Susan Anderson

Susan Anderson followed up on the promotional environment, asking if it was competitor-driven or due to lackluster consumer demand, if it would continue into Q3, and about Prestige fragrances growing relative to the market.

Answer

Laurent Mercier, Chief Financial Officer, confirmed that some competitors were very promotional in the second half of Q2, and they assume this will continue into Q3, impacting gross margin. He stated this environment pushes Coty to reallocate resources and focus on sell-out, amplifying innovation. He expressed confidence in the fragrance category's mid-single-digit growth, driven by volume and mix, and new consumers (Gen Z) entering the category via new tools like TikTok. He reiterated that the fragrance category is expected to keep growing mid-single-digit, with strong volume and mix.

Susan Anderson followed up on the promotional environment, asking if the worsening in Q2 was competitor-driven or due to lackluster consumer demand, and if it's expected to continue into Q3. She also asked about prestige fragrance growth relative to the market.

Answer

Laurent Mercier (Chief Financial Officer) confirmed that some competitors were very promotional in the second half of Q2, and this is assumed to continue into Q3, impacting gross margin. He emphasized reallocating resources to focus on sell-out and amplifying great innovation. He expressed full confidence in consumer demand, citing growing volumes, Gen Z entering the category, and traction from new tools like TikTok. He reiterated confidence that the fragrance category will continue growing mid-single-digit, driven by volume and mix.

Susan Anderson asked about the performance of the prestige portfolio excluding fragrances, particularly in cosmetics and skincare, and inquired about new innovation and investments. She also sought details on the higher promotional environment and how Coty plans to compete.

Answer

CEO Sue Nabi attributed the prestige division's underperformance to weakness in color cosmetics in Asia, linked to the shrinking reseller channel, but highlighted strong growth in skincare's Lancaster brand in China. CFO Laurent Mercier stated Coty is managing promotions cautiously, using strategic revenue management like new formats (e.g., pen sprays) to offer value without deep discounting. Nabi added that Coty is targeting the fastest-growing prestige segments with innovations like perfume mists to avoid margin-eroding promotions.

Susan Anderson asked about the performance of the prestige portfolio excluding fragrances, upcoming innovation in prestige cosmetics and skincare, and how Coty is navigating the heightened promotional environment in both mass and prestige.

Answer

CEO Sue Nabi stated that prestige performance was impacted by a slowdown in Asia related to resellers, but skincare brand Lancaster is growing strongly in China. CFO Laurent Mercier addressed promotions by stating Coty is managing cautiously, using strategic revenue management and new formats like pen sprays to avoid deep discounting. Nabi added that Coty is focusing on the fastest-growing parts of the fragrance market (niche and affordable mists) to offer value without diluting brand equity.

Susan Anderson from Canaccord Genuity Group Inc. inquired about the Consumer Beauty business, including the strategy to rebalance resources for profit, the future of the CoverGirl brand, the promotional environment in mass cosmetics, and the relative performance of international brands like Rimmel.

Answer

CEO Sue Nabi detailed a strategy to pivot resources from the under-pressure color cosmetics category towards the faster-growing and more profitable mass fragrance category. She highlighted the success of Rimmel in the U.K. as a playbook for combining prestige-inspired innovation with influencer marketing. CFO Laurent Mercier added that the company is protecting its brands from heavy promotions through strategic revenue management.

Susan Anderson of Canaccord Genuity asked about the company's pricing plans for fiscal '25, especially given the higher FX impact, and the expected balance between pricing and units.

Answer

CFO Laurent Mercier stated that with inflation slowing, future price increases will be more moderate, in the low single-digit range. He emphasized that the company retains pricing power due to innovation and technology, particularly in the fragrance category. The company continues to monitor elasticity to ensure pricing actions do not negatively impact volumes, citing fragrance as a category where they have successfully managed this balance.

Susan Anderson asked about Coty's pricing plans for fiscal '25 in light of higher FX impacts and the expected balance between pricing and volume growth.

Answer

Executive Laurent Mercier explained that as inflation slows, future price increases will be more moderate, in the low single-digit range. He asserted that the company maintains pricing power through innovation and will continue to carefully manage elasticity to protect volumes. He pointed to the fragrance category as a successful example of balancing price increases, mix improvement, and volume growth.

Susan Anderson inquired about the progress of restocking the Clear Eyes business, the expected timeframe for full stock across all SKUs, and any impact on margins during the supply disruption with anticipated recovery. She also asked for an update on e-commerce penetration, faster-growing online segments, and long-term penetration expectations. Finally, she sought an update on the women's health business, specifically if it was susceptible to consumer shopping patterns or retailer destocking.

Answer

Chris Sacco, CFO and COO, stated that the strategic acquisition of Pillar5 and new suppliers are progressing, but restocking will be a gradual process extending through fiscal year 2027, with sequential improvements expected. He noted that margins remained relatively stable, with no material change expected from eye care supply normalization. Ron Lombardi, Chairman, President, and CEO, reported over 10% consumption growth in e-commerce for Q3 but cautioned against predicting ultimate channel share. He emphasized working with retail partners to meet evolving shopper needs. For women's health, Lombardi highlighted Monistat's strong performance and expansion into new products, while Summer's Eve is well-positioned for long-term growth despite recent volatility, with the overall franchise performing well on a trailing twelve-month basis.

