Coty Inc. (COTY) Earnings Call Transcript & Summary

Welcome, everybody, and welcome, especially to Coty. We thank them for being our next presenters. Coty has undeniably -- undeniably become a leading global player in beauty that has been consisting -- that has been delivering strong and increasingly consistent results across not only fragrance, but makeup and increasingly skincare as well. With us to tell the Coty story are Chief Executive Officer, Sue Nabi; as well as Chief Financial Officer, Laurent Mercier. I'm going to hand the podium over to Sue and to Laurent. They're going to run us through presentation and that should just take us about half of our session, then we'll use the balance of time for Q&A. So with that, I'm over to Sue. Thank you.

Welcome, and good morning, everyone. So as you can imagine, we are very honored and very excited to be presenting at this Deutsche Bank Global Consumer Conference. I'm very happy to be here today to share an overview of Coty, as we've made, as you've seen it, tremendous progress over the last few years. Setting a very clear strategy, executing on our growth pillars and significantly improving the financial standing of the company. So let me start by sharing with you an overview of the company. We are not only an established player in beauty, but also increasingly a beauty powerhouse with significant untapped potential in the portfolio. We are a company whose legacy is rooted right here in Paris. Coty was founded 1904, 200 years next year, in France as a fragrance pioneer, opening fine fragrances to all society -- 120 years, I'm sorry, to all society with the launch of La Rose Jacqueminot, and we've been a global leader in beauty for the last 120 years. We are one of the few companies operating with 2 divisions that reach consumers across price points. This is a critical element, as you can see it on this slide, in our business diversification strategy. And we've continued to drive the premiumization of the portfolio of the company, our Prestige division now accounts for 62% of the sales, which is an increase of 3% from 2 years ago. Our Consumer Beauty division accounts for 38% of the sales, as you can see it. We're also diversified geographically. North America is roughly 1/3 of our revenues. Europe, Western Europe is less than 30%. We are still small in China, in Asia Pacific and Latin America, but we see there a lot of white space opportunities to grow meaningfully in each of these markets. This is particularly true in China, which currently accounts for roughly 4% of our sales, but represents a low teens percentage of the global beauty market. And Travel Retail, which accounts 8% of our sales year-to-date, which is continuing to grow at a tremendous space for Coty -- pace for Coty. Coty is also a company with very strong expertise, know-how and IP in each of our core categories. As you can see here again on this slide, our R&D organization is organized by category-led R&D centers of excellence. Fragrance center of excellence, which is based in Switzerland; cosmetics center of excellence in North America; skincare center of excellence in Monaco and increasingly in China, and bodycare well-being center of excellence, which is based in Brazil. Let me now take a few minutes to discuss Coty's extensive expertise and technology across our key categories, which have fragrances, color cosmetics and of course, skincare. Starting with fragrances. Coty has been reinventing modern perfumery for the last 180 years, starting with Rimmels, first perfume in the 1800s and Francois Coty La Rose Jaqueminot in the early 1900s. We've also been fueling innovation within color cosmetics for over 160 years and have been pioneering new technologies in skincare for over 70 years, thanks to the Lancaster brand. As you can see on the slide, we have large teams of scientists and industry experts working on each of these critical beauty categories. And we've been at the forefront of developing new technologies and patents in these areas, whether it's what we call modulation or long lastingness in the fragrance area. Fragrance is becoming a performance category, and we do have the right IP, clean formulations, innovative mascara technologies in color cosmetics, long-wear technologies in the global warming world, and encapsulation, [ vectorization ] of active ingredients and last, but not least, a one-of-a-kind patent in what we call full light protection in skincare. And it's clear that this company is a beauty company deeply rooted in science. You can see here our beautiful portfolio of fragrance and how they truly reach consumers across all price points and all psychologies, starting with mass brands, like CoverGirl or Rimmel, with many products priced below $10, all the way up to ultra-premium with prices ranging from $150 to $450, led by brands like Orveda skincare, Chloé, Chloé Atelier des Fleurs in the niche part of the market or the recently launched Lancaster Ligne Princière in China and the just announced Infiniment Coty Paris fragrance collection. Here you can see the 6 pillar, our 6-pillar strategy, which includes growing our Consumer Beauty business; second, accelerating our luxury fragrance business, especially on the female side and establishing Coty in Prestige makeup; number three, building a skincare portfolio; number four, building an e-com and DTC capabilities; number four, expanding in China and Travel Retail; and number six, becoming a leader and the best-in-class company in the sustainability arena. Starting with our first strategic pillar, stabilizing and now growing our Consumer Beauty business. In the latest quarter, we continued to drive double-digit sales growth in Consumer Beauty. As you can see on the slide, our leading brands have continued to gain market share, including CoverGirl and Rimmel in color cosmetics or Bruno Banani in mass fragrances, Monange in bodycare in Brazil, speaking to our broad-based momentum into this division. It's important to highlight that our business model is