Coty Inc. (COTY) Earnings Call Transcript & Summary

[Audio Gap] It's 120th anniversary, which is a tremendous milestone in and of itself. However, equally, if not more impressive is the momentum with which Coty has entered into this anniversary, the culmination of 3.5 years of very strong financial and operational results. With us today from Coty to highlight those results and articulate the path forward. our Chief Executive Officer, Sue Nabi; and Chief Financial Officer, Laurent Mercier. Together, Sue and Laurent will tell us how Coty plans to leverage its 6 strategic pillars to consistently grow ahead of the beauty market, steadily grow profit ahead of sales, further deleverage the balance sheet and position the company as a true beauty powerhouse for another 120 years. Let's thank Coty again for today's lunch. And with that, over to you, Sue.

Thank you very much, Steve. Good afternoon. Hello, everyone. Welcome. So as you know it, we are super excited to be presenting at CAGNY for the second time. This year, as you can imagine, is significant to us for a number of reasons. First, it's been 3.5 exciting years of Coty outperforming, sorry, the beauty market and delivering on our strategy in a very profitable way. Second, it's clear more than ever that the company is a beauty powerhouse, with significant untapped potential. And finally, as you have hopefully seen during the lunch right before this presentation, this year, we are celebrating our 120th anniversary. Coty and our brands are iconic and historic beauty pioneers. And at the same time, our results and outlook confirm that we are as a company as vibrant as ever and ready to lead the way in beauty for the coming century. Let's take a look at the short video on this. [Presentation]

So we're going to start today with an overview of who Coty is. I'll then focus on our strategy, the progress we've made and the significant white space opportunities in front of us. Then, Laurent will review our strong financial progress over the past 3.5 years. And finally, our attractive growth algorithm. So let me start by sharing with you an overview of Coty. We've established Coty as a beauty powerhouse, but there are plenty of opportunities ahead. As you can see on this slide, Coty is a well-established player in beauty. Last year, we reported $5.6 billion in revenues, over $970 million in EBITDA. We operate in over 120 countries. We have roughly 11,000 employees. We have 8 manufacturing plants, including the largest fragrance manufacturing plant in the world located in Barcelona, and we maintain the top 3 position fragrances and mass color cosmetics. A key differentiator of Coty today versus the Coty several years ago is the fact that this company is now led by a team of seasoned beauty executives, as you can see it on this slide. Most of our leaders have 20 to 25 years of beauty experience. And combined, we have 300 years. Our portfolio is diversified across categories and price points. In the last year, Prestige Fragrances accounted for roughly 55% of the mix. Mass color cosmetics is the second largest category at roughly 25%. Skin care and Prestige Cosmetics are still fairly small, but represent a sizable opportunity and Body Care and Consumer Beauty fragrances are each high single digits. Given our premiumized portfolio, over 60% of our business is in Prestige beauty. We are also diversified geographically. North America is roughly 1/3 of the revenues. Western Europe is 1/4 of the revenues. We are still relatively small in Latin America, in China, in Asia Pacific, but we see a lot of opportunity to grow meaningfully in each of these markets. And Travel Retail is 8% of sales and growing at an exceptional rate. A critical part of our strategy is our unwavering focus on driving balanced growth. Our first half fiscal '24 like-for-like growth is balanced across segments, across regions, volume price and mix. We delivered 18% like-for-like growth in Prestige and 7% growth in Consumer Beauty. This was fueled by low single-digit volume growth, low single-digit mix benefit and high single-digit expansion in price. Geographically, our growth was broad-based with double-digit growth in all regions. Coty continues to outperform the beauty market and our leading peers, as you can see it quite clearly on this slide. We have delivered strong like-for-like revenue growth over the past 10 quarters. And in 8 out of these 10 quarters, we have been the fastest-growing global beauty company. You can see here our beautiful portfolio of brands that reach consumers across all price points. Starting with mass brands like CoverGirl and Rimmel with many products priced under $10, all the way up to ultra-premium part of the market with brands like Orveda and soon Infiniment Coty Paris priced between $150 and $450. Our sales growth is also very well balanced by brands. Not only do we have a broad-based portfolio of brands with even our leading brands at or below around 10% of revenues, but we aren't overly reliant on any one brand to drive our growth. Our fiscal '23 like-for-like growth of 12% was driven by a balanced mix of Prestige brands like Hugo Boss, Calvin Klein, Burberry and Consumer Beauty brands like Rimmel, CoverGirl or Brazilian brand, Monange. As we've continued to drive the premiumization of our portfolio, our Prestige division now accounts for 62% of the sales, up from 52% in fiscal '19. The 10% increase in Prestige revenue mix is proof that our strategy to premiumize is working, led by our growing presence in Prestige fragrances, Prestige makeup and Prestige skin care. We still have ambition for further premiumization and expect that Prestige