科蒂集團 (COTY) 2026 Q2 法說會逐字稿

Good morning and good afternoon everyone. My name is Chloe and I will be your conference operator today.

At this time, I would like to welcome everyone to Coty's second quarter fiscal 2026 question-and-answer conference call. As a reminder, this conference call is being recorded today February 6, 2026, at 8:00 AM Eastern time or 2:00 PM Central European Time.

Please note that on February 5, 2026, at approximately 4:30 PM Eastern time or 10:30 PM Central European Time, Coty issued a press release and prepared remarks webcast which can be found on its Investor Relations website.

On today's call are Markus Strobel, Executive Chairman of the Board and Interim Chief Executive Officer and Laurent Mercier, Chief Financial Officer.

I would like to remind you that many of the comments today may contain forward-looking statements. Please refer to Coty's earnings release and the reports filed with the SEC where the company lists factors that could cause actual results to differ materially from these forward-looking statements. In addition except where noted the discussion of Coty's financial results and Coty's expectations reflect certain adjustments as specified in the non-GAAP financial measures section of the company's release.

With that, we will now open the line for questions.

(Operator Instructions)

Filippo Falorni Citi.

Markus maybe can you give us a bit more color on the color the future performance improvement plan for consumer beauty. You mentioned in the prepared remarks yesterday that there's a lot of different initiatives commercially including streamlining the portfolio. What are you thinking those potential impacts are going to be on sales near term and then a little bit longer term?

And then Laurent on the margin side consumer beauty has been significantly below corporate average. You have an aspiration of what their business operating margins can get back to.

Thank you.

All right. Thanks, Filippo. I'll take that on.

There's about three or four principles how we are addressing consumer -- the consumer business priorities and focus on our business building plan. It's imperative for us to get back to sellout growth and to market share growth. We've got to be the masters of our own destiny and win in the market. That's our ambition.

Now how are we going to do that?

Number one we're going to focus on our most iconic assets. These are brands like CoverGirl where we have assets in there like Lash Blast and Simply Ageless, and iconic brands like Rimmel. We started doing this in the last couple of weeks and I'm very encouraged by the early results. We have seen declines on these franchises in the high-single-digits. Now they went down to the low-single-digit to the mid-single-digit, so it's nothing to write home about, nothing that we are happy about but we're going to see the power of focus on the key assets.

Number 2, you know that cosmetics is driven very much by the big innovation bundles that come in spring. In the past we had gigantic innovation bundles with lots of SKUs that most of them didn't work and they crowded out productive SKUs on the shelf, so you had kind of the double whammy and you got returns from the trade. So we're avoiding this. We're going to bring our first bundle in fiscal '26 which is sharper, streamlined with better SKUs, fast rotation, and we'll also protect our existing fast rotating SKUs on the shelves.

This leads me to the question you had when do we see sellout? Obviously, if we sell in a smaller bundle you're going to see initially less pipeline fill and you're going to see this in Q3 but the focus we're getting with this and the sellout velocity on the shelf will improve sellout as we go along and hopefully get our business back on track. That's number 2.

Number 3 is that. When we do these big bundles and these big advertising campaigns, we have a lot of money on asset creation but we have very little money in what we call working ACP working, spending to show the wonderful assets to the consumers in digital in advocacy via influencers and so on and so on and so on. So by having smaller, sharper bundles, we're going to free up asset creation money put it into working media and we also did a lot of exciting experiments with AI in color cosmetics to create assets in a much more efficient way. We have a couple of experiments that show us we can probably create assets at 70% to 80% cost reduction versus what we're doing now. And again money we can reinvest into consumer, consumer-facing businesses. These three actions together will compound and beyond the Q3 which is the harm for us, right? Our expectations will get us into a much better future on color cosmetics.

