to share with you is that in America, again, Coty skincare sellout grew 2x the market in March and increased nearly 10% compared to March 2019. So there, there is also a huge potential. The fourth point of our strategy is again, taking all these brands and building e-com and direct-to-consumer expertise and capabilities to give a high reach to these innovations and brand repositioning. So if we move to the next slide. You can clearly see that Coty continues to have strong growth in this area. Looking at the results, with Luxury penetration growing 21% year-on-year; Consumer Beauty penetration booming at plus 56%, taking the overall Coty to almost 1/3 of expansion year-on-year, with fiscal year-to-date revenues in the mid-20s for our Luxury division, the high single-digits for the Consumer Beauty division, giving Coty a position in the high-teens. If we move to the next slide. You can also understand why the potential is huge when it comes to the reach of our brands, of our core talents or of the fashion houses behind our brands. You can see here that our Coty brands are having something like 16 million followers on Instagram. If you add the reach of the fashion houses whose beauty is into Coty, you can add 127 million people. And if you add the reach of our core talents, including the recent additions of Priyanka Chopra Jonas on a max factor, you can really add another 100 million and you can reach something like 844 million Instagram followers. That's going to take us really to the level of a huge reach, clearly, with Kim Kardashian and Kylie Jenner just the 2 of these 2 women having more than 400 million followers. So if we move to the next slide. You can clearly see that, again, when you think about expansion that we are doing in fragrances, specifically on niche fragrances, on prestige makeup, of course, and on skincare/e-commerce capabilities, the expansion in China is clearly something that's becoming a reality. So if we move to the next slide, you can see that we are strengthening already and strongly in the figures of our prestige fragrances in China. Coty fragrance sellout in Q3 is outpacing the market in China. The robust sellout growth that we are seeing there is clearly driven by Gucci sellout, that's up triple digits; Burberry sellout, again, up triple digits; Calvin Klein sellout, up double digits; and last but not least, Chloé Atelier des Fleurs, which is the high-end part of Chloé brand, which is the #1 productivity in China, Sephora, amongst artisanal fragrances. If we move to the next slide, this was about fragrances. Now let's have a look at how we are building prestige, make a presence in China. You see here on the image on the right, that the appeal for the Chinese consumers is huge from a brand like Gucci. But before that, we've been expanding our beauty launch on TMall. And the Gucci Beauty is now a top 4 luxury beauty brand launch since 2018. And again, on the right, you see a tremendous response to one of the events we've been doing recently in China with Gucci in Shanghai. That was a 7 days event, inviting 15 key opinion leaders that are friends of the brand, with the full Gucci Beauty assortment highlighting the recently launched Rouge Brillant, with people -- around 3,000 people attending the event, and this is quite obvious on the image. On the next slide, you can see that also we are continuing to strongly expand our footprint in Hainan, rapidly expanding our store presence and called e-commerce presence. Gucci and Burberry makeup represent already more than 20% of our revenues there. And fragrance sales are led by brands such as Gucci, Burberry, Chloé, but also Miu Miu. On the next slide, you can clearly also see that the 6 priority of the company is around becoming a beauty leader in innovation. So you can see how we work on this. We call it beauty that lasts. One, the beauty of our products; second, the beauty of our people; and three, the beauty of our planet. When it comes to the beauty of our products, you'll see that Coty is clearly leading the game, be it in the fragrance arena or on the makeup skincare arena. When it comes to clean beauty, that's also becoming a key driver, specifically on the mass cosmetic side. The second part is the beauty of our people. You all know that today, Coty is really showing the way for a beauty company, with an executive committee that's a female majority, same thing for our Board of Directors. And last but not least, we've been announcing many things recently, including the fact that we'd be paying equitably whatever is the gender by fiscal '22, which we will be the first company at this level to do. The third element is the beauty of our planet, and I think it's on the next slide. So you can see that Coty is the first company, and that's a great news because we are the #1 company in fragrances. And our #1 ingredient is alcohol or you can call it ethanol if you want. And we are going to benefit from a fabulous technology. That's all around fermentation and biocatalysis, brought to us with an exclusive contract with LanzaTech to really transition the majority of our fragrance portfolio into sustainable ethanol, with a negative carbon footprint behind this. So that's a great also thing that Coty is leading the way on. So if we move to the next slide, I would like now to hand it over to Laurent to take you into the financial cycle that's also in strong motion. Thank you for your attention.