will account for more than 2/3 of our revenues by fiscal '27. A key differentiator of Coty is our end-to-end capabilities and manufacturing footprint, as you can see it on this slide. We have 8 manufacturing facilities across 4 continents and several are carbon neutral by the way. We produce over 1 billion products annually in state-of-the-art facilities in a world where global supply chains have been disrupted over the last few years, where localized manufacturing is increasingly important and where scale players are prioritized by suppliers, our manufacturing capabilities are on a crucial competitive advantage. In fact, we manufacture roughly 80% of our products in-house. And hand-in-hand with our leading manufacturing capabilities are our extensive commercial and distribution reach. We have sales organizations directly running our operations in over 20 countries and directly and indirectly reaching over 120 markets. Our brands reached over 100,000 doors globally from the leading luxury department stores to niche perfumeries, specialty retailers, mass merchants, duty-free stores, e-com suppliers and of course, social media platforms, which are increasingly transforming into commerce platforms. There are very few players who rival our commercial scale and reach in this business. Let me take a minute to share a great recent achievement from the company. Last week, the director instituted in conjunction with the Wall Street Journal announced the list of the top 250 best-run American companies. Coty was named the company with the biggest improvements in our scores and ranking versus last year. Based on third-party data assessing customer satisfaction, employees engagement and development, innovation, social responsibility and of course, financial strength. I'm really incredibly, I have to say, proud of this accomplishment as it reinforces the significant improvements we have made across our business in the last few years operationally, financially and culturally. Our business model is, as you can see it here again on the slide, anchored on driving balanced growth across owned and licensed brands. In Prestige Fragrances, $40 billion market growing mid- to high single digits, our incredibly strong partnership with leading licenses like Hugo Boss, Marc Jacobs, Burberry mean that on average, we have over a dozen years remaining for our top 7 licenses. We're also building our portfolio for the long term as we add new licenses like Marni and Etro. We're 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 and Max Factor are excelling. Looking forward, we are targeting white space opportunities in Prestige skin care, ultra-premium niche fragrances, Prestige makeup, lifestyle, fragrances and wellness. And here again, we will be leveraging a combination of Coty-owned brands and licensed brands to win in these very attractive categories. In the $70 billion Prestige skin care market, we have begun activating core Coty brands like Lancaster, Philosophy and Orveda with promising initial results. 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 and Burberry into this segment are already proving successful with more to come as we introduce niche collections under Infiniment Coty Paris, Jil Sander collection, Marni and Etro collections. In the $30 billion Prestige makeup market now, we've expanded some brands like Burberry and Gucci into this space, while at the same time, driving the strong Gen Z appeal of Kylie Cosmetics. And finally, we will leverage the strength of our lifestyle fragrance brands like Mexx, David Beckham or Vera Wang to capture a portion of the $36 billion lifestyle fragrance and wellness market. With that overview of who Coty is, let me now share, number one, the great progress we've made in executing on our strategy and then the significant white space opportunities still in front of us. Starting with our 6-pillar strategy that you are now familiar with, which we are reaffirming and refining, consistent with the evolution of the beauty market. First, growing our Consumer Beauty business. Our mission is to outperform the mass market through disruptive innovation, amplified by social media advocacy. Second, accelerating our luxury fragrance business and establishing Coty in Prestige makeup. We will open the door to luxury to more global consumers while continuing to elevate the Prestige fragrance experience. Third, building our skin care portfolio over the mid to long term, led by our Prestige brands. Our focus is on winning over the most discerning skin care consumers in our areas of excellence, photo aging, prevention and repair for Lancaster, biotech and handset longevity science for Orveda and micro dose solutions for Philosophy. Fourth, step changing our organizational growth capabilities, including, but not limited to digital and R&D. We are shaping Coty into an organization which can create the must-have beauty products of tomorrow and capture the viral demand. Fifth, expanding in Travel Retail, China and other emerging markets as we introduce the next wave of middle and upper class consumers to the world of Coty brands. And six, becoming a sustainability leader, reinforcing our business for the long term. Starting with Consumer Beauty, where our strategy is anchored on leading the market with disruptive innovations fully amplified by advocacy marketing. We are now 3.5 years into our journey. So it's very important to frame what we've achieved and what's to come. Between fiscal '21 and fiscal '23, we executed our Consumer Beauty turnaround, including relaunching all of our brands, returning the division to sustained sales growth in line to ahead of the market and