anchored on driving balanced growth across Coty-owned brands and licensed brands. This is true in our existing core business of Prestige Fragrances and Consumer Beauty. In Prestige Fragrances, which is a $40 billion market growing mid- to high single digits, our incredibly strong partnership with our leading licenses, think about Hugo Boss, Calvin Klein, Gucci or Burberry, means that on average, we have over a decade remaining for our top 7 licenses. At the same time, we have attractive entry priced fragrances brands that we can continue to expand in the $18 billion mass fragrance market, including in markets like Brazil. We are also very well established in the $40 billion Consumer Beauty makeup market, which is growing low to mid-single digits and where our own brands, like CoverGirl, Rimmel or Max Factor, are doing great job. Looking forward, we are actively targeting significant white space opportunities in Prestige skincare and ultra-premium niche fragrances. And here again, we will be leveraging a combination of Coty-owned brands and licensed brands to win in these attractive categories. The $70 billion Prestige skincare market continues, as you know it, to grow in the mid- to high single digits, and we have begun activating core Coty brands, like Lancaster, philosophy and Orveda, with promising initial results and much more still to come. The ultra-premium niche fragrance market is still relatively small at roughly $4 billion, but growing very quickly, and our extension of some of our licensed brands, like Chloe into Atelier des Fleurs or Burberry into Signatures, in this segment are already proving to be very successful. And we will be supplementing this with our recently announced Infiniment Coty Paris fragrance brand, a pure player, which we've developed in-house. As you may have seen on the eve of the Cannes Film Festival, we announced the launch of our most ambitious and premium fragrance project to date, Infiniment Coty Paris. This truly represents a return to Coty's roots as the fragrance pioneer, founded in 1904, with now a new cutting edge futuristic vision for fragrances, building on our extensive expertise in this area. Infiniment Coty Paris will be a leading pioneer in the industry, using beauty, a lot of science for the first time in fragrances and art. The collection will ultimately include a range of 14 diverse scents with, for the first time here, again, patent pending for both the formulation and the packaging. We expect to launch the brand globally in 2024. Shifting to Orveda. In the last few months, we've begun to build the awareness, the buzz and the desirability of this ultra-premium skincare brand amongst our target consumers, ultra-high net worth individuals, celebrities, opinion leaders, especially in the scientific community and leading figures in the art world. We call it the [ Whisper's ] strategy. As part of our continued quest to power beauty with cutting edge science, Orveda has created and announced recently the launch of omnipotent concentrate, a patent pending serum here again, launching worldwide DTC in August 2023. The new potent serum is a scientific innovation in the areas of microbiome science and cellular longevity with concentration of actives up to 15x more than the average of the industry. Omnipotent concentrate has shown a very strong clinical results and is expected to further cements Orveda leading position in innovation, beauty and wellness. As part of our activation of the Orveda brand, we've recently upgraded the merchandising at Orveda's flagship counters in La Samaritaine here in Paris and on Saks Fifth Avenue in New York. We are very happy to share that we've already seen the monthly sales of the brand in both locations to name a few doubling versus the prior month run rate. This lays a very strong foundation for Orveda's critical commercial and launch initiatives slated for fiscal '24 and above. In March -- in mid-March, we've also launched Lancaster, ultra-premium skin care line called, Ligne Princière, bringing to the forefront Lancaster's heritage as the exclusive brand of the Monaco princely family, backed by patented and top testing formulations. And while we are still very early in the Ligne Princière launch, the initial results continue to be very promising. The Ligne Princière line has reached the #1 spot in social buzz across social media in China, which is a critical component in driving consumer awareness and, of course, trial. In fact, a recent KOL livestreaming on Douyin generated over $300,000 in sales in only 3 hours. Consumers are now calling the cream, the Kelly cream online. And you can imagine how this is a great advertising campaign that's been organically created by consumers themselves. And the conversion rate at new counters in this very competitive Chinese Mainland and Highland counters is currently in line to ahead of leading beauty peers with Lancaster Ligne Princière driving the majority of the sales. Turning now to our sixth and final strategic pillar, becoming a leader in sustainability. We've had several ESG milestones over the last few months, as you can see them on the screen. First, we launched the first -- the world's first, sorry, globally distributed carbon positive fragrance, manufactured using alcohol or ethanol from 100% recycled carbon emissions, in a partnership with biotech company, LanzaTech. And importantly, we are targeting for the majority of our fragrance portfolio to be producing -- to be produced using carbon-captured ethanol by the end of this calendar year. In addition, we are continuing to advance on our social agenda, including reaching our goal to pay equitably regardless of gender and announcing a new global gender-neutral parental leave policy. I'm very proud, as you can see it and feel it, of the progress that the organization has made across these key ESG pillars, and we continue our journey to drive further advancement. With that, let me turn it over to Laurent. Thank you very much for your attention. Laurent, floor is yours.