Thank you, Sue. So indeed, our financial cycle is in motion. So moving to next slide. As you can see, in Q3, we have delivered an outstanding gross margin. We delivered gross margin at 62.2%, which is a 450 basis point improvement year-on-year. This is driven by mix and revenue management and also supply chain improvement through better demand planning and lower E&O. Approximately half of this improvement is structural, half is temporary. So 60% is a new base for our gross margin. Moving to next slide. We have delivered in Q3 a strong and robust profit growth. Q3 '21 adjusted EBITDA of $183 million, increasing by more than $180 million versus last year. This brings to an EBITDA margin up by 18 points versus last year to a level of 17.8%. Despite sales decline, we were able to deliver significant year-on-year profit growth. This was partially driven by strong savings. And year-to-date, we achieved over $270 million savings. And we are on track to deliver by fiscal year -- end of fiscal year '21 the target of $300 million of cost saving. And we confirm our target of $600 million by fiscal year '23. Fiscal year '21 is a baseline for Coty's sales and profit acceleration. Since fiscal year '19, our net revenue decreased due to scope effect, low quality sales reduction and COVID impact. We are on track to deliver our guidance of net revenue, $4.5 billion to $4.6 billion by end of fiscal year '21. And despite this net revenue decrease, we have been able to increase our adjusted EBITDA margin by more than 300 basis point, from 13.3% to approximately 16% to 17% through strong profit protection efforts. And we are committed to exiting calendar year '21 with a leverage ratio moving towards 5x. We are driving future revenue and profit growth in Coty. As Sue explained, strategic priorities, skincare will reach part of net revenue over 10% by fiscal year '25 from 6% in '21. Prestige cosmetic will grow from 3% in '21 to high single-digit percent in fiscal year '25, and China will increase from 3% of net revenue in '21 to over 10% in fiscal year '25. Let me now hand over to Sue for a few words of conclusion.

Thank you very much, Laurent. So again, very happy that we have been again able to share with you the new beginning of Coty and to remind you again on the investment thesis. So again, as you've seen it during the presentation, we do have one of the most beautiful portfolio with 2 very complementary brand portfolios, as you've seen it. We are rapidly executing on all key strategic growth pillars, be it in Consumer Beauty or on the prestige side, with a strong cadence of portfolio milestones that are planned throughout the calendar '21. Again, as Laurent just mentioned it, our gross margin and cost reductions program are going to fuel not only our growth plans, but also our profitability, with clear opportunities to drive increased profitability through gross margin expansion, and of course, continuous cost reductions while -- and this is super important, still heavily investing behind our focus brands. And #4, multiple levers to continue the deleveraging of the company with, again, opportunities to improve our free cash flow and leverage through, of course, EBITDA growth, working capital enhancement, asset monetization, including the 40% that we do have in Wella. Thank you very much for your attention. I hope that this presentation allows you to understand better who is Coty and who is moreover, I would say, the new Coty. I'm very happy to listen to the questions that you will like me to answer or Laurent.

Great. Really helpful. Maybe I could just start with, you have a lot of really good fragrance brands on the Luxury side of your portfolio. And I was wondering if you could discuss how you prioritize those brands.

