Korinne Wolfmeyer • Piper Sandler Companies

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CFO Eva Boratto explained that launches like Men's and Everyday Luxuries are viewed as foundational platforms to build upon, not just anniversaries to lap. She noted that adjacent categories grew faster than the overall business, but their share of total sales remained at ~10% due to the significant impact of the Disney launch in Q1. CEO Daniel Heaf added his focus is on 'editing to amplify,' using key adjacencies to attract new consumers rather than pursuing excessive breadth.

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CFO Eva Boratto reiterated that 2.5% to 3.5% top-line growth is needed to leverage SG&A. She noted that for fiscal 2025, SG&A includes increased investment in technology as part of a multiyear modernization journey, with that spending being more weighted towards the second half of the year.

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CEO Gina Boswell responded that AUR management is a function of the company's agile model, which aims to optimize both top and bottom-line results by meeting the customer where they are. She noted AUR is still up double-digits versus pre-pandemic levels and is influenced by a 'good, better, best' product strategy and rigorously tested promotions that must be accretive to both sales and margin dollars.

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CFO Eva Boratto projected that international sales would be down mid-to-high single digits in the back half, impacted by war-affected regions and a Q2 shipment pull-forward. She emphasized an omnichannel focus rather than splitting out direct vs. store guidance. CEO Gina Boswell commented that they will continue to leverage their agile model to navigate the 'choppier macro' and respond to a 'discerning consumer' in the promotional environment.

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President & CEO Kecia Steelman stated that while the beauty category is always competitive, the 'Ulta Beauty Unleashed' plan is amplifying their differentiation, leading to market share gains. She noted that performance was balanced across categories, with skincare, wellness, and fragrance being particularly strong. Steelman also contextualized that the overall beauty market is normalizing to low-single-digit growth, consistent with Ulta's long-term forecast.

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CEO Dave Kimbell acknowledged that beauty is an attractive category for all retailers. He stated that the total mass beauty business grew in the mid-single-digit range during the quarter. While the mass makeup subcategory has decelerated across the industry, mass skincare remains a source of strength for Ulta. Kimbell reiterated confidence in Ulta's differentiated model, which combines mass, masstige, and prestige offerings to engage guests across all price points.

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CEO Dave Kimbell acknowledged that beauty is an attractive category for all retailers. He stated that while the overall mass makeup category has decelerated, Ulta continues to see strength in mass skincare. He emphasized that Ulta's model, which spans all price points, remains a key differentiator and the company is focused on driving its mass business.

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President & COO Kecia Steelman explained that the disruption was a short-term headwind caused by the complexity of managing dual systems during the phased ERP rollout to over 1,400 stores. This created challenges in purchasing and store inventory allocation. She confirmed this complex phase is now complete, and the team is focused on optimizing the new, unified system, expressing confidence for the upcoming holiday season.

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SVP & CFO Mandy Fields confirmed the August 1st timing is driven by a 90-day retailer notice period. The $1 increase applies to all e.l.f. SKUs globally, with other portfolio brands also taking some pricing. She noted that while models account for elasticity, initial community sentiment is 99% positive. CEO Tarang Amin added that the modest increase should enhance their value proposition and drive market share.

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CFO Mandy Fields declined to quantify the pipeline fill but reiterated that it was significant, which is why the company focuses on the second half's performance as a whole. She also noted that the gross margin outlook was raised to 40 basis points of expansion for the year, indicating strength even with Naturium's planned wholesale mix. Chairman and CEO Tarang Amin added that while international momentum continues, the Q4 growth rate will moderate as it laps prior pipeline fills from new retail launches.

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CFO Mandy Fields confirmed the Q2 EBITDA beat was due to a timing shift of both marketing and non-marketing SG&A expenses into Q3. She guided to a second-half EBITDA margin of approximately 23%, clarifying that the Q3 margin would be slightly lower than 23% due to the shifted expenses, while the Q4 margin would be slightly higher.