Thank you, Sue. Coty has made very substantial financial progress in the last several years. We have significantly improved our P&L and balance sheet with more improvement to come. Our Q3 core revenue grew 15% like-for-like, excluding Russia, bringing our fiscal year-to-date core business revenue growth to 10% like-for-like ahead of our original 6% to 8% like-for-like growth guidance. We delivered double-digit growth in both divisions, which benefited both from volume growth and double-digit expansion in price and mix. Geographically, our growth was broad-based, driven by all regions, particularly America and EMEA. Turning to Q4. As a reminder, we guided Q4 like-for-like revenue growth of roughly 10%. Now that we are 2 months into the quarter, I can confirm that Q4 growth momentum has been strong in line with our expectations. In the Americas, we are seeing continued strong growth led by momentum in Prestige Fragrances, Travel Retail and LatAm. It's worth highlighting that beauty demand in the U.S. remains quite strong with Prestige beauty continuing to outpace mass beauty. In EMEA, the continued strength is led by momentum in Prestige Fragrances and Travel Retail. And in Asia Pacific, we are seeing accelerating growth in the quarter, driven by China's reopening and Travel Retail. Moving now to the P&L. Over the last 2 years, we've grown our core revenues at a CAGR of 12% to 13% like-for-like, which exclude a high single-digit headwind from ForEx. We've also grown adjusted EBITDA to CAGR at 12% to 13% since 2021 despite significant ForEx headwind of over 40 million, and adjusted EPS has increased by 8x in the last 2 years. Fueling the strong profit growth has been very strong margin expansion. Gross margins have increased by roughly 400 basis points in the last 2 years. We are on track to end fiscal '23 with gross margin of roughly 64%. So combination of the strong top line growth, gross margin expansion and savings delivery have allowed us to significantly step up our marketing investment, which are on track to increase 500 to 600 basis points over the last 2 years. As a result, our adjusted operating margin is also on track to increase by roughly 400 basis points as we expect to end fiscal year '23 with adjusted operating margin of approximately 13%. At the same time, we've significantly improved the health of our balance sheet. We ended calendar year '22 with leverage at around 4x, and we're on track to end calendar year '23 with leverage towards 3x. This deleveraging has been enabled by both tactical asset monetization and strong free cash flow generation, and we are on track to generate over $400 million in free cash flow this year. With a strong financial improvement in the last 2 years, let me turn the path ahead -- let me turn to the path ahead. In light of the strong and resilient beauty market and the significant ante up growth potential for Coty, we continue to expect a very attractive growth algorithm for the company. Turning to the P&L growth algorithm. Outlook remains largely consistent with what we shared at our Investor Day in November 2021. In the third quarter, we updated our total fiscal year '23 like-for-like CAGR, excluding Russia, to 9% to 10%, reflecting a significant increase from our original outlook of 6% to 8% core like-for-like growth, excluding Russia. We continue to see like-for-like CAGR of 6% to 8% over the next 3 years and anticipate this growth to be at the upper end of this range. We continue to expect gross margin in the mid-60s, driving a 9% to 11% EBITDA CAGR, and we continue to target the mid-20s EPS CAGR, supported by lower interest expense as we deliver and lower share count. From a free cash flow standpoint, all of these translate into free cash flow, strong generation and steady deleveraging. We continue to expect free cash flow of over $400 million this year, driving our leverage towards 3x exiting calendar year '23. By fiscal '26, we expect adjusted EBITDA in the $1.2 billion to $1.3 billion range, free cash flow over $500 million and leverage at around 2x exiting calendar year '25. Finally, this brings me to the framework for our capital structure and anticipated capital return. First, we exited calendar year '22 with net debt below $3.9 billion and leverage of around 4x. Over the next 3 years, we expect to generate over $400 million free cash flow annually or over $1.2 billion cumulatively. We also continue to target the divestiture of our Well stake by calendar year '25 with proceeds of over $1 billion. Together, this brings cash inflow of over $2.2 billion over the next 3 years. Assuming 3 quarters to deleveraging and a quarter to capital returns, this should drive a very attractive capital structure in calendar year '25, including net debt below $2.5 billion, leverage around 2x, capital returns of around $500 million, including the $400 million of share buyback we have announced via equity swaps with our banks. With that, we are now happy to join Steve for some Q&A.