Thank you, Faiza. That's indeed a crucial and key question. Again, as I've been sharing it during the presentation, we have a top 6 fragrance brands, I would say. That are Calvin Klein, Hugo Boss, Gucci, Burberry, Marc Jacobs and Chloé. This top 6 number of brand accounts for almost 80% of our prestige fragrances. So this is the first way to make our decisions in terms of where and how to focus. Second element. All these brands, as you know it, and you've seen it, are fashion-driven brands, but can become fragrance powerhouses. As I shared with you earlier, in fact, when you look to the top 10 best-selling fragrances in the world, 9 out of 10 are fashion house brands. And the only one that's not is a fragrance that created in my previous slide in another company. The second reason why we are focusing on these fashion-driven brands is that there are brands with multi-category potential that we can extend, of course, into makeup. And we've done it with Gucci and Burberry with the success we're already seeing, and of course, skincare. And last but not least, the way we also look at the portfolio of the company, specifically on the fashion-driven, I would say, brands, is to look for those that have potential in China, in fact, in the key market that is China. And I usually say fashion smells and has a lot of color. So you can see naturally how this idea of fashion that smells can be translated firstly to fragrances and second into prestige cosmetics.

Excellent. And then you talked about a lot of initiatives that you're going through at this point. Can you talk about how we should think about the launch calendar in fiscal '22? When are some of these key products launching?

Thank you also for this question, Faiza. So again, I'm looking at the number of initiatives we're having. And clearly, fiscal '22, and the first half of fiscal '22, I should say, is clearly rich with innovations, be it on the Luxury side. And I've been sharing with you that we'll be announcing new and super exciting fragrance launches under Gucci, Burberry, Calvin Klein, to name a few, as we are clearly having the priority to have more male fragrances in the top 10, and we do have already some, and more female fragrances in the top 10, top 15 worldwide. Of course, we are very, very excited to be relaunching the refreshed Kylie Cosmetics product portfolio, with a clear omnichannel strategy, which is a first, and then an integrated direct-to-consumer website across cosmetics and skincare, which is also a first. On the mass side, on the Consumer Beauty side of the business, of course, everything I've been showing on CoverGirl is going to continue. And we are applying the same strategy on Rimmel, on Max Factor, to name a few, which is to take clean innovations to the next level and to think about the skinification of these brands. But before this, we'll be displaying the new brand equities, the new imagery as soon as this summer, and of course, until the end of calendar '21, which we'll be having strong innovations in the area of mascara behind some of our European brands and strong innovations behind the brand that's been doing fabulously well with since 1.5 years, that's Sally Hansen, that's our alternative to salon solution. So we're very excited by these initiatives for the first half of '22, since fiscal '22 is clearly a sales and profit growth inflection for the company. So it's really how we see it, and super excited about the first half.

Excellent. Maybe broadly, I'm curious, how do you envision sort of the fragrance and makeup categories evolving this year. Fragrance, I think, has done better than a lot of people expected during COVID. So I guess, how do you envision that continuing to do well through this year? I really like Laurent's slide where he talked about fiscal '19 and fiscal '21. So if you could just bring it into -- with your business sort of, do you expect -- I think it was the $1.2 billion, which was the COVID impact. Sort of do you expect -- at what point do you expect to recover most of those sales?