Susan Anderson asked for an update on Clear Eyes restocking progress, the expected timeline for full SKU availability, and any associated margin impacts. She also questioned the current penetration and long-term potential of e-commerce, and the performance of the women's health business, including its susceptibility to consumer shopping patterns.

Answer

Chris Sacco, CFO and COO, stated that Clear Eyes restocking would ramp through fiscal 2027 with sequential improvements, noting no material impact on margins. Ron Lombardi, Chairman, President, and CEO, highlighted over 10% e-commerce consumption growth in Q3, emphasizing consumer preference for broad offerings and service, and the company's focus on retail partnerships. Lombardi also reported strong performance for Monistat and long-term positioning for Summer's Eve, attributing recent volatility to year-over-year comps and dot-com order spikes.

Susan Anderson of Canaccord Genuity Group inquired about the financial impact of the Pillar five acquisition on margins and the resulting internal manufacturing mix for eye care. She also asked about the drivers of the full-year gross margin guidance, expectations for the cough/cold season, channel inventory levels, and the ongoing recovery of the Summer's Eve brand.

Answer

CFO & COO Christine Sacco stated the Pillar five acquisition is expected to be neutral to the P&L and gross margin, with the company not disclosing the specific internal manufacturing percentage. She affirmed the full-year gross margin guide of 56.5%, supported by a variable cost model and a reduced tariff outlook, and noted that cough/cold expectations remain unchanged. Sacco also confirmed that channel inventories are not inflated. Chairman, President & CEO Ron Lombardi added that the Women's Health segment grew in the quarter, indicating strong momentum for Summer's Eve.

Susan Anderson inquired about the growth outlook for the Women's Health brands (Summer's Eve and Monistat), the inventory and shipment forecast for the cough/cold category, and the company's capital allocation priorities given its reduced leverage.

Answer

Chairman, President & CEO Ron Lombardi expressed confidence in the Women's Health franchise, citing a return to growth for Summer's Eve in FY25 driven by new products and expecting this to continue. He projected flat shipments for the cough/cold category in FY26. CFO & COO Christine Sacco reiterated that the capital allocation strategy remains a balanced approach with a preference for M&A, supplemented by share repurchases and building cash to maintain flexibility for acquisitions.

Susan Anderson asked about the impact of the weak cough and cold season on Q4, whether retail inventory levels in the category are high, and the company's potential exposure to new tariffs from China, Mexico, Canada, and Europe.

Answer

CEO Ron Lombardi explained that the cough/cold category is not a significant part of the portfolio and that retailers appear to be reducing inventory rather than reordering, minimizing any Q4 impact. CFO and COO Christine Sacco added that the company is monitoring potential tariffs but feels its diversified supply base and U.S.-centric manufacturing provide a strategic advantage to manage any new costs.

Susan Anderson asked about the performance and competitive landscape of the international business, particularly the Hydralyte brand in Australia. She also inquired about the company's capital allocation strategy between share repurchases and M&A, and whether the U.S. promotional environment is becoming more competitive.

Answer

CFO Christine Sacco explained that the International segment's 5% growth was driven by strong, double-digit consumption growth for Hydralyte, which maintains a dominant market share in Australia despite new entrants. She also noted strong performance in other regions like Latin America. Regarding capital allocation, Sacco confirmed a balanced approach of debt reduction, opportunistic share buybacks ($38M YTD), and a preference for M&A, supported by strong cash flow and a leverage ratio of 2.7x. CEO Ron Lombardi added that Prestige is not seeing increased promotional pressure in the U.S. because its incident-based products did not experience the same level of price inflation as other consumer categories.

Susan Anderson requested an update on tariffs, including when e.l.f. Beauty expects to cycle their impact and if the price increase and other efforts have fully mitigated the tariff effects. She also asked if previous issues with holding back inventory from retailers due to pricing disagreements had been resolved, and if any catch-up shipments occurred in the quarter.

Answer

Mandy Fields, SVP and CFO, reported that the tariff rate has been 45% since November 10th, down from 170% earlier in the fiscal year, which will become a tailwind in fiscal 2027. She confirmed that all pricing and shipment issues with retailers were fully resolved by the end of Q2, with no further updates or catch-up shipments in the current quarter.

Susan Anderson requested an update on tariffs, including when the impact will cycle and whether the tariff burden has been fully mitigated through price increases and other efforts. She also asked for clarification on the resolution of holding back inventory from retailers who had not adjusted their pricing, and if any catch-up in shipments occurred during the quarter.

Answer

Mandy Fields, SVP and CFO, provided an update on tariffs, noting the rate has been 45% since November 10th, with no further changes. She indicated that if the rate remains at 45%, it could become a tailwind in fiscal 2027 compared to the higher rates earlier in the current fiscal year. Ms. Fields confirmed that the issue of holding back inventory due to pricing discrepancies was fully resolved by the end of the second quarter, with no further updates on that front.