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President and CEO Denise Paulonis stated the guidance change reflects the current uncertain environment. She noted the BSG segment is expected to recover from a flu-impacted Q2, while the Sally segment is seeing some consumer frugality in the Care category. CFO Marlo Cormier attributed strong Q2 margins to the Fuel for Growth program. She explained the back-half margin outlook reflects a planned step-up in SG&A for advertising and brand refresh investments, partially offset by continued Fuel for Growth savings.

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CEO Denise Paulonis stated that the company is 'squarely within the guidance range' with potential for upside from innovation and marketing initiatives. CFO Marlo Cormier added that the operating margin cadence will benefit from the Fuel for Growth program on a consistent quarterly basis, driving gross margin expansion and contained SG&A costs through the back half of the year.

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President and CEO Denise Paulonis reported that for the BSG segment, transactions saw a low-single-digit increase in frequency, which was offset by a lighter units per transaction (UPT), resulting in a positive 1% comp. For Happy Beauty Co., she noted strong average unit retails (AUR) and improving transaction trends, with the next phase of store openings designed to test different locations to further build transaction strength.

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CFO Catherine Dunleavy confirmed that marketing spend, which ramped late in Q1, will increase in Q2, but did not provide quarterly specifics beyond the full-year guidance. Regarding cash, she positioned the recent $300 million debt paydown as a prudent use of funds for shareholders, saving approximately $20 million in annual interest payments, and expressed confidence in the company's financial health.

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CEO Amanda Baldwin stated that the company believes it is important to continue investing behind the brand in Q4 to build for the future. She declined to provide 2025 guidance but noted that learnings from current marketing efforts and the deep analysis of the international business will inform planning for next year.

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CFO Paul Ruh clarified that the net impact of tariffs is already reflected in the full-year 2025 guidance, partially offsetting a benefit from foreign exchange. He stated that Kenvue is actively working to absorb the impact through productivity initiatives, alternate sourcing, and targeted revenue growth management. While the goal is to mitigate as much as possible, the situation remains fluid for 2026 and beyond.

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CEO Thibaut Mongon stated that margin evolution would mirror the top-line trajectory, being more muted in H1 (especially Q1) and accelerating in H2. Regarding tariffs, he confirmed a dedicated team has a playbook ready, with the primary exposure being U.S.-Canada trade. Potential levers include alternate sourcing and pricing actions, but he noted the current guidance does not factor in any tariff impact due to the fluid situation.

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Executive Thibaut Mongon expressed pleasure with the gross margin performance, attributing it to value realization and supply chain efficiencies. He noted that while commodity tailwinds have helped, they are expected to wind down. He reiterated that Q4 is typically the lowest gross margin quarter due to annual plant maintenance but reaffirmed the long-term goal of 20-30 basis points of sustainable annual expansion.

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CFO Laurent Mercier stated that Coty is well-positioned due to its manufacturing footprint but anticipates a low EUR 100 million impact in fiscal '26, primarily from Prestige fragrance components and marketing materials from China. He outlined mitigation strategies including building inventory, changing sourcing, and potential U.S. production shifts. He also confirmed mid-single-digit price increases on Prestige products, expressing confidence in the category's price inelasticity.

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CFO Laurent Mercier highlighted a healthy P&L, with H1 gross margin near 67%. He guided for a full-year gross margin improvement of about 100 basis points, supported by productivity, pricing, and mix. He confirmed A&CP spending in the high 20s and $120 million in savings initiatives, leading to a projected 70-90 basis point growth in EBITDA margin for fiscal '25.

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CEO Jean Madar and CFO Michel Atwood explained that the primary tariff risk is on components from China and finished goods from Europe. Michel Atwood quantified a potential 300 basis point impact, which they plan to mitigate by two-thirds through supply chain adjustments and the remainder through pricing. They do not expect a significant impact in 2025 due to inventory levels and FIFO accounting. The higher operating margin was attributed to favorable brand/channel mix and the strategic timing of A&P spending, some of which was shifted to Q2.