steadily improving the division's margin structure. Now we are entering the next phase of acceleration anchored on, first, accelerating our cosmetic brand through advocacy and disruptive innovation; second, driving the division's profit engines, nail and lifestyle fragrances; third, accelerating in emerging markets; and fourth, significantly expanding our margins. The work we've done to relaunch our Consumer Beauty brand is paying off. We have leading brand equities across countries like CoverGirl in the U.S., Rimmel in the U.K. and Germany, Sally Hansen and Adidas across a variety of markets. Even with the momentum of newer beauty brands, the latest [indiscernible] data confirms that CoverGirl's brand equity in the U.S. and Rimmel's equity in the U.K. remains above key competitors, including e.l.f. We already returned Consumer Beauty to strong sales growth, including 8% like-for-like growth in fiscal '22, 16% in fiscal '23 and 7% in the first half of the current fiscal. In fiscal '22, we were a little ahead of the market. In fiscal '23, we underperformed by a few points driven by some supply constraints and the work we were doing to refine our innovation and marketing strategy. This work is paying off and revenue growth in the first half of fiscal '24 is once again in line with the market. Of course, our focus is to deliver growth in line to ahead of the market. We intend, as you know, it to launch viral innovation like Yummy Gloss that we did last year. Speaking of viral innovation, we just launched CoverGirl simply ageless skin perfecter essence. Let's have a look at the video. [Presentation]

So CoverGirl Essence Foundation marks a new milestone in our leadership in skinified and key makeup. This is a first to mass product whose distinctiveness is immediately visible in the bottle and well positioned, therefore, for social media. The launch has been amplified by 5,000 influencers, and we are seeing great early results. CoverGirl reached the #4 rank in earned media value in December with an EMV that is multiple times above the EMV, we generated on CoverGirl over a full year. And I'm proud to share that it has already become the #1 new makeup launch on Amazon. Our mission is, of course, to continue and accelerate this playbook across our other key brands and of course, markets. It's important to highlight our business in lifestyle, fragrances and in nail, 2 areas where we are the market leader globally, which accounts for a mid-teens percentage of division sales and are highly profitable. We aim to overdrive these categories to triple the growth of the division and its profitability. In the market where demand for fragrances is booming, brands like Bruno Banani, David Beckham and Nautica offers consumers luxurious, but affordable alternatives. And they are leading in their respective markets. Bruno Banani is the #1 Germany fragrance brand, Beckham is the #4 fragrance brand in U.K., and Nautica is #4 in this country. Shifting now to the nail segment, where we are the #1 leader in nail globally with 21% market share, fueled by nail brands like Sally Hansen, but also, Risque, a Brazilian brand, but also strong nail franchises under our key color cosmetic brands like Max Factor, Rimmel or Bourjois. Sally Hansen is the undisputed leader in nail color and treatment in the U.S. with over 40% share, and we're extending into artificial nails already capturing 2% of that market in 1 year. We intend, as you can imagine, to capitalize on this and accelerate our brands further in the profitable nail category. We also intend to capture our fair share in emerging markets. Brazil is an example of a market where we are already very strong, but have many opportunities. Risque is the market leader in nail with over 30% share and 36% growth in the first half of fiscal '24. And brands like Monange and Paixao, who hold the #1 position in body oil, and #2 position in body lotion and the first rank in household penetration in the country. So what's next for Brazil? First, our leading distribution will provide a great platform to enter the mass fragrance category. We've recently entered 4,000 doors targeting over 15,000 over time. Second, we are establishing a center of excellence in Brazil to develop body care and beauty for melanin-rich skins. Third, we began to expand the Risque nail brand into other Latin American markets. Finally, we are exploring leveraging our low-cost production in Brazil to other emerging markets. As you know, we are laser focused on Consumer Beauty's margin structure, led by gross margin expansion. First, after the successful deployment of strategic revenue management programs in the U.K., we are now deploying this in the U.S. and in Germany. Second, we are taking portfolio decisions with a view to profitability, including which areas to accelerate or slow and where to allocate investments. Third, we are continuing our material value analysis on all non-value-add components. And finally, we're relevant, we will be taking very targeted pricing initiatives. You can see the initial results of this margin expansion efforts on this slide. In the last 2 years, we've reduced our Consumer Beauty SKU count by 6% while increasing revenue per SKU by 18% and gross profit per SKU by 46%. Of course, there is still a lot more work to be done as we look to expand our operating margins in Consumer Beauty by several points in the coming years. Moving to our second strategic pillar, which is all about opening the door to luxury -- to more and more consumers around the world through luxury fragrances and luxury makeup. The Prestige fragrance market grew 21% in fiscal '22 and roughly 10% in the