Coty Inc. · NYSE:COTY
Coty — Barclays Back to School Conference 2019
31 slides from Coty's conference presentation, Sep 3, 2019
Slide 1: Coty: Iconic Brand Builder
COTY ICONIC BRAND BUILDER BARCLAYS BACK TO SCHOOL CONFERENCE September 3, 2019 1
Slide 2: We have a strong asset base and a roadmap to unlock significant value
WE HAVE A strong asset base and a roadmap to unlock significant value 2
Slide 3: Strong Asset Base
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Slide 4: A Diversified Beauty Company
A DIVERSIFIED BEAUTY COMPANY Coty competes in key segments LUXURY MASS PROFESSIONAL Coty’s product portfolio covers key categories FRAGRANCES HAIRCARE BODYCARE COSMETICS SKINCARE 4
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: 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 8: Gucci Make-up Line
GUCCI MAKE-UP LINE RELAUNCH OFF TO A VERY STRONG START ▪ 33K lipsticks sold in 1 store on 1st day ▪ More than 1 million lipsticks sold in the first two months ▪ Strong momentum online, with e-commerce at 55% of Gucci lipstick sales 8
Slide 9: 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 9
Slide 10: Professional Beauty: Leader in Salon Hair
PROFESSIONAL BEAUTY COTY IS A LEADER IN SALON HAIR High loyalty and barriers to entry Salon customers’ repeat purchase rate is >13x that of retail beauty consumers 10
Slide 11: Wella #1 Salon Hair Color Brand
WELLA #1 SALON HAIR COLOR BRAND Majority of our salon customers have been buying Wella for >9 years Strongly positioned for further growth 11
Slide 12: Brands with Significant Growth Potential
BRANDS WITH SIGNIFICANT GROWTH POTENTIAL >$200M in Revenues U.S. still >55% of revenues 60%+ awareness and top 5 brand power in several additional key beauty markets ~$300M in Revenues Top 5 markets still >70% of revenues Reaching double-digit % awareness in 4 additional markets 12
Slide 13: Coty's First Eco-Ethical Brand
COTY’S FIRST ECO-ETHICAL BRAND Haircare brand, offering a range of natural, vegan and cruelty-free products 93% to 99.7% natural origin, 100% recyclable packaging Natural personal care market currently ~$4B and expected to grow ~5x in next 5 years Example of white space opportunity 13 Source: Kline,
Slide 14: Strong E-Commerce Momentum
STRONG E-COMMERCE MOMENTUM Across all divisions E-Commerce Penetration (% of Net Revenues, excludes Younique) 14% >30% Rev ~30% Rev Growth 12% Growth >30% Rev Growth 10% High single digits penetration 8% Mid single digits >25% Rev penetration 6% Growth 4% 2% Luxury Consumer Beauty Professional Beaut
Slide 15: Significant Value in Luxury & Professional Beauty
SIGNIFICANT VALUE IN Luxury & Professional Beauty Combined for ~68% of Coty EBITDA 15
Slide 16: A Clear Path for Improvement in Consumer Beauty
A CLEAR PATH FOR IMPROVEMENT IN CONSUMER BEAUTY 16
Slide 17: Mass Beauty Segment in Moderate Decline
MASS BEAUTY SEGMENT IN MODERATE DECLINE Opportunity for value creation through growing premium mass segment 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 i
Slide 18: Consumer Beauty: Strong competitive position in key geographies
CONSUMER BEAUTY Strong competitive position in key beauty geographies Color Cosmetics Hair Coloring & Styling Mass Fragrances & Body Care ¹ Nail category only ² Hair Styling only 18 ³ For Germany, refers to share in Mass Fragrances; in Brazil, refers to share in Body Care Source: Nielsen
Slide 19: Increase At-Scale Advertising to More Brands and Markets
INCREASE AT-SCALE ADVERTISING TO MORE BRANDS AND MARKETS Example brands Number of priority brands in key markets supported through advertising at-scale 3x 19
Slide 20: Rimmel Wonder'Luxe Case Study
RIMMEL WONDER’LUXE CASE STUDY ▪ Rimmel Wonder’Luxe launches in the UK at 12% Rimmel Wonder'Luxe UK Ranking premium to existing Wonder range Launch Month Month 6 Month 7 ▪ With substantially increased TV support in recent 3 months, Wonder’Luxe now #3 mascara in the UK 5 and #1 for Rimmel ▪ Rimmel gai
Slide 21: Create Value by Reversing Price Erosion
CREATE VALUE BY REVERSING PRICE EROSION IN OUR CATEGORIES AND BRANDS priced higher Coty Coty sample brand price index relative to direct competitor brand Coty price index vs. competition = 100% Coty lower priced Past Yesterday Going Past Yesterday Going Past Yesterday Going Past Yesterday Going Forw
Slide 22: Accelerate Hero Sub-Brands to Build Bigger, Simpler Brands
ACCELERATE HERO SUB-BRANDS IN ORDER TO BUILD BIGGER, SIMPLER BRANDS Share of hero sub-brands 22
Slide 23: Gradually Rationalize Our SKUs
GRADUALLY RATIONALIZE OUR SKUS Simplifies our business and drives 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%
Slide 24: Roadmap to Healthier Consumer Beauty Business
ROADMAP TO HEALTHIER CONSUMER BEAUTY BUSINESS Executional gaps have impacted profitability for Consumer Beauty – 32% of Coty EBITDA Our action plans target stabilizing revenue and expanding margins 24
Slide 25: Compelling Investment Opportunity
COMPELLING INVESTMENT OPPORTUNITY
Slide 26: Our Objectives: FY23 Targets
OUR OBJECTIVES FY23 Targets Net revenues growth (constant FX & scope) 0 to 2% (stable FY23 vs FY19) Adjusted Operating Margin 14% to 16% Free Cash Flow ~$1 billion Net Debt to EBITDA Less than 4x 26
Slide 27: 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 28: Strong Financial Position and Path to Deleverage
STRONG FINANCIAL POSITION AND PATH TO DELEVERAGE ▪ Ample liquidity and no major maturities until FY23 ▪ Financing conditions allow flexibility ▪ Generating positive free cash flow, which will steadily increase to over $1Bn by FY23 and drive debt paydown
Slide 29: Our New Path Starts Now: FY20 Outlook
OUR NEW PATH STARTS NOW FY20 Outlook 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 30: We have a strong asset base, and a roadmap to unlock significant value
We have a strong asset base, and a roadmap to unlock significant value 30
Slide 31: 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, strategic planning, targets, segment reporting and