Great. Thank you. Maybe very quick, Sue, this may be just my read of it, but I didn't see as much in the presentation on Prestige makeup, as I would have thought. Is that just didn't have time or is there something to read into that?

No, no, this is part of our strategy. You can see that the second pillar is about improving our fragrance growth, be it entry Prestige, premium or ultra-premium, makeup is still part of it. It's a key part of it, with Gucci makeup, Burberry makeup, Kylie cosmetics. We've just done 2 very important launches in China, starting with the first long-wear foundation on both Gucci and Burberry. Beyond wear, that's the name of the foundation of Burberry and Eternity on Gucci and the start is very strong. It's true that today, because of the fragrance index and now the makeup index starting to be at play, you hear us talk more and more about this. But it's true that we've been so much focused about how do -- to take advantage -- full advantage of the fragrance index, that is true that most of the questions were on this and most of my answers, too.

Okay. Very good. Very good. And so Laurent, and so you're welcome to weigh on this as well. But one thing that I often hear from investors that your medium and long-term targets, the sales and EBITDA and the EPS, CAGRs that you walked us through, Laurent, many investors have told me that those are enticing targets, but they're -- and they're not fully discounted in the stock. But at the same time, they feel "too ambitious or too aspirational" and thus raising concerns you'll have to ultimately walk them back. So what is your response to that pushback? And what gives you the confidence that they're achievable?

Yes. Thank you, Steve. So I mean, let me start first with the figures. I mean, it's 11th quarter in a row where we deliver -- overdeliver versus the guidance and expectations. So this is definitely what we shared during our Q3 earnings call. And also to pursue this, as you saw Q3 growth was 15% and then we raised our guidance for fiscal year '23 9% to 10%. So it's a clear demonstration that we are consistent in delivering our numbers and guidance. And to build on this is also we raised our -- now we shared that our guidance will be in the coming years at the upper end of the 6% to 8%. So you see it's a clear demonstration about our confidence. What's driving this is that our 2 key growth pillars, so Fragrance and Consumer Beauty, we are seeing, I mean, a very strong dynamic with what we're calling this fragrance index is really in motion and Consumer Beauty is showing very extreme dynamics. So these are very, very strong solid pillars. And on top of this, we have the white space, definitely skincare, showing China and digital e-commerce. So you are seeing that it's built in a very consistent way and solid and solid manner. Now moving to the P&L. Definitely, we are really focusing on the gross margin expansion, 400 basis point improvement over the last 2 years. We continue the journey definitely than fueling A&CP and delivering consistently this 9% to 11% EBITDA growth and also supported by All-In To Win savings. Last, but not least, and you see, I mean, very strong momentum on EPS, again, very consistent 8x versus 2 years ago and giving a guidance in the mid-20s EPS growth in the coming years, helped by deleveraging. And also now we are seeing tax rate in the mid to high 20s. So you see it's really facts and figures, which confirm our full confidence in this algorithm.