Susan Anderson of Canaccord Genuity asked for clarification on why tariffs would impact Q1 results despite inventory builds, and inquired about new shelf space or international plans for the Naturium brand.

Answer

SVP & CFO Mandy Fields explained that some tariff impact will be felt in Q1 as certain essential products had to be shipped during the higher-tariff period, ahead of the August price increase. Chairman and CEO Tarang Amin added that Naturium's distribution is significantly expanding at Boots in the U.K., with other expansions to be discussed in the future.

Susan Anderson asked for more color on Naturium's performance and its rollout to Ulta, and also inquired about the competitive landscape, including legacy brands and new entrants like K-Beauty.

Answer

CFO Mandy Fields stated that Naturium's performance is very pleasing, with continued growth, particularly at Ulta where the business is building week-over-week. Chairman and CEO Tarang Amin addressed competition by stating that while the category is always competitive, few brands can scale effectively. He emphasized that e.l.f.'s competitive moat is the integrated nature of its advantages, especially its unique ability to deliver prestige quality at accessible prices, which has not been replicated.

Susan Anderson inquired about the innovation pipeline, particularly regarding core franchises after a quarter with less support, and asked for an update on inventory levels.

Answer

CEO Tarang Amin clarified that the tracked channel softness was due to cycling a 'perfect storm' of support for the Power Grip and Halo Glow franchises last year, not a lack of newness. He noted that spring 2025 innovation will focus on reanimating these core franchises. CFO Mandy Fields added that inventory levels are appropriate for supporting global demand and are expected to build in Q3 for spring launches before declining in Q4.

Susan Anderson requested an update on the Sally store remodel program, now branded Sally Ignited, asking about the number of completed stores beyond the Orlando market, their performance compared to the core fleet, and if any have been completed outside Orlando. She also followed up on the strong color growth at Sally, inquiring if it's driven by more DIY customers due to stretched wallets, if these are new or returning consumers, and if they are cross-shopping other products.

Answer

Denise Paulonis, President and CEO, reported that 30 Sally Ignited stores were open at fiscal year-end, including the full Orlando market and a handful of other locations. She explained that the new layout, discovery bar, and purpose-built fixtures are driving higher dwell time and cross-category shopping, with units per transaction (UPT) and average transaction value (ATV) trending above the rest of the fleet. Paulonis confirmed plans for 50 additional Sally Ignited stores in fiscal 2026 within existing capital programs. Regarding color growth, she stated that new, reactivated, and existing customers are contributing, with LCOD providing confidence for DIY endeavors. Paulonis noted that customers are managing budgets by doing more DIY hair color, with a significant portion splitting between DIY and salon visits, and that customers are exploring other products while in stores.

Susan Anderson requested an update on the Sally store remodel program, including the number of completed stores, their performance compared to the core fleet and the Orlando market, and any remodels outside Orlando. She also asked about the strong growth in Sally's color category, whether it's driven by new low-income consumers due to stretched wallets, if these are new or returning customers, and if they are cross-shopping other products.

Answer

Denise Paulonis, President and CEO, explained that the Sally brand refresh, now called Sally Ignited, focuses on physical and digital enhancements for discovery and community. She noted 30 stores were open at year-end, including the Orlando market and other locations, with 50 more planned for fiscal 2026 within existing capital. These stores show higher dwell time, cross-category shopping, and increased units per transaction (UPT) and average transaction value (ATV). For color growth, Paulonis stated it's driven by new, reactivated, and existing customers, with LCOD providing confidence for DIY coloring. She highlighted that 25% of customers DIY their hair, and another 25% split between DIY and salon, indicating budget management as a factor.

Susan Anderson inquired about the recent acceleration in Sally Beauty store closures, the performance of renovated stores, shifts in consumer behavior between DIY and salon services, and requested quantification of the sales impact from the online education tool.

Answer

President & CEO Denise Paulonis clarified that the Q3 store closures were not a change in U.S. strategy but were concentrated in Europe due to a strategic exit from Spain. She noted that while it's early, the 20 refreshed stores are showing positive trends in basket growth and cross-shopping. Paulonis confirmed that consumer frugality is driving interest in DIY color, benefiting Sally, though it's offset by softness in ancillary categories like care. She quantified the success of the Licensed Colorist on Demand (LCOD) tool, stating it drives a 25% higher transaction value and one additional trip per year from engaged customers, directly contributing to sales growth.

Susan Anderson inquired about recent consumer spending behavior, asking if the company has observed a pullback, and questioned whether there is evidence of consumers trading down from professional salon services to do-it-yourself coloring.

Answer

President and CEO Denise Paulonis noted that after transitory issues in Jan/Feb, March brought more consumer anxiety amid tariff news, a trend reflected in the updated guidance. She confirmed there is no significant evidence of consumers trading down from professional services to DIY color, a shift that historically requires a major economic downturn. However, she did observe consumers looking to extend time between salon visits and seeking value and promotions across both business segments.

Susan Anderson inquired about the Sun and Skin Care category, specifically the promotional environment, inventory levels at retail, the competitive landscape with new brands, and any upcoming innovation for the next year.