last 1.5 years. And with our strong execution and leading brand portfolio, we've consistently outperformed this market. It's helpful to remind what's underpinning the strong and sustained Prestige fragrance category. Consumers globally are seeing fragrances as both affordable luxuries and still good items. And as a result, consumers are moving up the fragrance penetration curve. Prestige fragrance penetration in the U.S. has grown strongly and existing users are using fragrances more often, but penetration still remains well below that in Europe. Similarly, in China, fragrance penetration remains in the single digits, while amongst Gen Z consumers in Tier 1 cities, penetration is already over 20%, which is a great leading indicator. All of this supports our expectation that fragrance demand will grow above historical levels. Coty, as you know it, is a natural partner for global luxury houses to expand their brands into the world of beauty. This is due to our leading end-to-end capabilities, including multi-category beauty expertise, a track record of leading innovation, accelerating a portfolio of key technologies and patents, leading manufacturing capabilities and extensive distribution and commercial capabilities. Building up such capabilities in-house is prohibitively costly, time consuming and risky, which is why we have been partnering with many of our brands for over 2 decades. We have a high-quality portfolio of licensed brands with long-standing relationships lasting over 25 years. We don't have any sizable licenses up for renewal in the next 4.5 years. The average remaining duration of Coty's top 7 licenses is now 12.5 years. With the effective duration higher given one of these licenses is evergreen and automatically renews based on certain criteria. As we emphasize the growth we are delivering in Prestige fragrances is broad-based. Each of our top 7 brands -- Prestige brands, sorry, grew by double digits in calendar '23 regardless of price points in spite of the fact that on the fashion side, several of these brands witnessed subdued performance. And our focus, of course, is on investing and fueling momentum in brands where we see the biggest potential in the short, in the medium and in the long term. This year's highlights has been the stellar performance of Burberry Goddess, which is a top 1 to top 3 female fragrance launch in many key markets and the most successful launch in Coty's history. The spectacular success of Burberry Goddess have been the result of a new proprietary Savoir Faire within Coty to develop blockbuster fragrances. We cannot discuss this in detail for competitive reasons, but this new way of doing is being deployed within Coty to develop future fragrance launches. Burberry, as you can see it on this slide, is now gaining market share across all key markets, propelled by Goddess, by Her and by Hero franchises, which are all expanding. The success of Goddess and Burberry's other key franchises has fueled a significant increase in the rankings of the total brand, now reaching a top 10 position worldwide. And Burberry Beauty sales are over 2x higher than what they were in 2019 when we started to operate the license. Our strategy to accelerate Hugo Boss, a license we extended beyond 2035, is also paying off, as you can see it in the figures. We are premiumizing the brand first with Bottled Eau de Parfum and this year with Bottled Elixir. As a result, Hugo Boss is gaining market share across Europe. For Chloe, our premiumization strategy has been led by strongly accelerating the ultra-premium collection called Atelier des Fleurs. We focused on Asia and Travel Retail and certain European markets. And you can see on the results here with Chloe gaining share across France, Germany, but also in China. We have a strong fragrance innovation pipeline for calendar '24 again. We just launched the latest addition to the iconic Marc Jacobs Daisy franchise called Daisy Wild. We are very excited about the potential for this launch, supported by a Gen Z-focused campaign and the distinctive bottle you are seeing on the screen. In the coming months, we will also announce another Gen Z-focused premium female fragrance. And in the fall, we will launch an extension under a top-selling female fragrance pillar. Our focus remains on bringing newness to market, while at the same time, fueling our existing icons. Our strategy remains firmly rooted in the premiumization of our portfolio. Within Prestige fragrances, we are steadily shifting our mix from Eau de Toilette to Eau de Parfum and Elixir, which by nature are priced more than 30% higher than Eau de Toilette. In the last 3.5 years, we have significantly expanded the proportion of those more premium products Parfum and Elixir from approximately 46% of the mix in fiscal '21 to 55% of the mix in fiscal '24. The other element of our premiumization strategy is of growing our ultra-premium fragrance of our business, which are priced at more than double the base business. Beginning a couple of years ago, we launched ultra-premium collections under Chloe, Gucci, Burberry and Hugo Boss, all of which are performing very well. And we will soon formally launch the Infiniment Coty Paris ultra-premium pure player line which will be a key addition to our ultra-premium portfolio on the part that is growing the fastest, which is the pure player niche brands. We are on track for these collections to generate over $80 million of sales this year and are targeting over $200 million of revenues by fiscal '27. Importantly, this is a relatively small percentage of the rapidly growing ultra-premium fragrance segment and our ambition is, of