Got it. So the second -- then the question becomes, how do things change if we find ourselves in an environment going forward where the U.S. slips into recession, Europe slips into further recession? China recovery is more drawn out. Does that impact your confidence or your -- the achievability of those medium-term targets?

No, that's the question we all ask ourselves on a daily basis. The reality, at least one of the possible way to look at this thing, is that the economists are lost since COVID hit. And every theory that's been built over the last century is not working anymore for many regions. But one of the key reasons is that people today are more and more looking at what does make them look better and feel better. That's a key change element since COVID hit 3, 4 years ago. And I do believe that the category that is all about making people feel and look better is becoming more than ever an essential category. That's the reason why you've seen a pace -- at play, sorry, 2 of these famous indexes. We knew the lipstick index from the '90s. But now there is the fragrance index, which is not just female, it's female, male, younger, all the people. Fragrance makeup index is restarting, specifically on the lead category, and skincare index has been here since forever and will last forever because of the aging of the population. So for all these reasons, first, I do believe that the beauty category is a preserved category. The second thing is that I do believe that -- and this is what Laurent was mentioning, there is no slowdown or down trading or whatever is the name, probably because of the first element I've been speaking about, which is this ability or will of consumers to focus on these categories that are making the difference on a daily basis. Three, you've seen us outperforming the market and outperforming the guidance and all the expectations. And this is because this category is again a one-of-a-kind category. And last but not least, even if this had to happen in a worst-case scenario, I do believe that the maturity phase of the company on one side and the white spaces that we've been presenting earlier. Of course, we speak a lot about skincare white spaces, about China, about digital, but we have also white spaces in our core categories. On the fragrance area, I believe that premium is still a white space for us because we are very strong on entry Prestige fragrances. Female fragrances is another white space and it's a big one, 70% of the market. And ultra-premium part of the market is another white space for us in the fragrance area. So not only in the, I would say, categories where we are starting, but also in the categories where we are very strong, we have strong white spaces in front of us. So if you put all together, the resilience of the beauty industry, the beauty business, our white space possibilities and maturity phase of the company, I believe even if your worst-case scenario happens, we will be still in our algorithm, which was built with very, very down to earth realistic assumptions, in fact. So see it like this. Don't see it as the best of the best of the [ worlds ], but probably the worst of the [ worlds ] that give us the 6% to 8% and 9% to 11% of EBITDA.

Okay. So Laurent, you talked about deleveraging and the deleveraging impact on the EPS algorithm. I guess that target of getting to -- getting net debt below $2.5 billion, getting leverage down to about 2x by fiscal '25. Maybe just elaborate on the building blocks to get there. And then including perhaps any update on the potential Wella divestiture, the plan Wella divestiture, how that plays into it?