Answer

Rod Little, President and CEO, described the recently completed Sun season as very promotional with below-average weather. He confirmed that inventories are clean going into the next year due to Q4 adjustments. Little stated that Edgewell would match promotional intensity if it remains high and that planning for the upcoming season is conservative, similar to the last. He highlighted Hawaiian Tropic as the fastest-growing top-10 brand, driven by strong activation, formulations, and a new campaign entering its second year. A new campaign for Banana Boat is also planned, with increased investment behind both brands. Fran Weissman, CFO, added that low single-digit growth is expected for Sun and Skin in 2026, with international markets serving as a key growth engine through higher volumes, pricing, and regional execution. In the U.S., focus will be on Hawaiian Tropic's distribution gains and promotional support, alongside Banana Boat innovation and an enhanced promotional strategy.

Susan Anderson asked about the sun and skin category, focusing on the higher promotional activity observed, the outlook for the category next year, current inventory levels at retail, the competitive environment with new brands, and any upcoming innovation.

Answer

Rod Little, President and CEO, acknowledged that the past sun season was highly promotional with below-average weather, but stated that inventories are now clean. He indicated that Edgewell would match promotional intensity if it continues and has conservatively planned for a similar season next year. He highlighted Hawaiian Tropic as the fastest-growing brand in the top 10, benefiting from strong activation, better formulations, and a new campaign, which will continue into year two. A new campaign for Banana Boat is also planned, with increased investment behind both brands. Fran Weissman, CFO, added that international markets are expected to drive sun care growth through higher volumes and pricing, with a focus on regional execution and everyday sun protection.

Susan Anderson from Canaccord Genuity Group asked about the Sun Care business, specifically regarding Q4 replenishment expectations, channel inventory levels, and future innovation. She also inquired about competitive dynamics in Wet Shave and the performance of the Billie's Body Wash line.

Answer

COO Daniel Sullivan stated that Q4 Sun Care sales expectations are based on replenishment to meet mid-single-digit consumption growth and that channel inventories are in a good position. President and CEO Rod Little added that Hawaiian Tropic is performing strongly, and the team is focused on strengthening Banana Boat. Regarding Wet Shave, Little noted the women's category remains highly promotional but Edgewell is competing effectively. He acknowledged that Billie's Body Wash results were below expectations and are being re-evaluated, while emphasizing a renewed corporate priority to win in the global shave category.

Susan Anderson asked about the performance of the Billie Body line and its national expansion plans. She also inquired about updated capital allocation priorities, including the potential for M&A and acquiring other DTC brands.

Answer

COO Daniel Sullivan confirmed the national launch of Billie Body is underway with strong retailer support, particularly from Target. President and CEO Rod Little emphasized this expansion is built on the success of the core Billie shave business, which continues to gain significant share. On capital allocation, Sullivan noted that after prioritizing deleveraging, M&A will be an important part of their strategy, though valuation is a challenge. Little added that given the current stock price, share repurchases remain a highly attractive use of capital.

Susan Anderson of Canaccord Genuity asked about gross margin, questioning if any structural changes would impede a return to pre-pandemic levels in the mid-40s. She also requested a breakdown of the forecasted 115 basis points of COGS inflation for fiscal 2025.

Answer

COO and CFO Daniel Sullivan expressed confidence in the path back to pre-COVID margin levels, driven by strong productivity and pricing levers. He noted that for fiscal 2025, the inflationary picture is similar to 2024, with the 115 bps of COGS inflation driven by low single-digit increases in raw materials, mid-single-digit increases in labor, and deflation in warehousing and distribution. He stated that while inflation and FX are unpredictable variables, the company's performance demonstrates its ability to manage these pressures.

Susan Anderson asked about the efficiencies and potential margin impact resulting from the further integration of Hiya Health into USANA's operations, broader industry trends concerning VMS/wellness purchases and consumer value-seeking, and the company's future diversification strategy, including potential DTC business acquisitions.

Answer

Chief Operating Officer Walter Noot detailed plans for USANA to manufacture all of Hiya Health's vitamins in-house and noted cost reductions from assisting Hiya Health in transitioning to a new 3PL partner, with more quantitative details expected in February. CEO Jim Brown acknowledged a general struggle in direct selling post-COVID but highlighted strong performance from Hiya Health and RiseBar, emphasizing USANA's high-quality, differentiated products. Jim also confirmed diversification as a core strategy, seeking M&A opportunities, with CFO Doug Hekking prioritizing investments in commercial strategy and venture companies.

Susan Anderson inquired about further efficiencies from Hiya's integration and their impact on margins, general industry trends regarding VMS and wellness purchases, consumer demand for value, and potential regional differences. She also asked about opportunities to acquire more direct-to-consumer businesses as part of USANA's future diversification strategy.