course, to capture our fair market share of over 10%. Our Prestige fragrance portfolio remains robust and diverse and dynamic with brand ranging from timeless icons to effervescent and playful spanning different distribution scales and regions. We are strengthening and balancing the portfolio further as we add new brands. Two weeks ago, we announced that we signed a long-term license with Marni. And today, we've announced another new license, Etro. Etro is an Italian luxury brand founded in 1968 known for its quality craftsmanship and strongly positioned in Europe and Asia, Japan. Through our license agreement beyond 2040, we are excited to build a strong business of new premium and ultra-premium fragrances under this brand. We also signed a long-term license with Marni, an Italian luxury brand known for its artistic collections. The brand has particularly very strong appeal amongst Gen Z consumers in Asia and in Europe. We will be launching the Marni beauty line in the next couple of years. In sum, the licensing model is more attractive than ever. By combining leading luxury names, our end-to-end capabilities, a long-term partnership structure and the diversified base of distinct brands, this sets the path to reach a leading position in fragrance and in beauty. Soon as you know it, we will also be officially launching our ultra-premium brand Infiniment Coty Paris, and you can tag by the way, if you want to follow the line. This is a major milestone. It's the first time in half a century that there will be a Coty branded fragrance. Even with Coty's 120-year history Infiniment Coty is anchored in modernity with a patent pending formulation for the first time in fragrances, fully sustainable juice and packaging and a collection of sands, which are simultaneously luxurious, niche and wearable. We hope you enjoyed experiencing the brand and smelling the product during today's launch and as part of your gift bags. And we encourage you to follow, as I said it before, the brand Instagram account, which started a few days ago as we launched this new chapter. We are also building up our Prestige Cosmetics business. As you can see it on this beautiful side, focusing on steady and profitable expansion. As shown here, our recently opened Burberry Beauty Boutique in Selfridges London offers consumers the full Burberry assortment of fragrance, ultra-premium collection, and of course, makeup. For Kylie Cosmetics, we are continuing to expand the brand globally, led by Travel Retail locations where we are on track to have over 250 doors this year, including the Mumbai Airport, as you can see it on this slide. In fact, Kylie cosmetics is the #1 Indie maker brand in Travel Retail Americas and the #2 Indie maker brand in Travel Retail Europe, confirming the brand resonates with the Gen Z consumers worldwide. Across our Prestige Cosmetics brand, we have been expanding our assortment as we've launched foundations under Kylie, under Burberry and under Gucci. The business is performing well, as you can see it growing double digits in Q2 with makeup reaching 30% to 40% of China brand sales for both Burberry and Gucci. In fact, Gucci has now reached a top 10 position in Asia in lip and face powders. And of course, the next milestone of our Prestige maker business is Marc Jacobs Beauty. Having extended the Marc Jacobs license and expanded the scope to include makeup, we are now actively developing a very exciting collection and look to launch it in the next couple of years. And now I'd like to focus on skin care, which we believe represents a significant white space opportunity for us in the mid- to long term, enabled by Coty's technologies and brands. As you know, Lancaster has been at the forefront of the biggest skin care innovation over the past 70 years. This brand introduced the first retinal patent, the first DNA repair technology, the first skin oxygenation technology, vectorization of active ingredients and of course, patented full life protection. Our patents behind these critical technologies extend ranging from 2027 to 2032. We are winning over discerning skin care consumers in our areas of excellence, photo aging, prevention and repair for Lancaster, biotech enhanced longevity science for Orveda and micro dose solutions for Philosophy. As you can see it here, we have a robust brand portfolio covering the full range of price points and subsegments from Monange and Paixao at the entry level in Brazil to Philosophy at entry premium, Lancaster at Prestige and ultra-premium -- and Orveda at the ultra-premium side of the market. When we launched our leading skin care brand, Lancaster, Philosophy and Orveda less than a year ago and are already recognized by the most prestigious beauty awards and beauty editors, Lancaster Ligne Princière has garnered awards from the leading Chinese beauty publications including, as you can see, Vogue, El and Marie Claire. Philosophy has also been recognized by People's Magazine, Cosmopolitan, Oprah Daily and of course, QVC awards. Orveda was awarded several exclusive beauty awards, including the most prestigious award of the beauty industry, [indiscernible] Marie Claire, but also El Beauty Award and Bazaar Best of Beauty. Awards and recognition of our brands are very important step and elevate the brand position, increase consumer awareness and willingness to try and reinforce scientific credentials and efficacious technology behind our formulations. Our skin care brand, as you can see it here, are distinct in their brand equities, technologies, price points and each has its distinct commercial strategy. For Philosophy, we are focused on Ulta, QVC and e-com including a