Yes, absolutely. And here again, it's very consistent and built with robust assumptions. So let me start first with that. I mean deleveraging remains the #1 imperative of the company. So you saw we landed a calendar year '22 with a leverage of around 4x as we committed more than a year ago. And we confirm really our path towards 3x leverage ratio by end of calendar year '23. So this is very consistent and strong focus from the global organization. So how do we do that and we continue. So this year, we will deliver free cash flow above $400 million. And going forward, the algorithm is really based with $400 million free cash flow generation at a minimum earlier. And again, back to Sue's comments, you easily understand that this is a conservative assumption, but this is definitely the way we build it. So $400 million at a minimum. And adding on top, definitely that by calendar year '25, we are targeting divestiture from Wella and here also $1 billion at a minimum. So when you combine all these elements, we come easily to the 2x leverage ratio by '25. And we can also start some capital return to our shareholders, so roughly 500 million. And as I shared in the algorithm, definitely the equity swap that we initiated last year of about $400 million is the first step to this $500 million capital return to shareholders and $4 million via share buyback. So again, same as the top line, EBITDA, free cash flow deleveraging is really built with very, very concrete and tangible initiatives.

Okay. And a driver into that as well, there's a lot of focus on the top line. But I think maybe overshadowed, maybe that has overshadowed your productivity or progress on productivity and cost savings. And I think in fiscal '23, you remain on track for the $170 million in cost savings, $130 million already achieved. You've already reaffirmed the number of $90 million in 2024 and $75 million after that. So I mean, just give us a sense for where your confidence in the line of sight to those savings are, where they're being sourced from? And I also believe those are net numbers. So you're assuming reinvestment already in those numbers. So just talk us through where the conviction comes from.

Yes. No, absolutely. So you're absolutely right to remind how important is what we are calling All-In To Win savings. This is a transformation umbrella that we started 3 years ago, remains, I mean, top of our agenda, okay? So it's definitely, as you say, to fuel and support all the growth initiatives, but also to protect P&L and cash flow. So this is definitely a strong focus. Indeed, the target is $170 million this year. We are a $130 million end of Q3. So we are perfectly on track, okay, to deliver the savings. So I want to precise 1 point. So these are growth savings. The element is definitely that over the last 2 years, there was really high inflation, and we mitigate high inflation through these savings, but also mix and pricing, okay, which are not captured in these savings. But definitely, so these savings, again, is a big focus from the organization where it's coming from. And so it's, of course, on cost of goods. We shared several times all the initiatives that we -- we started 3 years ago on cost of goods. We continue through platforming, reviewing the portfolio, [ 0-based ] approach in the factories. We have high-performing factories, both in Fragrance and Consumer Beauty. We are really optimizing our A&CP, of course, focusing on ROI, but also building, making some productivity, optimization on our A&CP even with the new tools, digital and so on. So we are very focused on this. And of course, on SG&A, we continue to have some productivity initiatives and always with the approach that we make savings, and we have reallocated the resources on where we are building growth. So you see it's really comprehensive and the way we animate the team. And now we are really moving also to an approach, which is end to end, okay, which is really the core of transformation. One concrete example, we are running a lot of initiatives on strategic revenue management, so reviewing all the [indiscernible] trade terms. And this, we are doing both in Prestige and in Consumer Beauty.

Okay. Few minutes left. So I want to ask a couple of more questions, Sue. The first one at the conference so far, I mean it's early, but I think it's going to be -- I'm pretty confident is going to be a theme, is the concept of pricing and pricing power. And there's a lot of concern amongst investors that pricing power for a lot of consumer goods companies is diminishing and there's risk of pricing going the other way. But so far, beauty is not part of that discussion. I think for a lot of probably very valid reasons. In fact, at the end of the last quarter, you talked about pricing that you had planned early next year, tied to some of the sustainability initiatives and new product launches that you have. I guess, what is your outlook on pricing in this environment, especially if we -- if my worst-case scenario plays out? And do you believe that Coty has further opportunities for pricing power alongside innovation?