Answer

Walter Noot, COO, detailed Hiya's in-house vitamin manufacturing and operational efficiencies from supply chain support and a 3PL transition, but did not quantify margin impact yet. Jim Brown, CEO, and Walter Noot, COO, discussed the direct selling industry's struggles post-COVID, USANA's enhanced compensation plan, and competition in VMS. They highlighted Hiya's market share gains in children's vitamins and Rise Bar's growth in protein, emphasizing USANA's quality differentiation. Jim Brown confirmed diversification through M&A and internal expansion as a future strategy, aiming for an omnichannel presence. Doug Hekking, CFO, added that near-term capital allocation priorities include the commercial strategy and venture companies.

Susan Anderson asked CEO Scott Uzzell for his high-level views on growth opportunities across Helen of Troy's categories, including Beauty and Wellness, Home and Outdoor, and potentially new categories. She also requested more detailed color on the performance of specific brands and segments during the quarter, particularly the weaker wellness brands versus prestige hair and tools in Beauty and Wellness, and OXO's performance within the softer Home and Outdoor segment.

Answer

CEO Scott Uzzell confirmed opportunities in both Home and Outdoor and Beauty and Wellness, citing innovation potential in brands like Osprey, Curlsmith, Olive & June, and OXO. He emphasized focusing on fewer initiatives, strengthening the foundation, paying down debt, and then considering M&A. CFO Brian Grass specifically added that Beauty is a category with significant opportunity, supported by a strong innovation pipeline. He explained that sell-in lagged sell-through due to retailer caution and direct import disruptions, noting wellness was weaker from direct import disruption and a soft cold/flu season. In Beauty, while overall strong, some consumer trade-down and competition were observed, but the new product pipeline looks promising. For Home and Outdoor, shipments were softer due to retail inventory adjustments and direct import impacts, but OXO and Osprey showed favorable point-of-sale. Assistant CFO Tracy Schuerman confirmed OXO and Osprey's strong performance, with insulated beverageware being a softer area.

Susan Anderson asked Scott Uzzell (CEO) for his high-level views on growth opportunities across Helen of Troy's categories, including Beauty & Wellness and Home & Outdoor, and potentially new areas. She also sought more detailed color on segment performance, specifically regarding weaker wellness brands, prestige hair brands, tools in Beauty & Wellness, and OXO's performance within Home & Outdoor.

Answer

Scott Uzzell (CEO) identified opportunities across the entire portfolio, including Osprey, Curlsmith, Olive & June, and OXO, stressing the need to strengthen the foundation before considering M&A. Brian Grass (CFO) added that Beauty holds significant opportunity with innovation. Brian Grass (CFO) and Tracy Schuerman (Assistant CFO) detailed that sell-in lagged sell-through, wellness was weaker due to tariffs and cold/flu season, while beauty showed mixed results with some trade-down. Home was softer due to inventory adjustments, but Osprey and OXO showed favorable POS, and the hydration category is seeing a pivot back to bottles.

Susan Anderson from Canaccord Genuity Group asked for color on the company's sell-through performance at retail compared to its sell-in, aiming to gauge underlying consumer response to the brands. She also questioned whether retail inventory levels were becoming too lean.

Answer

CEO Brian Grass reported that point-of-sale (POS) unit volume was up for 8 of 11 key brands, indicating positive underlying consumer demand, though dollar POS was down, which he attributed to consumer trade-down behavior. CFO Tracy Schuerman stated that retail inventory was 'pretty well balanced' post-Q1, with only a few areas being lean, and that the company has factored further retailer inventory adjustments into its Q2 forecast.

Susan Anderson followed up on tariff mitigation, asking for a breakdown of the strategy between price increases and supplier cost savings. She also inquired about the company's China exposure including the Olive and June acquisition, and current consumer and retailer trends.

Answer

CFO Brian Grass explained that Olive and June has a mitigation plan to be cost-neutral or better. He refrained from detailing the specific mix of mitigation levers like pricing, citing too many variables, but affirmed all levers are meaningful. CEO Noel Geoffroy added that reducing marketing spend is a last resort and would be optimized using data analytics. Geoffroy also noted that while consumer softness is anticipated, the most immediate impact is from retailer order patterns, such as pausing direct imports, which is affecting Q1.

Susan Anderson asked for a follow-up on the Beauty segment's liquid hair products, questioning if recent strength was broad-based across Drybar and Curlsmith and how new retail space for Drybar was performing. She also inquired about the drivers behind the quarterly increase in inventory and the state of inventory levels at retail.

Answer

CEO Noel Geoffroy clarified that Curlsmith continues to be a strong performer, while Drybar has pockets of strength in specific collections like Big Brew and Liquid Glass. CFO Brian Grass explained that company inventory is higher due to a strategic build for thermometry ahead of the illness season and to create a buffer for supplier transitions out of China. Consequently, Noel Geoffroy added that retailer inventory levels are highest in the Wellness category due to the weak season.

Susan Anderson of Canaccord Genuity inquired about the company's expectations for consumer spending and the promotional environment during the holiday season. She also asked about the anticipated gross margin cadence for the third and fourth quarters.

Answer

CEO Noel Geoffroy anticipates that consumers will remain choosy and value-focused during the holidays. She noted that Helen of Troy plans to participate in key promotional events with a broader assortment but does not foresee major changes in the depth of discounts. CFO Brian Grass added that he expects gross margin to normalize and return to levels near or slightly above the prior year in the second half, with Q3 and Q4 performance being very similar to each other.