very strong direct-to-consumer presence. For Lancaster, we are focused on department stores and e-com platforms. And for Orveda, we remain very selective building the brand through dedicated Maison, high-end perfumeries and select e-com channels. And while we are still early in our skin care journey, we are seeing a very positive momentum. Philosophy sales grew for the third consecutive quarter after years of lackluster performance. Our focus on the brand's loyal consumers and natural advocacy is paying off with Philosophy now ranking at the #4 in EMV in the U.S., which is an improvement of 3 ranks versus the previous year. For Lancaster, we are seeing the best return on investment coming when we focus on UV protection and photo aging repair benefits, which will help accelerate the growth of the brand in China. Importantly, Lancaster sales have also grown for the third consecutive quarter. And for Orveda, the door productivity has increased up to 3x higher versus a year ago. We are, of course, continuing to learn, to adjust and reinforce our meeting and commercial strategies behind this key skincare brand. Let's now get a glimpse of our recently opened Orveda Maison in Shanghai, embodying an ultra luxury experience while mixing futuristic and traditional Chinese codes. [Presentation]

So now let's focus on step changing our organizational capabilities, particularly in digital and R&D. We are shaping Coty to create must-have products and, of course, capture the viral demand. As you can see, our significantly strengthened digital capabilities are evidenced in our results in both divisions. In Prestige, e-com sales grew 24% like-for-like, contributing over 1/3 of divisional growth. In Prestige e-com penetration is now close to 30%, up 130 basis points from last year. We have gained 50 basis points of market share in Prestige e-com, which makes us today the second player in this channel globally. In Consumer Beauty, e-com sales grew 29% like-for-like, contributing here again to a third of the growth of the division. E-com penetration in the division is now 11%, up 150 basis points from last year, and we've gained here 60 basis points of market share in the mass beauty e-commerce environment. Shifting now to our R&D expertise. We have over 100 years of expertise across each of our core categories of fragrances and color cosmetics. We have a robust patent portfolio in skin care and fragrances. And we have strong teams of scientists and industry experts working on each of these categories. As you can see, while we have been increasing our R&D spend in recent years, our intent is to significantly grow our R&D investment by 1.6x in the next 3 to 4 years. Moving now to our fifth pillar, which is expanding our presence in Travel Retail in China and on key emerging markets. Our goal is to introduce the new middle and upper class consumers to the world of beauty. Our Travel Retail business continues to boom, growing over 20% in the first half, even after cycling over 30% last year. The channel now accounts for 8% of our business and a mid-teens percentage of Prestige. This is, as you know, is a key growth driver for us as Travel Retail is nicely margin-accretive. In calendar '22, we gained Travel Retail share reaching the second position in this channel. And initial data indicates that we once again outperformed the Travel Retail beauty category in calendar '23 across the 3 regions, again, gaining market share. At CAGNY last year, we set a target to grow Travel Retail by over 50% to $600 million in fiscal '26. Today, we are on track to reach this $600 million sales target by fiscal '25, which is a year ahead of schedule. China now accounts for roughly 4% of our sales and is nicely profitable, led by our Prestige business. While the broader market recovery remains slower than many anticipated, our small presence allow us to grow strongly with our Prestige business outperforming the market by 30 points. China isn't the only market we're actively building our presence and expanding our brands. We have strong related positions and revenue growth across multiple emerging markets, including Brazil, Mexico, South Africa, Saudi Arabia or India. In total, emerging markets account for roughly 17% of our sales and we expect this to be a key driver of the growth in the coming years. Finally, our sixth strategic pillar, which is progressing towards sustainability. In the past year, we've had a number of critical milestones, including surpassing our recycling targets, having 100% of our own supply chain using renewable electricity and reaching Scope 1 and 2 carbon neutrality in 3 of our factories and our Amsterdam headquarter, and importantly, we have committed to setting net zero aligned targets. We are also continuing to drive more sustainable innovation following our breakthrough introduction of carbon captured ethanol in our fragrances, Infiniment Coty Paris will be the first full fragrance collection to use this 100% recycled ethanol. We are also steadily increasing refillable solutions for our products, including Burberry Goddess, and 6 of our brands are today certified cruelty-free. On the people pillar to finish with, we expanded our gender natural parental leave policy to set a global minimum of 14 fully paid weeks for all employees regardless of location or gender. We also continue to make progress towards gender balanced leadership, in fact 47% of our leaders and the majority of the Board and our Executive Committee are now women. And this is complemented by our sustained commitment to gender pay equity. With that, Laurent will discuss our financial progress and medium-term outlook. Thank you.