I think that the company has been doing exactly the right kind of job since now 2.5 years to make sure that the desirability of the brands is intact, including a huge amount of work we've done on value distribution, which is pricing power. And when you protect the price of your products, you are giving yourself ability to command the price you want on the market. So this part allowed us to do, what, 3 price increases until now, significant ones that have been very well accepted by both retailers and consumers. And as Laurent said, we are contemplating another 1 and this 1 has a lot to do with value creation. So in fact, what I mean by value creation, I take 2 examples. This company is a fragrance company and the makeup company. On the fragrance side, the #1 ingredient is alcohol. And alcohol is part of fragrances. Sometimes it's going to be up to 95% of a 5% concentrated fragrance. There, the transition towards more clean alcohol, carbon positive alcohol is something consumers are not only ready for, but are requesting this and are ready to pay a premium for this, okay? So this is the way we are presenting the new wave of price increases that we tend to do this summer and in fall. And second, when it comes to the Consumer Beauty business, which is mainly a makeup business today, it's exactly the same story. Remember, this company has been gaining back market share, doing double-digit growth because we've decided that all the brands are going to lead the clean revolution and the skinification of the makeup business. And this again is requested by consumers. And if there is one thing that they are ready to pay an extra premium for, it's exactly cleaner formulation, healthier formulations or formulations that are good also for the planet. So that's the way we are seeing this, I would say, different waves of price increases. Of course, one of the key element is mix. And therefore, our new launches, they are all at premium prices. But again, at the same time, we have 2 divisions that go from $5 to $500, and we are very granular in the way we do our price increases. We need to make sure that each brand or each division keeps an entry door for those who are not going to be able to afford this premiumization. So it's always the story of being balanced between entry prices, core prices, premium prices, which does not prevent us from premiumizing the price of each and every innovation.

Great. We're almost out of time. But I wanted to ask, as you look forward with 6 pillars, 6 strategic pillars of your transformation. As you look ahead, which of those pillars do you think is going to be the most important or the most -- the one that's going to get the most incremental focus from where we are today?

Six pillars, remember, number one, Consumer Beauty; number 2 Prestige Fragrance business and Prestige makeup; number 3, skincare; number 4, of course, China; and number 5 digital and, of course, sustainability. So for me, the 2 first pillars, which are growing Consumer Beauty business and accelerating on Fragrances and Prestige makeup, are what I call perform pillars. They are as important today as tomorrow. These are what makes us 11 quarters of growth ahead of guidance and ahead of expectations. And there, we are progressing very fast. And again, we have white spaces in this area. In Consumer Beauty, we believe that we have a strong white space in Gen Zs. We've solidified the loyal consumers that are buying our brands around the world. And now we're adding a layer, which is the TikTok, a specialty store business model targeting Gen Zs. And this is something that we finally found the recipe, now we need to scale it. So we found it. For us, this is going to continue to play in the perform part. And fragrances, I'm not going to say again how much we are -- we've done great. We have great launches arriving in the coming quarter. And also, we have these white spaces and every price bracket. These are the perform parts that we are going to continue to use to do our quarters. And then there is this transform one. Skincare, digital, which, by the way, if you do both, you are successful in China because it's all about digital and a lot about skincare. And there, I think it's a question of finding the right business model given the changing landscape. It's not about do you have the right brands. We do have the right brands, including in skincare, and we have very well positioned brands. Do we have the right technologies, IPs, formulations? We do have this, and we still see it. We did Lancaster Ligne Princière in China that started 2 months ago and the best rating items, kicker items on the market are Lancaster Ligne Princière. So when you have the right brand, the right product, what's missing is, what's the strategy? And there we test and learn. Instead of throwing a lot of money on everything, we test and learn. We are seeing, for example, to share with you that the magic of Tmall is less present than it used to be. And there is another thing that is at play today is peer-to-peer conversations through livestreaming. And there, I can give you an example. We did the first livestreaming with a KOL, who is not even the super high KOL that ask for millions and millions. It's really people who are not very famous, but who have a strong expert audience. She did 100,000 per hour on the first livestreaming and the second one that was 3 hours, she did over 300,000. So imagine having not one, but an army of live streamers, we can see the reach. It's very relative for us because it has not at all the same kind of request in terms of share of the gross margin. So viola, this is what we are doing. At the moment, where we understand exactly what is the recipe of success, we are going to scale and double down. So it's really transform and perform or perform and transform. So these topics, we are fine-tuning the equation. And of course, as soon as the equation is very clear and adapted to the different markets, we double down behind that.

Great.

I think I'm perfectly in time.

You are. On that, we will break. Thank you Sue and Laurent.

Thank you so much.