Ashley Helgans

Ashley Helgans of Jefferies Financial Group Inc. inquired about the company's expectations for the broader fragrance industry, noting that other companies have mentioned a normalization in the category.

Answer

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.

Sydney on for Ashley Helgans at Jefferies requested more detail on the concept of 'innovation fatigue' in mass color cosmetics, whether this phenomenon is also occurring in prestige, and how promotional activity has trended across different channels.

Answer

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.

Ashley Helgans from Jefferies Financial Group Inc. asked for more detail on how sell-in vs. sell-out trends and retail inventory tightening vary by region, and whether the planned mid-single-digit price increases would apply to the total prestige portfolio or select brands.

Answer

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.

Ashley Helgans of Jefferies Financial Group asked about the performance of recent product introductions and the underlying assumptions for fragrance industry growth in the second half.

Answer

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.

Ashley Helgans followed up on previously mentioned product introductions, asking about their performance, and also inquired about the company's underlying assumptions for the fragrance industry in the second half.

Answer

CEO Sue Nabi highlighted the success of the Gucci Flora Orchid launch, noting its impact was initially limited by a retailer exclusivity period but is now performing very well. She also cited strong growth from the BOSS brand, driven by new innovations. For the second half, she confirmed continued launches and the anniversarying of key fiscal '24 initiatives, including a significant new innovation for the David Beckham brand.

Sydney Wagner, on for Ashley Helgans, asked how the company is balancing consumer value sensitivity with planned price increases, particularly regarding tariffs, and inquired about traffic pacing throughout the quarter and into Q4.

Answer

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.

Ashley Helgans inquired about the innovation seen in the market compared to last year and asked for color on how customer traffic and demand evolved throughout the quarter.

Answer

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.

On behalf of Ashley Helgans from Jefferies, an analyst noted that prestige appeared to outperform mass in skin and makeup and asked for insight into this trend, questioning if it was driven by trade-up or brand innovation.

Answer

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.

Ashley Helgans asked for more details on the new marketplace platform and inquired about Ulta's strategy to combat headwinds from brands that are expanding their distribution to other retailers.

Answer

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.

Ashley Helgans asked whether the increasingly competitive environment has affected Ulta's ability to attract new brands and how the company considers a brand's existing distribution when bringing in new partners like ILIA.

Answer

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.

Ashley Helgans of Jefferies, with Sydney Wagner asking on her behalf, inquired about potential adjacent product categories for Rhode, evidence of consumer trade-down from prestige, and the sustainability of the current innovation pace.

Answer

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.

Ashley Helgans asked for more color on the broader slowdown in the mass cosmetics industry over the last six months, noting that e.l.f. has been outperforming.

Answer

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.

Ashley Helgans inquired about e.l.f. Beauty's marketing spend strategy amid a slowdown in mass cosmetics and asked for commentary on performance in the drug channel, where competitors have noted challenges.

Answer

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.

Ashley Helgans inquired about the company's strategy for premiumizing its portfolio in a potential recession and whether the luxury category is expected to continue outperforming.

Answer

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.

Ashley Helgans of Jefferies inquired about which specific geographic markets are seeing the most moderation and what to expect for promotional levels as the market normalizes.

Answer

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.

Ashley Helgans of Jefferies asked about the macroeconomic and consumer health assumptions embedded in the full-year guidance and requested any initial takeaways from the official launch of Milk Makeup in Ulta Beauty stores.

Answer

Executive Michel Brousset described the beauty consumer as highly resilient, driven by a continued trend of premiumization. He noted that Waldencast's growth is less dependent on the macro environment due to its size and specific growth drivers. Regarding the Ulta Beauty launch, he stated the brand is performing strongly and the Q1 guide reflects specific base effects, not a lack of demand. He highlighted the strategic importance of the new Skin Tint for entering the large complexion category and reaching new, incremental consumers through Ulta.

Ashley Helgans asked about potential plans for a new device system release now that Syndeo issues have stabilized and how a trade-up program might be structured.

Answer

CEO Marla Beck confirmed that the company is actively investing in innovation for a future device, intending to leverage its portfolio of 179 patents. Executive Michael Monahan clarified that while a new device launch is a key part of the long-term business model, no new system is factored into the 2025 financial guidance.

Ashley Helgans asked for insights into the underlying consumer demand trends for Hydrafacial treatments. She also inquired if the third-party manufacturer in China was a factor in the past Syndeo device issues and requested the manufacturing volume split between China and the Long Beach facility before the consolidation.

Answer

CEO Marla Beck confirmed that consumer demand remains strong, evidenced by increased consumables-per-device sales in the U.S. and EMEA, particularly within the medical channel. CFO Michael Monahan stated that the China manufacturing partnership was relatively new, accounted for less than a third of production on average, and had already been ramped down, ensuring the consolidation would not be a major disruption. He did not directly link the partner to Syndeo issues.

Ashley Helgans asked about the level of consumer health assumed in the 2025 guidance and the ideal mix between private label and national brands.

Answer

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.

Ashley Helgans inquired about current trends in the professional channel, specifically if consumers are still extending time between salon appointments, and asked for clarification on whether the region-specific international strategy involves different marketing or different product assortments.

Answer

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.

Ashley Helgans asked for more detail on the expected timeline for seeing a sales lift from marketing investments and whether the company is considering any changes to its current marketing strategy.

Answer

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.

Ashley Helgans asked for clarification on the assumptions for consumer health and the promotional environment that are embedded in the full-year guidance.

Answer

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.

Ashley Helgans of Jefferies inquired about the differences between the customer profiles for the Reserve, Resale, and Subscription businesses, as well as any notable performance trends for each segment.

Answer

CEO Jennifer Hyman explained that the Reserve business is a crucial and reaccelerating new customer acquisition channel, with new customers up 36% year-over-year. She noted that these customers are diverse and are funneled into other offerings like the new, more accessible $119 subscription plan. Hyman emphasized that fashion subscription has become mainstream, attracting a broader demographic directly, which provides confidence in accelerating subscriber growth in 2025.

Asked about the company's strategy for marketing investment and ROI, and for an update on the decision to reduce promotions, including key learnings and current thinking on pricing, especially given the challenged consumer environment. The questions were asked by Blake Anderson on behalf of Ashley Helgans.

Answer

Executives explained they are diversifying marketing channels beyond paid performance to a full-funnel brand-building approach to drive organic traffic, reinvesting savings from less efficient ads. Regarding promotions, they have eliminated multi-month and ineffective promos, leading to better customer quality. They believe the core value proposition and improved customer experience, as seen in the Reserve business's growth, are more effective drivers than deep discounts.

Ashley Helgans from Jefferies requested an update on affordable luxury product launches, the impact of the nutrition business on customer acquisition, and the outlook for the China market amidst government stimulus.

Answer

President and CEO Ryan Napierski confirmed a focus on 'masstige' pricing for new lines like MYND360. He highlighted that the nutrition business historically shows higher customer acquisition and retention, prompting a strategic innovation shift towards it for 2025. Regarding China, Napierski expressed caution, noting that while there is government stimulus, it is too early to tell if it will boost consumer confidence and spending in their product categories.

Ashley Helgans of Jefferies requested an update on affordable luxury product launches, the impact of the nutrition business on customer acquisition, and the outlook for the China market in light of government stimulus.

Answer

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.