Coty Inc. · NYSE:COTY
Coty — Morgan Stanley Global Consumer & Retail Conference 2019
26 slides from Coty's conference presentation, Dec 4, 2019
Slide 1: Coty Iconic Brand Builder
COTY ICONIC BRAND BUILDER MORGAN STANLEY CONFERENCE December 4, 2019
Slide 2: A strong asset base and a phased roadmap
WE HAVE A strong asset base and a phased roadmap to unlock significant value 2
Slide 3: Coty's Roadmap
COTY’S ROADMAP 1: Turnaround 2: Refocus 3: Accelerate • Detailed 4-year • Launched strategic • Amplify growth potential roadmap to return review of the of the portfolio Coty to revenue Professional Beauty • With Kylie partnership: growth, expand division, associated hair margins to 14-16%, and brand
Slide 4: Turnaround
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Slide 5: Luxury Business: Global Leader in Fragrances
LUXURY BUSINESS COTY IS THE GLOBAL LEADER IN FRAGRANCES #1 Global Fragrance Maker 3 out of Top 10 Luxury Fragrance Brands Average remaining license life ~8 years 5
Slide 6: Luxury Business
LUXURY BUSINESS Coty luxury net revenues growing in-line to ahead of global luxury fragrance market 6.0% Steadily improving margins, with room 5.2% 4.7% for further expansion 4.1% 1.9% -1.1% FY17 FY18 FY19 Global Luxury Coty Luxury Operating Fragrances YoY Net Revenue YoY Margin 6 Source: NPD, Eurom
Slide 7: Mass Beauty Segment in Moderate Decline
MASS BEAUTY SEGMENT IN MODERATE DECLINE Opportunity for value creation through better execution Mainstream Value Coty US Premium Mass Mass Mass LFL ▪ Context: Measured mass beauty 11% segment declining -1-2% annually in the last 3 years 5% ▪ Drivers: Growing penetration of indie brands in unmeasured
Slide 8: Increase At-Scale Advertising and Reverse Price Erosion
INCREASE AT-SCALE ADVERTISING AND REVERSE PRICE EROSION Number of priority brands in key markets Coty sample brand price index relative supported through advertising at-scale to direct competitor brand priced higher Coty Coty price index vs. competition = 100% 3x Coty lower priced From To Past Yeste
Slide 9: Initial Europe Demand Elasticity Results
INITIAL EUROPE DEMAND ELASTICITY RESULTS CONFIRM OPPORTUNITIES FOR VALUE EXPANSION Max Factor – Key EU Retailer Rimmel – Key EU Retailer AUP Trend Unit Trend +11% -9% AUP Trend Unit Trend +8% -5% Baseline Trend Recent Trend Baseline Trend Recent Trend Pricing changes and results: • Initial pricing a
Slide 10: Initial Positive Signals – Europe & U.S.
INITIAL POSITIVE SIGNALS – EUROPE & U.S. DRIVEN BY MEDIA SUPPORT AND IN-STORE EXECUTION Rimmel – U.K. Drivers of Improvement: U.K. Color Cosmetics Market Rimmel Cosmetics • Ramp-up of TV media support • Strong performance of new innovations, launched at premium pricing (Wonderluxe mascara, Lasting M
Slide 11: Refocus
REFOCUS 11
Slide 12: Strategic Review Next Step in Ongoing Transformation
STRATEGIC REVIEW NEXT STEP IN ONGOING TRANSFORMATION ▪ Announced Strategic Review of the Professional Beauty business and associated hair brands, as well as the Brazilian operations aimed at: ▪ Unlocking shareholder value ▪ Sharpening focus on fragrance, color cosmetics, and skincare core businesses
Slide 13: Overview of Business Under Review
OVERVIEW OF BUSINESS UNDER REVIEW ▪ ~$2.7B of annual revenues ➢ ~$1.8B Professional Beauty division (steady growth, high loyalty market) ➢ ~$900M across retail hair and Brazil ▪ Operating margin profile similar to Professional Beauty ➢ Margin further elevated by removal of some allocated overhead co
Slide 14: Accelerate
ACCELERATE 14
Slide 15: New Beauty Partnership with Kylie Jenner
NEW BEAUTY PARTNERSHIP WITH KYLIE JENNER • Coty + Kylie strategic partnership sets foundation for a global beauty business • Partnership combines: ➢ Kylie’s strong brand equity and unparalleled social media reach, particularly amongst Gen Z ➢ Coty’s global R&D, manufacturing, distribution knowledge
Slide 16: Kylie Beauty Business Overview
KYLIE BEAUTY BUSINESS OVERVIEW REVENUES • ~$177M TTM¹ (>40% Growth vs CY18) • Growth fueled by: • Steady quarterly sales run-rate on DTC • Positive contribution from launching in Ulta (Nov 2018) • Skincare intro in May 2019 EBITDA Margin • >25% 16 ¹ TTM sales estimate through September 30, 2019
Slide 17: Luxury Business: Leverage Brands into Adjacent Categories
LUXURY BUSINESS Opportunity to leverage brands into adjacent categories Market Size ($Bn) ▪ License agreements allow expansion into cosmetics and skincare COTY #1 Share ▪ Major growth opportunities in the ~$24B luxury cosmetics and ~$35B luxury skincare segments $40 Luxury ▪ Gucci make-up relaunch o
Slide 18: Significant Untapped Potential in Skincare
SIGNIFICANT UNTAPPED POTENTIAL IN SKINCARE <$100M in ~$200M in Revenues Revenues #6 skincare brand in #6 Skincare brand the U.S. in China Sephora 18
Slide 19: Significant Untapped Potential in Cosmetics
SIGNIFICANT UNTAPPED POTENTIAL IN COSMETICS 19
Slide 20: Financial Outlook
FINANCIAL OUTLOOK ; c aad 4
Slide 21: FY20 Outlook Targets Confirmed
FY20 OUTLOOK Targets Confirmed LFL NET REVENUES Stable to slightly down YoY ADJUSTED OI +5-10% YoY (At Constant Scope Strong A&CP reinvestment and Currency) ADJUSTED EPS Mid-single digit growth YoY FREE CASH FLOW Moderate improvement YoY
Slide 22: Q&A
COTY ICONIC BRAND BUILDER Q&A
Slide 23: Appendix
APPENDIX
Slide 24: Gradually Rationalize Our SKUs
GRADUALLY RATIONALIZE OUR SKUS Simplify our business and drive gross margin expansion SKU Mapping of Top Cosmetics Brand in Key Market High Value Accelerate Growth SKU Relevance / productivity Engineer ~15% of SKUs ~38% of SKUs ~10% of ~70% of revenues revenues Rationalize Reduce Complexity ~22% of
Slide 25: Profits - Building Sustainable Income Growth
PROFITS - BUILDING SUSTAINABLE INCOME GROWTH Assortment Promotion Mix / Value Innovation ~40% of gross margin expansion Productivity Net Revenues COGS SKU Reduction ~60% of gross margin expansion Gross Margin (>5%) Advertising Fixed Cost Organization Working Media delayering Mutualizing Digital & Tr
Slide 26: Disclaimer
DISCLAIMER Forward-Looking Statements Certain statements in this presentation are forward-looking statements. These forward-looking statements reflect Coty Inc.’s (“Coty’s”) current views with respect to, among other things, Coty’s turnaround plan announced on July 1, 2019 (the “Turnaround Plan”), s
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