Yeah maybe Filippo to take your second question on the profitability for consumer beauty. I mean you heard from Markus that number 1, there is a clear diagnosis on where we have the gaps and the work that Gordon and the team initiated that in front of each gap okay there is a clear action plan. So now of course, it takes some time really to implement these actions. Markus was giving the example of innovation, so the team really has designed really a detailed innovation plan but of course, this is going to pay off in fiscal '27.

But on top of this is of course reignite the sellout and then volume. Will also reverse the gross margin trend because currently in the gap there is some fixed cost under absorption, so we have really these elements a lot of work done on platforming across all our great brands.

[AnCP] detailed work really how to optimize AnCP and of course there is an overall work on SG&A optimization. So I'm not going to give you a precise number but I can tell you that all these initiatives are currently under high scrutiny and you will start to see really some improvement in fiscal '27 which will be part of the profit recovery for the global company.

Rob Ottenstein, Evercore ISI.

Great. Thank you very much.

Just to kind of understand things a little bit better, I want to just sort of throw out a friendly challenge which I'm sure it'll be easy for you to rebuke but I think help understand things a little bit better. Based on the management comments from what I understood, there's a problem with focus, brand, SKU proliferation. You want to get the portfolio right so you can really focus on the key brands and that all of that makes sense but this is also happening within the context of very significant changes in where and how the consumer buys, drugstores where you're pretty heavily exposed have been very weak, department stores have been weak for many years, amazon has become a huge driver.

So I was wondering if you could just kind of talk about your strategy within the context of these very important route to market changes and how the consumer shops and why you feel it's more important to get rid of SKUs first rather than get the RTM footprint right first and how you're balancing those two. Thank you.

Yeah, I don't think this is a contradiction. I mean number one focus is to drive sellout and market share because we have been underperforming the market in the last 18 months and this is obviously not sustainable for us. We've got a minimum growth with the market and ideally slightly ahead of the market. This is our objective.

Focus on SKUs. This is one thing and I can tell you examples about that this really makes a gigantic difference in the performance but obviously in the channel footprint, this is something we are addressing as well. We're actually in -- we're actually doing in our Prestige portfolio pretty well on Amazon. We have grown sales by like 30% in the last 6 months, we've launched Marc Jacobs brand in Amazon in July. This is doing very well, double-digit growth, and you know the fun fact is that our launch on Amazon has a halo effect on actually on brick and mortar.

A similar thing we're seeing in the TikTok shop in the UK where we have been pretty active with our Rimmel brand and everything we're doing in the TikTok shop and the volumes are still small today but the marketing effect we're getting and the increase in the algorithm rankings has a huge halo effect on the other channels.

So we are investing into the new channels but again, it's always important to take the other channels along because a consumer also shops there. When I talk about less is more to build the core, this applies to the portfolio but also it applies to the channels because we also need to have the new channels be successful and the halo effect building our core in our existing channels. I think this is where the magic happens.

Right? Are you making any changes in terms of channel strategy?

We're going to invest obviously -- in our business we've got to go where the consumer goes, okay? So we're investing heavily in online, we're investing heavily in e-commerce, we're investing in TikTok shops, and everywhere where consumers go but it's for us also important that we especially in our cosmetics business protect the channels where our existing consumer shops as well.

As we get new consumers that's great. But brands like CoverGirl and Sally Hansen, there's a huge Gen X population that shops for them and actually we have retailers asking us everybody's going after Gen Z, who's doing something for Gen X and you can do that because you have the brands to do it. Please help us. So I think with the right joint business planning activities with the drugstores and these customers, we can do a big splash in the market on both groups.

Nik Modi, RBC.

So I guess just Markus, any views on kind of how you intend to manage the business after the Gucci license ends and would you consider a deal with [Karen] to kind of terminate early just so you can kind of move on and reallocate resources?

That's my first question and I have just a quick bigger picture strategic question.

Okay let me get to your first one, Nick.

