Ashley Helgans • Jefferies

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CEO Sue Nabi explained that 'innovation fatigue' in mass color is driven by a proliferation of complex launches that have confused consumers, particularly those over 30. She clarified this is not an issue in the simpler fragrance category, which benefits from the 'Treatonomics' trend. CFO Laurent Mercier noted that promotions began in Consumer Beauty about a year ago due to a category slowdown, while in prestige it is a more recent trend driven by peers and retailers. He stated COTY's strategy is to avoid short-term reactions and focus on innovation and brand support.

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CFO Laurent Mercier stated the main sell-in and sell-out disconnect is in the U.S., which is driving most of the decline, while Europe remains healthy and in-line. He reiterated that retailers globally are aggressively managing inventory. He clarified the price increase focuses first on the U.S. Prestige portfolio due to sourcing from Europe, but the company will look at other categories and regions where elasticity is low. CEO Sue Nabi added they are increasing consumer touchpoints with smaller formats to maintain demand.

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CEO Sue Nabi confirmed that recent launches like Gucci Flora Orchid were successful, though its initial exclusive retail distribution limited its full impact. She highlighted that BOSS has become the company's #1 brand due to strong innovation. For H2, she noted they will continue with key launches, anniversary successful initiatives from FY24, and introduce a major innovation for the David Beckham brand.

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President & CEO Denise Paulonis noted that traffic trends entering Q4 were directionally in line with the recovery seen in Q3. On pricing, CFO Marlo Cormier stated that no material price increases are planned in the near term. She detailed the company's limited tariff exposure (20% of COGS from China/Western Europe) and outlined a mitigation strategy that includes vendor cost-sharing, modest and selective price actions, and sourcing optimization. Cormier expressed confidence that these measures will allow the company to maintain its healthy gross margin profile.

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CEO Denise Paulonis described innovation as 'very robust,' highlighting efficacy-driven products like K18, tool simplification for stylists, and at-home nail trends. Regarding traffic, she said Q1 was consistent outside of the compressed holiday season, but early Q2 saw more 'noise' from factors like the flu and weather. She emphasized that underlying demand remains healthy, particularly in the core hair color business.

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CEO Daniel Heaf stated the company will not force a specific channel mix but will meet consumers where they are, expecting the digital business to grow at or slightly above market penetration. CFO Eva Boratto added that the fragrance category is on-trend and growing, and as a leader, Bath & Body Works aims to grow with the market and gain share, driven by continuous innovation.

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CEO Gina Boswell stated that the fragrance category has remained buoyant for them and that Bath & Body Works is uniquely positioned at the center of mass and prestige. She believes fragrance is a transportive and desirable category, and as a leader, the company is well-positioned to meet broad customer demand, using the Disney collaboration as an example of making a concept accessible through fragrance.

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President & CEO Kecia Steelman clarified that for makeup, prestige was flat while mass was slightly negative. More broadly, she stated that the company has not seen any data to suggest consumers are trading down. She pointed to a key indicator: spend per loyalty member has remained consistent across all income cohorts. This suggests that despite weaker consumer sentiment, engagement with the beauty category remains strong.

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CEO Kecia Steelman described the new marketplace as a curated, invitation-only platform launching in the second half of 2025 to expand offerings in a low-risk way. CFO Paula Oyibo added that to counter wider distribution, their merchant teams work to secure exclusive products and launches from those same brands.

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CEO David Kimbell asserted that Ulta remains a top destination for brands, and its ability to secure new partnerships has not been diminished. He explained that brands are eager to access Ulta's 44 million loyalty members and unique store experience. The company successfully partners with both emerging brands for exclusivity and established brands like ILIA for broader reach, demonstrating the continued strength of its value proposition to the vendor community.

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Chairman and CEO Tarang Amin did not disclose specific categories for Rhode but noted ample room for expansion. He stated e.l.f.'s success is driven by bringing new consumers into beauty, not by trade-down. CFO Mandy Fields affirmed the company feels great about its innovation pace, citing the success of recent launches.

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Chairman and CEO Tarang Amin identified two primary factors for the weaker category: consumer uncertainty related to inflation and the economy, and a lack of compelling innovation and marketing from competitors. He expressed long-term bullishness, citing historical cycles where the category has rebounded strongly after soft periods. Amin reiterated that e.l.f.'s strategy is working, as evidenced by 24 consecutive quarters of growth, and the company will continue its approach even in a challenged category.

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CEO Tarang Amin stated that the company's strategy is to remain consistent with its marketing spend, guided at 24-26% of sales, because it continues to deliver high ROIs and drive top-line growth. Regarding the drug channel, he explained that unlike legacy brands, e.l.f. is still in an expansion phase with retailers like CVS and Walgreens, which more than offsets any broader channel softness.

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CFO Michel Atwood stated that the luxury category continues to grow faster than prestige as consumers seek more distinctive products, pointing to the acquisitions of Annick Goutal and the premiumization of Van Cleef as examples of their strategy. CEO Jean Madar added that products retailing over $100 perform better, and the company is launching new higher-priced items because consumers are willing to pay for quality and value.

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Executive Michel Atwood noted a global market growth slowdown in Q4 2024 to 9%, with the industry now anticipating mid-single-digit growth. Executive Jean Madar stated that he does not expect an increase in promotional activity in 2025, citing the company's significant A&P investments. Michel Atwood clarified that competitor promotions are focused more on value-added gift sets rather than direct price discounts, a trend observed in Q4.

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CFO Jill Timm responded that the guidance takes a prudent approach, acknowledging both the time needed for internal changes and the uncertainty in the macroeconomic environment for the consumer. CEO Ashley Buchanan addressed the brand mix question by stating she avoids setting a specific target percentage for private label. She believes setting such a target can lead to forcing products on customers. Instead, her philosophy is to offer high-quality proprietary and national brands and let the customer decide the optimal mix over time, similar to how the company approaches the e-commerce versus store sales mix.

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CEO Amanda Baldwin noted that the trend of extended time between salon visits has stabilized post-COVID and is not worsening, with the company's strategy focused on creating new service occasions. For the international business, she clarified that the approach is to maintain global brand consistency while localizing the go-to-market channel mix and communications, not altering the core product assortment.

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CEO Amanda Baldwin distinguished between the positive results from new product launches, like the No. 5 Leave-In Conditioner, and the broader portfolio. She stated that while the new 360-degree marketing approach is outperforming expectations on launches, it will take more time for the new CMO to apply these learnings across the entire business to generate an overall lift in demand.

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CEO Antony Spring stated that the consumer remains under pressure but is still willing to indulge, and the company is focused on creating compelling experiences. He views the promotional environment as a constant but is confident in Macy's current inventory position. COO & CFO Adrian Mitchell reinforced this, noting that a healthy inventory mix with more newness reduces the need for heavy promotions.

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President and CEO Ryan Napierski explained that new product lines are focused on 'masstige' or affordable luxury pricing. He emphasized that the nutrition business demonstrates higher customer acquisition and retention, prompting a strategic innovation shift towards it for 2025. Regarding China, Napierski stated that while there is local optimism from government stimulus, the company remains cautious as a significant impact on consumer spending has not yet materialized.

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