Susan Anderson inquired about the rationale for acquiring retailer Space NK for international expansion instead of opening Ulta-branded stores, and asked for details on the differences between the two retail concepts.

Answer

President and CEO Kecia Steelman explained the acquisition was a unique, less capital-intensive strategy to enter the UK market with an established player. She described Space NK as a standalone, prestige-focused retailer with smaller, high-street stores and a high-touch service model, which offers valuable learnings for the core US business.

Susan Anderson from Canaccord Genuity asked for an update on the newness and innovation pipeline for the remainder of the year, questioning if a continued ramp-up in new products is expected.

Answer

President & CEO Kecia Steelman confirmed that the company is pleased with the newness pipeline for Q2 and the second half of the year. She emphasized that the upcoming launches are well-balanced across all major categories and include a significant blend of brand exclusivity, which is a key part of their strategy to drive momentum and build on their market position.

Susan Anderson inquired if Ulta is seeing increased competition on the mass side of the business, in addition to prestige, and asked if the decline in the hair care category was primarily driven by prestige products.

Answer

CEO David Kimbell clarified that while the entire beauty category is competitive, the most significant pressure comes from the dramatic increase in prestige distribution points, which is why Ulta maintained its market share in mass. He confirmed the hair care category's decline was primarily due to a planned promotional shift of the 'Gorgeous Hair' event from Q2 into Q1, not a fundamental weakness in the business.

Susan Anderson of Canaccord Genuity Group inquired about the drivers behind the lower net revenue per order, the returns on increased marketing spend, and the key factors expected to fuel revenue growth in the second half of the year. She also asked about the progress of category expansion, particularly into areas beyond cleaning, and requested color on the sales mix.

Answer

CEO & Director Jeff Yurcisin explained that the lower revenue per order was a direct, temporary result of the Q2 platform migration and efforts to re-engage specific customer cohorts. He affirmed that increased marketing spend is driven by strong payback metrics post-migration. Yurcisin detailed that future revenue growth will stem from lapping prior marketing cuts, an improved customer experience on the new platform, and significant category expansion into human health and wellness, including personal care and VMS, which is the company's top strategic priority. He declined to provide a specific sales breakdown by category.

Susan Anderson of Canaccord Genuity Group Inc. inquired about the drivers of the forecasted Q3 sales decline, specifically its concentration in the specialty retail channel, and followed up on the promotional environment for the second half of the year.

Answer

COO & CFO Catherine Dunleavy explained the Q3/Q4 sales timing shift is intentional to better align with customer demand, citing headwinds in DTC post-Q2 events, a more even split of holiday shipments in retail, and a Q4 benefit in the Pro channel from Black Friday participation. CEO Amanda Baldwin added that the promotional strategy is not about increasing frequency but being more strategic, focusing on key 'tentpole' moments and supporting the professional channel.

Susan Anderson asked for details on the strong performance in the specialty retail channel, questioning the balance of sell-in versus sell-out and the health of retail inventory levels. She also inquired about consumer reception to the new brand refresh.

Answer

CEO Amanda Baldwin confirmed that inventory levels with retail partners are healthy and attributed the channel's strong performance to retailers' enthusiasm for Olaplex's strategic vision and innovation pipeline. She added that the brand refresh has been very well received. CFO Catherine Dunleavy noted that Q1 2025 sell-through improved year-over-year and is expected to continue improving as marketing ramps up.

Susan Anderson inquired about OLAPLEX's commitment to the professional channel amidst rising competition, the drivers of its sales decline, and the strategy to stabilize it. She also asked for details on the international distributor rationalization and its expected impact on 2025 sales.

Answer

CEO Amanda Baldwin affirmed the professional channel's importance as both a sales and marketing engine, outlining a strategy focused on superior products, education, and community building. Regarding international markets, she described a methodical, country-by-country process to strengthen partnerships rather than just reduce them. COO & CFO Catherine Dunleavy added that North America is expected to lead 2025 performance while the international transformation continues.

Susan Anderson from Canaccord Genuity Group asked for clarification on whether tariff uncertainty was the primary cause for retailers pulling back on orders and questioned the company's capacity to add more brands to its portfolio.

Answer

Chairman and CEO Jean Madar clarified that the pullback in ordering was due to general uncertainty and a lack of visibility, not directly because of tariffs. Regarding portfolio expansion, he affirmed that Inter Parfums has the capacity to take on more brands, noting that recent additions like Longchamp are complementary and that the portfolio is actively managed, which may involve phasing out smaller brands over time.

Susan Anderson asked for clarification on whether tariff uncertainty was a direct cause for retailers pulling back on orders and questioned the company's capacity to add more brands to its portfolio following recent acquisitions like Longchamp.

Answer

Chairman & CEO Jean Madar clarified that reduced ordering was not a direct result of tariffs but rather part of a broader trend of prudence amid general market uncertainty. Regarding the brand portfolio, Madar affirmed that Inter Parfums definitely has the capacity to take on more brands, viewing new licenses like Longchamp as complementary and part of an ongoing strategy to diversify and edit the portfolio over time.