I mean how are we addressing this and I think we've mentioned this in previous calls. I mean job number one for us is to drive our big brand franchises and we have many big franchises that are basically over $0.5 billion like Hugo Boss, Burberry to the next level. They have still a huge growth potential. Marc Jacobs has huge growth potential, [Chloé] has huge growth potential. So basically these brands that we have where we see the potential where we bring out new -- so we are basically pretty busy cooking new initiatives and new innovations for the years '27, '28, '29 that coincide with the Gucci exit in June 28th. I think it is to really have the right pipeline to build our topline sales and compensate part of this.

Second job to be done is building the new brands that we have acquired. We have new licenses with Swarovski, Armani, Etro and we have big plans for Swarovski. We're going to come up with what we hope to be a real blockbuster in 2027.

And number 3 obviously on Gucci as we get closer to the license exit, we probably also need to look into our cost structure how we kind of tweak this a bit to keep our profitability intact. So these are the three actions we're taking there.

Now your question on caring and I mean we are always open for deals that create value for us, that create value for our shareholders. So yes we are open.

Got it.

And then just I guess this kind of gets at Filipo's question on the consumer beauty business but newness is so important in fragrances. How does that kind of -- does that conflict with this whole notion of kind of streamlining the complexity of the portfolio?

Yeah, no, not necessarily. I think a newness let's understand what newness is in fine fragrances. People love it when they like to experiment. They like to [layer sand]. So of course you're going to come up with new propositions but the new propositions need to be tailored in a way that they drives the total portfolio or the total brand. I'll give you one example. We've launched the BOSS Bottled Beyond in summer. That's a pretty successful initiative. It's the number 2 male initiative of the year. We have already 90 basis point share in the US because we wanted to crack the US for Hugo Boss with this initiative and it's working very well.

Problem is our Hugo Boss franchise in total is not growing, so the innovation is great, but it has no halo effect on the core. And often what happens is you bring in a new innovation, many SKUs, it's pretty cool. Everybody sells the innovation. And then we're losing shelf space on SKUs that are loved by consumers and are fast rotating right? So that is something we need to avoid in the future and be much more surgical how we bring our innovation to market and also how do we build in a halo effect, right?

So that if you launch one it halos on the other by joint merchandizing or there's tons of other things that we can do. So yes, innovation is the lifeblood of this category but innovation executed in a way that it has an effect on the core. So if a Hugo Boss bottle beyond I want it to grow the total Hugo Boss franchise and not only the innovation itself and we're applying this discipline this logic, this idea of building a halo effect into innovation in everything that we do and I think that should have a pretty strong effect moving forward.

Olivia Tong, Raymond James.

Nice to speak with you Markus and Laurent. Markus I was wondering if you could give some views on your assessment of the internal controls at the company and sort of prioritization. What's your starting point because is it the brand the marketing innovation, SKU management it sounds like it's all of the above. So do you think this is a company in need of significant reinvestment? Are there costs that you can take out? And I guess most importantly do you trust the answers that the analytics are providing?

Yeah, that's thanks Olivia for that question.

Number one, I mean we have a very, very creative organization. We have amazingly creative people that come up with very awesome things where even I with my long beauty experience have to say, wow, this is really cool right? What we are missing a bit is the operational discipline to bring this to market in a way that is sequenced, that is properly funded, and that is well thought through in agreements for example in the plants we go to market.

We are very often very so excited about the innovation that we're focusing on the selling right which is good for a quarter or two but what we focus on is the sellout. How does it reach the consumer? Does it meet the consumer needs? Do we have strong joint business planning plans with every single retailer to really bring it out and get the sellout going because if you get the sellout going the selling will come. This always equals at the end of the day. But we've got to start from the sellout from the consumption from the market shares.

That's the big switch that we're going to do and this is not only -- it's not only words on paper this is -- it's easy to say right? I can put this on a PowerPoint chart, it looks great. It's very hard to do to change the mindset of the organization on this one and put the processes in and the data and the analytics. That's where we spend a lot of time these days. How do we get to one source of truth in every aspect of our business?