Thank you, Sue. In addition to all of the great strategic progress we just discussed, Coty has made very substantial financial progress in the last 3.5 years. We have significantly improved our P&L and balance sheet. Let's start with the P&L. Based on our expectations for fiscal year '24, in the last 3 years, we are on track to deliver like-for-like net revenue CAGR of approximately 12% and adjusted EBITDA at CAGR of approximately 12% to 13% and grow our adjusted EPS by approximately 9x. Fueling the strong profit growth has been very strong margin expansion. Gross margins have increased by roughly 400 basis points since fiscal '21. The combination of strong top line growth, gross margin expansion and savings delivery have allowed us to step up our marketing investments, which remains the high 20s percentage. On adjusted operating margin, we are on track to increase by roughly 450 basis points to approximately 14% for fiscal year '24. At the same time, we have significantly improved the health of our balance sheet. Last year, we generated around $400 million and expect fiscal year '24 to be broadly consistent and deleveraging has been a top focus. I am proud to say that we have lower leverage by approximately 4x in the last 3.5 years and in calendar year '23 with leverage of approximately 3x. We have also been generating strong savings to fuel our agenda. We are on track to deliver $110 million to $120 million in savings in fiscal year '24 and another $75 million in fiscal year '25 for a grand total of approximately $800 million from fiscal year '21 to fiscal year '25. We are also reiterating the fiscal year '24 guidance we discussed on our earnings call a few weeks ago. As a reminder, we are guiding to a strong fiscal year '24 with revenue growth of 9% to 11% like-for-like, modest gross margin expansion, low double-digit adjusted EBITDA growth ahead of our growth algorithm of 9% to 11%. And total adjusted EPS, excluding the equity swap, of $0.44 to $0.47. While our fiscal year '24 guidance implies a somewhat slower second half, I want to be clear that we are not seeing a sudden slowdown in beauty demand. Rather, our first half was very strong and partially aided by lower comparable last year while in the second half, there are a few one-off elements that come into play. First, we will see a low to mid-single-digit impact in our Prestige business from difficult comparables last year from retailer restocking. Second, we expect ForEx to be at a low single-digit headwind to both reported sales and profit. And third, the second half will include headwinds from Lacoste divestiture, without which our profit in the second half will be up in the double-digit percent with a much stronger margin expansion. To be clear, this was always contemplated in our fiscal year '24 outlook. While these are all comparable factors; from a sell-out perspective, we continue to expect to outperform the market similar to the first half. To sum up, I want to emphasize that growth remains strong. The beauty market remains healthy, and our fiscal year '24 guidance implies low double-digit growth in EBITDA, which is above our medium-term algorithm of 9% to 11%. With a strong financial improvement in the last 3.5 years, let me turn to the path ahead. Looking out over the next 3 years, we continue to expect a like-for-like revenue CAGR at the upper end of 6% to 8%, with balanced contribution from volume, mix and targeted pricing and each of our key categories. Beginning with Consumer Beauty, excluding Skin. We expect our business to grow at a mid-single-digit percentage CAGR, outperforming the market growing low to mid-single digit. This outperformance will be supported by our acceleration in emerging markets, lifestyle scenting and nail while market share gains in our core markets could offer potential upside. In our largest segment, Prestige Fragrances, we expect to grow at a high single-digit percentage ahead of the market growth of mid- to high single-digit percentage, which is still above the historical category growth levels of low to mid-single digits. Our growth in the Prestige Fragrances will be driven by our strategy to overdrive core and new markets and accelerating in ultra-premium fragrances. In Prestige Cosmetics, we expect to grow at a CAGR of 10% to 20%, focusing on steady and profitable expansion with potential upside from our launch Marc Jacobs Beauty. And finally, in Skin Care, we expect to grow at CAGR 15% to 25% as the portfolio expands through a typical S-curve cycle. Consistent with what we have shared, our focus is on driving a balanced growth agenda. Before we go into our expected