Susan Anderson inquired about the U.S. business, asking for color on retailer destocking and the drivers behind North American growth. She also asked about global consumer fragrance trends, particularly in Europe and Asia.

Answer

CFO Michel Atwood stated that significant retailer destocking in the U.S. has abated and there is no major disconnect between sell-in and sell-out. He noted that while the U.S. market was slightly down in Q1, Interparfums gained moderate share. CEO Jean Madar added that globally, the fragrance market is still growing but at a slower pace than last year, with Europe facing challenges while Asia shows mixed results.

Susan Anderson of Canaccord Genuity inquired about the 2025 performance outlook for top brands versus new launches and asked about early 2025 consumer trends and the sell-in/sell-out dynamic.

Answer

Executive Michel Atwood projected that brands with major innovation, such as GUESS, Ferragamo, and Lacoste, will see disproportionate growth in 2025. He expects more moderate growth from larger brands like Jimmy Choo and Coach, which have flanker launches planned. Executive Jean Madar confirmed the 4% growth target for 2025 will be achieved without increased promotions and projected that growth will be weighted towards the second half of the year. Michel Atwood added that the sell-in/sell-out gap has normalized and key consumer trends, like male adoption of fragrances, remain strong.

Susan Anderson of Canaccord Genuity Group Inc. asked about the company's strategic pricing plans to offset tariffs, the pace of consumer trade-down to private label, the primary drivers of the expected back-half revenue growth, and the performance and long-term outlook for Opill.

Answer

EVP & CFO Eduardo Bezerra stated that pricing actions and supply chain initiatives are on track to fully offset tariff impacts. President & CEO Patrick Taylor confirmed an acceleration in consumers moving to store brands, which he views as a long-term benefit. He detailed that second-half growth will be driven ~75% by OTC wins and ~25% by nutrition. He also provided a positive update on Opill, citing a 55% repeat rate and plans for brand extensions.

Susan Anderson inquired about contract manufacturing opportunities in infant formula, the drivers of organic sales performance across categories like Cold/Cough and Digestive Health, and the full-year gross margin outlook after a strong Q1.

Answer

CEO Patrick Lockwood-Taylor confirmed an increase in contract manufacturing interest and noted the FDA is stepping up foreign inspections. He and CFO Eduardo Bezerra attributed digestive health softness to planned distribution losses, which were offset by other category strengths. Bezerra reaffirmed the full-year gross margin target of 40%, explaining that Q1's outperformance was due to manufacturing efficiencies that may not repeat at the same level.

Susan Anderson inquired about the recovery ramp for the Infant Nutrition business into Q4 and 2025, its associated margin profile, and the performance of the Opill launch, including its path to EPS accretion.

Answer

CFO Eduardo Bezerra explained that the infant formula recovery is on track for store brands but faces uncertainty in the contract business due to new market entrants. He noted margins should continue to improve in 2025. CEO Patrick Lockwood-Taylor added that Opill is gaining momentum with strong repeat rates but requires further optimization, while Bezerra confirmed it is gross margin accretive but not expected to be EPS accretive in the near term.

Susan Anderson inquired about the drivers behind the improved digital gross margin, the future target for selling and marketing expenses, and plans for new product rollouts in the nutrition segment to stimulate growth.

Answer

The company explained that the higher digital gross margin is due to disciplined production spending, which is now the new long-term expectation. Selling and marketing expenses are targeted to reach the mid-30s as a percentage of revenue, down from over 50% in the MLM era, by eliminating partner commissions, not by reducing marketing investment. The nutrition segment is set for a major expansion in 2026 with the retail launch of Shakeology, P90X, and Insanity branded supplements.

Susan Anderson of Canaccord Genuity Group Inc. inquired about the drivers for the higher digital gross margin, the expected future level for selling and marketing expenses, and plans for new supplement launches to stimulate growth in the nutrition segment.

Answer

Interim CFO Brad Ramberg attributed the improved digital gross margin to more disciplined production spending, establishing a new long-term target of 86-89%. He also projected that selling and marketing expenses would decrease to the mid-30% range from the current 39.9%. Executive Chairman Mark Goldston clarified that actual marketing spend remains robust, with savings coming from the elimination of MLM commissions. Goldston also confirmed a major retail push in 2026 for the Shakeology, P90X, and Insanity nutrition brands to drive growth. CEO Carl Daikeler added that growth will be pursued efficiently, with a focus on profitable return on ad spend.

Susan Anderson inquired about the North American core business, asking if it returned to growth and what specific field activation strategies drove its improvement. She also asked for a regional growth outlook for the second half, the drivers for expected gross margin improvement, and how new products like MarineGlow Collagen contribute to growth.

Answer

CEO Terrence Moorhead stated that while the total core business did not return to growth, it saw vast improvement from better field fundamentals, new talent, and enhanced sales support. For the second half, CFO Shane Jones projected low-to-mid single-digit growth for Asia Pacific and continued growth in Europe, with North America expected to accelerate to mid-single-digit growth. Jones also noted that gross margin should see modest improvement as FX headwinds abate. Moorhead concluded that new products are key for customer acquisition and building long-term momentum in high-growth categories.