So when we talk about service to customers. What is the one number that tells us are we meeting service to customers? What is the one number that tells us are we meeting offtake and market share expectations? So we spend a lot of time at the moment data and AI to really build out our data lake to make sure we have the right questions, the right answers, the right hypothesis and come up with the right actions. So you're right, there's a lot of investment needed in this space and we're making these investments.

Charles-Louis Scotti, Kepler.

A couple of questions from my side. The first one, could you please provide us more granularity on the expected meeting of the sales decline in Q3? It appears that the consumer beauty will remain the main drive but Prestige beauty can become significantly easier in Q3 and apparently inventories are healthier. And despite that it seems that there will be a sequential deterioration in Q3. So what's explaining this dynamic?

And more broadly, what's driving the gap between the expected market growth and Prestige and Consumer and your own expected growth? Is it destocking or market share losses?

Second question on the course -- sorry one by one.

Yeah maybe I can start with that one Charles and then please go on. So indeed on the Q3 mid-single-digits, so as we indicated I mean it's the main headwind is from consumer beauty and indeed as we shared just before. I mean we are really still in a phase of that we know where the gaps are the team is really putting in place all these actions but it takes time and indeed we are still in this phase where the example that too many innovations then we have to take some returns in some cases, so it's still hurting the top-line and this is something that indeed we are managing. There is also a part that you know it's exactly the strategy we are focusing on the big bets. So there are also some parts where we are deprioritizing, okay so it may it's weighing on the net revenue but for good reasons. Okay, it's really within a project it will pick up and then it will improve the gross margin and it will improve the profitability.

So there is this dimension that you need to consider in Q3 for consumer beauty. But at the same time we are starting to see some green shoots. Markus was referring to CoverGirl, Simply Ageless, Lash Blast are doing good. So we need really to amplify these initiatives but again it takes time.

Then on Prestige, I mean first of all you see that indeed we have some really sequential recovery from Q1 to Q2. This is what we indicated. I can tell you that the headwinds that we faced over the last year which was related to retail -- retailer inventory, now is fading out so we are really now sell in and sell out step by step are really now synchronized so that's positive.

Now again Q3 we still have some challenges. Now it's really focusing on sellout. Sellout will be selling but sellout indeed and we indicated in the call that we still have some headwinds. I mean, US Prestige is one case. I mean our Q2 was not at the level expected. Q1 sellout was very encouraging. The beginning of Q2 was encouraging but the end of Q2 in fact was lower than expected. And these are exactly the reasons that Markus was sharing.

Okay so that's really the big indication. We have great assets great innovations which are really doing great but on the other hand we didn't focus enough on the core and this is currently what's putting pressure on our sellout and market share and that all the actions are in place to correct this. But indeed it takes time and it's weighing also on our Q3 Prestige top line. So that's really the big picture. But keep in mind that these are adjustments and then step by step there will be some sequential recovery on both divisions.

Okay, thank you very clear.

And on the 200 and 300 bps gross margin contraction, could you break down the key drivers between input cost inflation, product geographic mix, tariffs, and promotions? And what is your full year gross margin assumption given that the margin counts also become much easier in Q4? Is it fair to assume the same 200, 300 bps margin contraction in Q4 or a little bit less? Thank you.

Yeah. Thank you.

So indeed the Q2 gross margin came lower than our initial expectations and this is indeed what's driving, putting some pressure on the profits. So what are the big drivers. On the Prestige division, the number one is that indeed we saw in Q2 and especially end of Q2 release some very high promotionality in the market, so it really puts some pressure on trade terms on markdowns. So this is really something that we saw really from the whole category and the whole sector, so it indeed created some headwind on the gross margin and this is mostly the case indeed in Prestige.

And on top of this, of course, I mean comes the tariff. We indicated tariff is about $8 million for this Q2. Will be below $40 million for the whole year and the third element still on Prestige is also the ForEx as we discussed last time we have production in the US and we started really to put some more production in the US but we still have big productions in Europe and of course, the EUR dollar is creating a headwind on the gross margin.