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Executive Michel Atwood attributed weaker performance in some smaller brands, like Lanvin, to their geographic exposure to challenging markets such as China. He stated that while the focus is on larger brands, smaller brand performance can be more volatile. For 2025, Atwood anticipates a flat Q1 top line due to the Dunhill discontinuation and FX headwinds. He expects stable full-year gross margins but noted that front-loaded A&P spending will likely pressure Q1 operating margins.

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CFO Michel Atwood explained that for the first nine months, sell-in has been slower than sell-out as retailers destock inventory, a trend observed across the industry. He quantified the disconnect at about one percentage point, varying by geography. He added that retailers are now well-stocked for the holiday season, which is proceeding well.

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CFO Stan Sutula stated that the $200 million tariff impact is roughly linear through the remaining quarters and that mitigation efforts will ramp up through the year, which is why the full-year gross margin guidance is roughly flat. While they run numerous internal scenarios on potential future tariffs, he said it's impossible to predict the outcome. He did confirm that toothpaste imported from Mexico is compliant with USMCA and not subject to certain tariffs, which is a positive factor included in the guidance.

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CEO Noel Wallace stated that the fundamentals of the Hill's business are very strong, with a stabilized category and continued execution against segment growth opportunities like small dog and wet food. CFO Stan Sutula added that the business is well-positioned for top-line growth and margin expansion, driven by new innovation and the wind-down of the private label business. Executive John Faucher also confirmed that the margin inflection in the underlying business is real and underway.

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Noel Wallace, Chairman, President and CEO, explained the shipment timing was due to a non-systemic network disruption. The e-commerce issue was specific to the skin health business, where some large online retailers made inventory adjustments. He characterized the broader North American macro environment as stabilizing, with normalized promotions and slightly higher coupon redemption, but no deeply unusual retailer behavior.

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Executive Andre Schulten emphasized that P&G is in a favorable position due to its deliberate strategy of locating the majority of its supply chain close to consumers. He stated that significant supply chain changes require certainty and will not be a "knee jerk reaction." He declined to comment on specific partner conversations but noted that communication lines are always open, given the volatility of the past several years.

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Jon Moeller, Chairman, President and CEO, described conversations with retailers as very positive and focused on driving mutual market growth and supply chain efficiencies. He noted that while the tone can vary slightly based on a specific retailer's performance, the general partnership is constructive and centered on shared opportunities.

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CEO Colleen Keating explained that marketing spend will grow with revenue and will remain heavily weighted to Q1, with promotional coverage throughout the year. She stated that franchisees are not trading development for re-equips, noting that the vast majority are on pace with development obligations while also voluntarily investing in new strength equipment, demonstrating a balanced approach and confidence in the strategy.

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CFO Nelson Urdaneta projected that gross margin will continue to expand in 2025, but at a slower pace than in the prior two years, driven by strong productivity (~5%) offsetting muted pricing. He also noted that operating margin is expected to grow faster than gross margin, thanks to SG&A savings from the new organizational structure. The cadence of marketing spend was not detailed, but the overall level was expected to be similar to 2024.

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CFO Eduardo Bezerra clarified that the company walked away from low-margin business with a specific customer, which was margin accretive. He expects new, higher-margin business wins to begin offsetting the top-line impact in Q2 2025, with more consistency in the second half. He also explained that lower operating expenses in Q3 reflect benefits from Project Energize, but A&P and R&D spending are expected to normalize in 2025.

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CFO Eduardo Bezerra clarified that the 4-point guidance change was driven by lower seasonal demand/destocking (2.5 points) and the lost store brand distribution (1.5 points), not the planned SKU rationalization. For 2025, Bezerra noted it's early but expects recovery from the H1 2024 infant formula impact, while monitoring consumer demand and the continued investment in Opill. CEO Patrick Lockwood-Taylor detailed Opill's progress, noting strong sell-in, with 30-40% of sales from e-commerce, and ongoing efforts to optimize marketing and retail execution.

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CFO Rick Dierker stated that R&D spending has been consistently around 2% of SG&A over the long term and expects that to continue. He confirmed an SAP project is planned for next year but deferred providing specific financial details or other callouts until the company's Analyst Day in January.

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