Coty Inc. (NYSE:COTY) Q3 2024 Earnings Call Transcript

Turning tour second pillar, focused on accelerating our luxury fragrance business and establishing Coty in prestige makeup. The fragrance index remains as strong as ever as we saw the fragrance category growth accelerating sequentially in Q3 to mid-teens percentage growth, driven by continued robust global volume growth and ongoing premiumization. Against this favorable backdrop, our prestige fragrance execution continues to be robust with Coty gaining market share and growing sell-out in the high teens percentage. Our market share gains are broad-based, including in mature markets like North America, France, and Germany, and growth engine markets like the Middle East. Our prestige fragrance net revenues grew 12% like-for-like in Q3 and 18% like-for-like fiscal year-to-date supported by multiple growth engines, and fueled by strength in existing icons coupled with strong contributions from new launches, like Burberry Goddess, Cosmic Kylie Jenner and Marc Jacobs Daisy Wild Most of Coty’s leading fragrance brands grew net revenues by a double-digit percentage fiscal year-to-date.

This robust Q3 and year-to-date prestige fragrance growth across our leading brands is evidence of the broad-based momentum we’re seeing across our portfolio and the structural multi-year momentum we are seeing in the fragrance category worldwide, as more consumers use fragrances more frequently and opt for more premium offerings, supporting well-being and also accessing affordable luxury. Within the strong momentum we are seeing across our Prestige fragrance portfolio, the performance of our new launches continues to be exceptional. Beginning with Burberry Goddess, Coty’s biggest fragrance launch ever. Consistent with the very strong results we shared last quarter, Burberry Goddess Eau de Parfum continues to be a top female fragrance launch in key markets.

The phenomenal success of Burberry Goddess has elevated growth in other Burberry franchises, like Hero and Her, which has resulted in total Burberry fragrance revenues growing over 60% fiscal year-to-date. We are continuing to build on our track record of exceptional fragrance launches with two new hits which were launched this spring. In Q3, we launched Marc Jacobs Daisy Wild and Cosmic Kylie Jenner, both of which have already reached the top ranks Marc Jacobs Daisy Wild is the number one fragrance launch in the U.S. calendar year-to-date, which has also benefitted the full Daisy franchise. And, Cosmic Kylie Jenner, the first fragrance launch under Kylie, is the number two fragrance launch in the U.S. calendar year-to-date. This means that Coty innovations hold the Top 2 spots amongst U.S. fragrance launches this spring, with Burberry Her Petals also reaching a Top 10 position Cosmic Kylie Jenner has also performed very strongly internationally, providing a halo effect on the broader brand.

These winning launches reaffirm Coty’s position as a leading fragrance expert with best-in-class end-to-end capabilities, from developing a winning scent which resonates with consumers across all regions, to activating distinctive marketing campaigns, and finally to disruptive in-store and online activations. Speaking of disruptive innovation and winning scents, we have recently launched Infiniment Coty Paris, our most ambitious and premium fragrance project to-date, with the goal to capitalize on the whitespace opportunities we have in the rapidly growing ultra-premium niche fragrance market dominated by pure player brands. For Coty, this is a major milestone because for the first time in half a century, we have a Coty branded fragrance collection.

So far, the response has been overwhelmingly positive. Infiniment Coty Paris is anchored in modernity, with a patent pending, Molecular Aura technology extending the fragrance’s signature up to 30 hours, and a collection of scents which are simultaneously luxurious, niche and wearable. And, as part of our commitment to sustainability, Infiniment Coty Paris is the first globally distributed full fragrance collection to be manufactured using 100% carbon-captured alcohol, and the bottles are refillable, stackable and reusable, as the brand has pioneered art cycling through specially designed bottles that can be stacked together to create new works of art. In March, we opened our first Infiniment Coty Paris boutique in Paris with promising early results as well as a counter at the Liberty London niche perfumery area, where Infiniment is already the best-selling Coty fragrance brand amongst our brands sold at the retailer.

And we’re also planning to pen an Infiniment boutique in New York this summer. At the same time, sales on the Infiniment Coty DTC site are also strongly exceeding our Expectations Together, let’s watch our Infiniment Coty Paris brand video. [Video Presentation] We are also continuing to strengthen our Prestige makeup business. In Q3, Coty’s Prestige makeup sales grew over 25% like-for-like with all brands growing by a double-digit percentage like-for-like. Fiscal year-to-date, our prestige makeup business generated double-digit percentage growth like-for-like with contributions from Burberry, Kylie and Gucci. The very strong success of Burberry Goddess has driven a halon Burberry makeup, which generated very strong double-digit percentage sales growth in Q3 and fiscal year-to-date.

Similarly, the success of Cosmic Kylie Jenner is also driving a significant halon Kylie’s cosmetics business. For Kylie Cosmetics, we are continuing to actively expand the assortment with recent launches including powder plush long wear foundation, powder blush sticks, and wisp lash mascara. And the recent launch of Kylie Cosmetics in India and Malaysia is off to a great start, with sales ahead of target and the brand reaching top cosmetics rankings in this initial period. And last but not least, Gucci makeup continues to resonate with consumers, generating double-digit percentage growth like-for-like in Q3. Shifting now to our third strategic pillar, building our skin care portfolio over the mid-to-long term, led by our prestige brands: Lancaster, philosophy and Orveda.

Skin care represents, as you know it, a significant white space opportunity for Coty in the mid to long-term, and our focus is on winning over the most discerning skin care consumers in our areas of excellence – photo aging prevention and repair, biotech-enhanced longevity science, and dermatologic wisdom solutions. And, with this winning strategy, our momentum in skin care continued to build in the third quarter, with acceleration in Lancaster across both Europe and China, top industry awards and growing productivity for Orveda, and strong momentum in philosophy’s social media resonance. Lancaster generated over 25% growth like-for-like in Q3 and over 20% growth like-for-like fiscal year-to-date. The very strong Q3 results for Lancaster confirm that the brand’s strategy to communicate the UV protection and photo aging repair benefits of each of Lancaster’s her pillars, is working philosophy’s brand relaunch continues, aided by the brand’s focus on step-changing social media advocacy.