Having said that just keep in mind that the gross margin, Prestige is still higher than versus two years ago. Okay so despite these headwinds, we are in a good territory. So we are seeing this pattern remaining in Q3. And then indeed, there will be some recovery in Q4. Consumer beauty is -- we discussed the number 1, there are similar components but there are two other elements which are important.

Number 2 that lower volumes especially on our cosmetic brands is creating fixed cost under absorption which is really hurting our gross margin. So that's why the sellout and recovery on our big brands step by step will mitigate these hurt.

And the second one is a mix. We are doing great in Brazil. On the other hand as you understand our big brands in the US which are very high profitable. They're under pressure. So there is also this mechanical mix effect. And again the plan of the color of the future is really to recover this and step by step to recover. So Q3 will still be the same pattern and then some sequential recovery in Q4 which will continue in fiscal '27.

Oliver Chen, TD Cowen.

On the consumer beauty side given the strategy edits here, should we expect it to get worse and worse before it gets better just in order to conduct that reset? And also as you think about consumer beauty, what specific innovation are you most -- feeling most confident about that we should focus on?

And on the fragrance side of the house and Prestige fragrance, I would love your thoughts on your growth relative to the market and what innovation you're most focused on to attempt to outgrow the market trends.

Thank you.

Yeah, the first question was again, I forgot (multiple speakers) --

(multiple speakers)-- consumer beauty --

The consumer beauty, yeah, I was already on the innovation, on consumer beauty. I think I would not -- I think things will get better. This quarter for us is difficult as we are really changing the way they go to market, sharper bundles, better focus on the base business. It will take some time but I would not characterize this going getting from worse to worse. It will not be easy. It will take some time but it will get better. I'm pretty much convinced of this. I have seen the plans. I have seen the way the team is defining the equities of the brand to both appeal to a modern consumer but also make sure that our heritage consumer is being protected and keeps loving our brands. So I'm very excited about that.

We have good innovation coming up. We have strong innovation coming up on our core franchises on the Simply Ageless, on the Lash Blast but also on new items, more trend items like skin tints and all these things that are currently being requested by the market so we're on it. So I guess the bundle that we're going to bring out the fiscal '26 bundle is going to be good, much better than before. The fiscal '27 bundle will be great. So that's the way we envision it.

In Prestige, we have some pretty exciting blockbusters coming up in the next couple of months. We're going to launch a big Calvin Klein female initiative, actually now soon -- very, very soon. And we're super excited about that because we're trying to already make sure that we have halo effects on the Calvin Klen client franchise, and Calvin Klein is a big franchise. If you can move the needle there, you can get immediate better sellout and growth.

We will have a big bet with the Marc Jacobs beauty like the makeup launch in end of the fiscal year, which we tried to turn into a big blockbuster as well. Very excited when I look at that innovation. So this is our near-term focus to get these two things right and obviously, we have many more things in the pipeline that we can talk when we speak again.

Susan Anderson, Canaccord Genuity.

I guess maybe just to follow-up on the promotional environment, I guess as things kind of worsened in second quarter in the back half was this driven by competitors I guess trying to gain more share or was it just consumer demand was lackluster and then do you expect this promotional environment and lockdowns to continue in the third quarter? And then just to follow-up on Oliver's question as well. Maybe if you could talk about kind of where your Prestige fragrances are growing relative to the market. Thanks.

I can start. So indeed yeah, I mean we saw some competitors in being very aggressive on promotion. So that's why I was telling you it came more second half of Q2. Yeah we are taking the assumption that it will stay in Q3, so that's why we are including this in our equation in our gross margin.

So now at the same time, this is really the segue to all the strategy and what Markus has just shared. So it's really that on our side, it's really forcing us and pushing us to really to reallocate our resources and really focusing on the sellout. We have great innovation that we can amplify, so that's really the motto. And again as you know, we are really across the full portfolio. We are seeing the Gen Z and entering the category being very excited. Volumes are growing. That's very important.