revenue mix evolution by category, I wanted to mention that we have more rigorously classified the revenue streams for brands covering multiple categories. Specifically, Philosophy's legacy fragrance sales have been reclassified in 2 fragrances, while the skin care lines under Paixao and Monange have been included in the skin care. So net impact for fiscal '23 total skin care sales is fairly negligible. Based on our targeted growth algorithm, by fiscal year '27, we expect Prestige fragrance to still be our largest category at the mid-50s of the total. This is higher than what we shared last year based on our expectations for the category to remain strong and for Coty to outperform, supported by growth in ultra premium, new markets and our new licenses. Lifestyle fragrance to grow a few percent in the mix as we overdrive this category, skin care to reach a high single-digit percentage of sales from 4% currently. This is a little lower than our prior ambition in large view to the slower recovery of the China market, particularly in the skin care category and our focus on building out our skin care brands in a healthy and sustainable way. Prestige Cosmetics to be a mid-single-digit percentage of sales from 3% currently as we focus on profitable growth. Similarly, from a regional standpoint, we remain confident in the solid growth potential of Europe, Asia Pacific and the Rest of the World. However, our outsized growth will come from the U.S., given the size of the market and healthy demand fundamentals Travel Retail, where our growth trajectory has accelerated, and we are a year ahead of plan in reaching our sales target objectives and China, where we expect to more than double driven by Prestige. Based on the regional growth algorithm, we expect continued diversification in our regional sales footprint, specifically by fiscal year '27, we expect Travel Retail to reach roughly 10% of sales from 8% currently. And for China, we expect to reach mid- to high single-digit percentage of sales a couple of points below prior targets based on the current trajectory on the market. In effect, the strength of Travel Retail and developed markets is balancing the slower of China. We are also diversifying our portfolio by capturing white space opportunities in emerging markets, which make up 17% of our portfolio, and we expect to grow to around 20% by fiscal year 27. Turning to the P&L growth algorithm. Our outlook remains largely consistent with the algorithm we shared at our Investor Day in November '21 and our Investor Day last July. We continue to see a like-for-like CAGR at the upper end of the 6% to 8% over the next 3 years and beyond. We continue to expect gross margins in the mid-60s by fiscal year '25, and mid- to high 60s by fiscal year '27, driving a 9% to 11% EBITDA CAGR. And we continue to target a mid-20s EPS CAGR, supported by lower interest expense as we deliver a gradual reduction in the share count. Over the past few years, we have steadily reduced our leverage, and we are on track to reduce our leverage towards 2.5x exiting calendar year '24. By fiscal year '27, we expect adjusted EBITDA in the $1.4 billion to $1.5 billion range, free cash flow over $500 million, leverage of around 2x exiting calendar year '25 and beyond. Finally, this brings me to the framework for our capital structure and anticipated capital returns. First, we exited calendar year '23 with net debt of approximately $3.3 billion and leverage of 3.1x. Over the next 2 years, we expect to generate at least $400 million free cash flow annually or over $800 million cumulatively. We continue to target the divesting Wella's stake by the end of calendar '25. Our capital allocation priorities remain deleveraging and cash returns to shareholders, including executing the first tranche of our equity swap agreement by the end of this month, which will result in a share count reduction of 27 million. This should drive a very attractive capital structure by the end of calendar year '25, including net debt below $2.5 billion and leverage around 2x, which we expect to reach through our free cash flow generation and EBITDA expansion. Cash returns to shareholders, including additional share buyback associated with our previously announced equity swaps. In calendar year '27, we expect to maintain financial leverage at 2x while deploying additional capital returns and potential for small-scale M&A. With this, let me hand it over to Sue to conclude.

Thank you to Sue, Laurent and Coty for the presentation. We're going to right to the breakout next door. Thanks to Coty also for lunch again and for the gift bags. Thank you.