So to answer your question about what are the -- how do we envision the fragrance and makeup categories evolving this year. Clearly, the fragrance business is changing in a direction that's driven by, I would say, 2 trends. In the Western world, clearly, fragrances are becoming in a way a well-being item, a mental health, I would say, a booster, if I can say, something that makes you feel good before it makes you looks good. So there is something happening in this arena. And we've seen that the biggest success we've been having in fiscal '21, which is Marc Jacobs Perfect, and fiscal '20 also is clearly showing the direction. It's really a launch that's all about self-expression. It's a launch that really displayed not just one vision of beauty, like traditional, I would say, fragrance launches are, but showing 40 people from all ages or skin tones or genders or body sizes or whatever is the choice they do in life, all these visions around what people think is perfection were displayed into this launch. So it shows that fragrance is not just about smelling good, but becoming in a way a voice around what is the world of today and the world of tomorrow. In the Chinese world, in Asian world, clearly, what's happening is fragrance is becoming probably as strong as what the fashion bag is, in fact. It's really the item to have. And Chinese consumers are shopping very, very expertly, at the same time, boosting, I would say, high-end mainstream brands, but also niche or artisanal fragrances. So clearly, this is great news for Coty because of the portfolio of fragrance powerhouses we do have, with fashion houses behind this. When it comes to makeup, clearly, what we are seeing is that, as the markets are reopening, we are seeing strong cosmetic demand trend improvement on the 1 year. But also on a 2-year basis, for example, in the U.S., in U.K., in China, to name a few. And this is clearly driven by the increasing consumer mobility and the social interactions, all driving the beauty usage occasions, as you can imagine. And we clearly believe that this is going to be the case in all the other, I would say, reopening markets. There is no reason it won't happen.

Sounds good. I was wondering, as it relates to your investments, I think you've really pivoted the strategy from cost -- just cost-cutting and restructuring towards investments, which is really good to see. How do you envision sort of the right level of advertising spending? And maybe how much do you think -- where do you think you are in terms of data and analytics maybe relative to competitors? And is that an area where you would like to spend more in addition to advertising?

I think maybe I'll pass it over to Laurent. But a few words just to say that, again, what's happened in Q3, with the results, for example, we've showed you on CoverGirl, it's clearly the result of our fewer bigger working media strategy behind key bets of the company, and that's already showing great results. And in the fourth quarter, we are again progressing very, very strongly with in working media strongly ahead of the one, including our fiscal 2019 for the same, I would say, cost of it. Maybe Laurent, you can complement on what would be the right level of media investment, again, behind our key strategic bets for the company in fiscal 2022.

Yes, yes. Absolutely. So I can take over. And indeed, to remind a few numbers. So in H1, level of A&CP was 20% of net revenue. We increased in Q3 to 23% A&CP on net revenue. And we confirm that in Q4, the level of media will be higher than Q4 of '19, while delivering at the same time the $750 million EBITDA guidance. So it's really that we are improving. What's important is that within A&CP, we are making sure that we are optimizing working media where we have a strong ROI. And at the same time, we keep optimizing the nonworking where there is a lower ROI. So it's really the question of allocation and optimizing the level of working media. And as Sue mentioned, it's also that we are doing that on fewer initiatives. So it's really that the support, the level of media we are putting on initiatives is much, much higher than what we had 2 years ago. So these are -- and last element which I want to insist is, of course, the question on percentage and dollars, but it's also the quality of investment. Now what we are making sure is that we are testing the copy. We are making sure that any dollar we are investing in working media has an immediate return on investment. And this is really what makes the difference in our equation and really to build a profitable model.

Understood. Anything you can say on data? Because we do have a question coming in from an investor around sort of your data analytics capabilities. I don't know if there's anything you want to say on that. And how much focus that might be?

I can follow up on this one. Definitely, we are really investing on stepping up on data. To give you a few examples, so Jean-Denis Mariani who is our new Chief Digital Officer, is really working on e-commerce, but really injecting in the Coty's capabilities really some data-driven decision. We mentioned -- Sue mentioned about B2C. So all this kind of model are really here that we can gain some capabilities and knowledge in terms of data. So that, again, the decisions we are making, the investments we are making are really based on data. So this is really our big focus. But it's not only marketing investment. It's also the way we drive the business. I give you just one example is on forecast, which is a big driver of profitability. We are investing also in artificial intelligence so that the forecast accuracy is improving and is getting much, much stronger. So yes, we are really stepping up in terms of data capabilities.

Perfect. Thank you so much. I think we'll end it there. Really appreciate both of you joining us. And hopefully, we'll see you in Paris next year. Thank you.

Thank you very much, Faiza. Thank you, everyone. Bye-bye.