So again we are taking this more as a conjectural effect but we are confident that all the work we are doing will help really to manage and mitigate these headwinds. So again to be very clear from a consumer standpoint, there is full confidence. I mean all the KPIs household penetration, especially in market like the US, new consumers entering the category. This is at stake and as I mean new tools TikTok, again these are new tools where really we are seeing great traction. So again we shared we stay absolutely confident that the fragrance category will keep growing mid-single-digits and really volume and mix. Okay so volume is very important and it is the case.

Andrea Teixeira, JP Morgan.

So I was hoping to see if you can comment, Markus, first of all welcome. I was hoping to if you can talk to the experience you had managing these brands, especially the consumer beauty portfolio at P&G and some of the fragrances as well at the time of the decision to sell this branch to Coty. I mean I obviously, it's the question that most of us probably are thinking what's different now with Coty. And obviously, the industry has transformed over the last years where Coty has been the stewardess of these brands but what gives Coty a better right to win. And a clarification on the key rationalization, what is the top-line in gross margin impact over the years and how to think in terms of the cadence of that impact?

Thank you.

Okay, I cannot obviously not comment what went down 10 years ago. I was running the SK-II brand at that time in Asia far away. I can only comment today what we are doing on the business and what gives me confidence.

If you look at for example the history of CoverGirl in the last few years, there has been a lot of back and forth on the positioning on the equity right? A brand for like older consumers and then suddenly try to make it a full Gen Z brand which obviously did not work and then back again and back and forth. I think every brand that I've ever run everything starts with the consumer, okay?

Do I understand my consumer? Do I understand my target? Do I write the propositions for my target? And do I have a strong activity that I'm going to drive and then I'm not going to walk away from. So what we have done in the last couple of weeks under Gordon's leadership is really sharpen and define our equities and basically say whom is CoverGirl for and whom it will appeal to. Who's going to love Rimmel and we find out that's consumers out there that do. There's consumers that potentially do. Older consumers, younger consumers these brands have broad appeal and we need to bring it now to life. We need to bring it from a PowerPoint chart into the market and we're doing that and it's going to happen over the next couple of weeks and months and I'm fairly confident that we can get better than we were before.

And the growth margin the question was --

Yeah, your question -- sorry Andrea, was really okay, how do we see some improvement from all these actions? I mean I think you're familiar with that again. Number one, as I shared I mean today we know what are the headwinds in our gross margin. So some will naturally disappear or anniversarize, so of course the tariff I mean the ForEx all these headwinds are hurting this year. Next year they will anniversarize. I think consumer beauty you heard really that all these actions will deliver some gross margin. So now on the SKU rationalization, either consumer beauty or Prestige of course that it has an impact because the full value chain, So this is and Markus (multiple speakers)--

Yes, one, Andrea I think which is very important that we're doing a lot in terms of becoming more productive and saving costs, improving our gross margins, but in the beauty category with the gross margins you have in general in beauty. The number one thing is to drive top-line growth because I'm always saying the top-line health is bottom-line wealth in beauty and that's what we're all here to do.

Thank you. At this time, we've reached our allotted time for questions. I'll now turn the call back over to Markus Strobel for any additional or closing remarks.

All right. Thanks for the call.

We recognize that our recent financial performance has not met expectations. There's no sugarcoating it. This leadership transition marks a fresh chapter, grounded in realism, discipline, and focus. Going forward, we will be transparent about what works and what does not. We're going to set balance near- and long-term targets, we're going to concentrate our resources where they matter most, and we'll continuously review our portfolio to unlock value.

Consumer demand is on Northstar and we have a clear emphasis on focused execution, sharper priorities. I'm confident that Coty will improve. It will take time but progress is already underway. As I said in my prepared remarks, it will not happen overnight but it will happen.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.