COTY ICONIC BRAND BUILDER BARCLAYS BACK TO SCHOOL CONFERENCE September 3, 2019 1
WE HAVE A strong asset base and a roadmap to unlock significant value 2
STRONG ASSET BASE
A DIVERSIFIED BEAUTY COMPANY Coty competes in key segments L U X U R Y M A S S P R O F E S S I O N A L Coty’s product portfolio covers key categories F R A G R A N C E S H A I R C A R E B O D Y C A R E C O S M E T I C S S K I N C A R E 4
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
LUXURY BUSINESS Coty luxury net revenues growing in-line to ahead of global luxury fragrance market 6.0% 5.2% Steadily improving margins, with room 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, Euromonitor, Coty estimates
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 off to a very strong Skincare Segment start Luxury Fragrance $30 Segment Luxury Cosmetics Segment $20 $10 6% 3% 4% 7% 8% 5% Estimated Next 5Y CAGR 7 Source: NPD, Euromonitor, Coty estimates
GUCCI MAKE-UP LINE RELAUNCH OFF TO A VERY STRONG START ▪ 33K lipsticks sold in 1 store on 1 st 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
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
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
WELLA #1 SALON HAIR COLOR BRAND Majority of our salon customers have been buying Wella for >9 years Strongly positioned for further growth 11
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 ~$300M in Revenues markets Top 5 markets still >70% of revenues Reaching double-digit % awareness in 4 additional markets 12
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, Transparency Market Research
STRONG E-COMMERCE MOMENTUM Across all divisions E-Commerce Penetration (% of Net Revenues, excludes Younique) 14% >30% Rev Growth ~30% Rev 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 Beauty TOTAL COTY (ex Younique) FY18 FY19 14
SIGNIFICANT VALUE IN & Professional Luxury Beauty Combined for ~68% of Coty EBITDA 15
A CLEAR PATH FOR IMPROVEMENT IN CONSUMER BEAUTY 16
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 in unmeasured Total Mass Beauty: channels -7% -1% to -2% ▪ Our goal : Moderate revenue -10% decline through premiumization of our brands to be in line with the market of -1-2% by FY23 US Color Cosmetics CAGR (‘16 - ’18) Coty US Consumer Beauty LFL CAGR (FY17-FY19) 17 *Coty US Consumer Beauty excludes Younique Source: Nielsen, Coty Inc
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
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
RIMMEL WONDER’LUXE CASE STUDY Rimmel Wonder'Luxe UK Ranking ▪ Rimmel Wonder’Luxe launches in the UK at 12% 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 gains 0.4 points of market share, following share losses 15 PLANNED ACTIONS TV SUPPORT AIRS Launch premium innovation and support with 4x increase to advertising relative to FY19 Source: Nielsen, Coty Inc 20
CREATE VALUE BY REVERSING PRICE EROSION IN OUR CATEGORIES AND BRANDS Coty higher priced Coty sample brand price index relative to direct competitor brand Coty price index vs. competition = 100% Coty lower priced Past Yesterday Going Past Yesterday Past Yesterday Past Yesterday Going Going Going Forward Forward Forward Forward 21
ACCELERATE HERO SUB-BRANDS IN ORDER TO BUILD BIGGER, SIMPLER BRANDS Share of hero sub-brands 22
GRADUALLY RATIONALIZE OUR SKUS Simplifies our business and drives gross margin expansion SKU Mapping of Top Cosmetics Brand in Key Market High Accelerate Growth Value SKU Relevance / productivity Engineer ~15% of ~38% of SKUs SKUs ~70% of revenues ~10% of revenues Rationalize Reduce Complexity ~22% of SKUs ~25% of SKUs ~10% of revenues ~10% of revenues Low High SKU Gross Margin 23
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
COMPELLING INVESTMENT OPPORTUNITY
OUR OBJECTIVES FY23 Targets 0 to 2% Net revenues growth (constant FX & scope) (stable FY23 vs FY19) 14% to 16% Adjusted Operating Margin ~$1 billion Free Cash Flow Less than 4x Net Debt to EBITDA 26
PROFITS - BUILDING SUSTAINABLE INCOME GROWTH Assortment Promotion Mix / Value Innovation ~40% of gross margin expansion Productivity COGS Net Revenues SKU Reduction ~60% of gross margin expansion Gross Margin (>5%) Fixed Cost Advertising Organization delayering Working Media Mutualizing Digital & Traditional support functions Operating Income (Margin +3-5%) EPS FCF Net Debt 27
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
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
We have a strong asset base, and a roadmap to unlock significant value 30
Recommend
More recommend