Susan Anderson of Canaccord Genuity asked about the sustainability of strong growth in Europe and Asia and the strategy for revitalizing the North American practitioner channel. She also inquired about the expected balance between gross margin and SG&A for the remainder of 2025 and the cadence of the new share repurchase program.

Answer

CEO Terrence Moorehead credited strong fundamentals for growth in Asia and Europe but noted tougher comparisons are coming in H2 2025. CFO Shane Jones highlighted Japan's strong new customer growth. For North America, Moorehead detailed a strategy involving new leadership, a new digital toolkit, and enhanced marketing. Jones guided for modest gross margin improvement, quarterly SG&A of $40M-$42M, and aggressive opportunistic share repurchases.

Susan Anderson inquired about the key drivers behind the accelerated growth in the Asia Pacific region and its future outlook amidst macro pressures. She also asked for an update on the North American digital business upgrade, including the timeline and features of the new distributor toolkit, and questioned the potential financial impact of tariffs on raw materials.

Answer

CEO Terrence Moorehead attributed the 21% local currency growth in Asia to successful strategies involving consumer-friendly product bundles, the 'Subscribe & Thrive' program, and strong field incentives. He anticipates continued robust growth, though not at the 20%+ level. Regarding digital, Moorehead confirmed the core platform upgrade is largely complete and detailed a new AI-powered distributor toolkit with CRM and marketing features set to launch in late Q3 or early Q4 2025. On tariffs, CFO Shane Jones estimated a potential $2 million to $3 million full-year impact on gross margin from proposed tariffs, while noting the situation remains fluid.

Susan Anderson inquired about the updated full-year guidance, seeking a regional breakdown for the implied flat Q4 performance, and asked about the new consumer product packs in Asia and the performance of the Power line.

Answer

CFO Shane Jones provided the Q4 regional outlook, noting a timing pull-forward in Asia Pacific, continued weakness in China, stable results in Central Europe, and offsetting trends in North America's digital versus core business. CEO Terrence Moorehead explained the product strategy in Asia involved shifting from detox to vitality-focused packs to broaden appeal and drive repeat purchases. He also noted the Power line is seeing strong progress in Europe and near double-digit growth in North America, with plans to market it as a system in late 2025.

Susan Anderson of Canaccord Genuity inquired about the drivers of strong consumable sales, particularly the impact of new launches like Hydralock, the reasons for the pickup in the APAC region, and the timing of the upcoming skin care line.

Answer

Executive Marla Beck explained that new products like Hydralock HA drive traffic to provider practices and that the upcoming backbar line for in-treatment use is slated for H2 2025, with a broader consumer skincare line planned for early next year. Executive Michael Monahan attributed the strong APAC consumable sales primarily to effective execution and reduced discounting in China.

Susan Anderson inquired about the primary drivers for the anticipated decline in delivery system sales for Q1 2025 and the outlook for consumer demand for consumables.

Answer

Executive Michael Monahan attributed the device sales pressure to macro uncertainty and higher interest rates, which are delaying provider purchasing decisions. He noted the company is using its 'good, better, best' pricing strategy to mitigate this. CEO Marla Beck added that consumer demand for treatments remains consistent, supported by favorable trends like treatment stacking. Monahan specified that consumable growth is expected in the Americas and EMEA, with a slowdown in APAC due to the strategic shift in China.

Susan Anderson asked about the company's strategy for consumables, including the planned cadence of new launches, whether new products drive a sales uptick, and the potential for a future skincare line. She also inquired about the financial impact of consolidating manufacturing into the Long Beach facility, specifically regarding P&L, margins, and cost savings.

Answer

CEO Marla Beck stated that innovation is a key strategy and the new commercial leadership is defining the 2025 launch cadence. She confirmed the company is still evaluating a back bar and skincare line. CFO Michael Monahan noted a one-time $7.6 million charge in Q3 related to the manufacturing exit and expects to realize future efficiencies from the consolidated Long Beach facility.

An analyst on behalf of Susan Anderson asked about the potential impact of tariffs on sourcing and international business, and inquired about other product innovations planned for the year.

Answer

The company expects any impact from tariffs to be minimal, as the bulk of materials and sales are in the U.S., and supplements are not on the list for recent Canadian tariffs. Other innovations planned for the year include one or two new complementary supplement formulations and potential reformulations of existing products like TRU NIAGEN immune and beauty.

Susan Anderson asked for details on Milk Makeup's innovation pipeline and white space opportunities, the performance of the physician-dispensed channel, and the current M&A landscape for indie beauty brands, including valuations.

Answer

Executive Michel Brousset highlighted that innovation is core to Milk, noting a substantial runway exists in major makeup subcategories like liquid foundation and lipsticks where the brand is not present. He estimated the physician-dispensed channel is growing at 6-8% and is benefiting from a consumer shift to science-backed skincare. Regarding M&A, he confirmed the market has many attractive targets but said Waldencast remains highly selective, and valuations for great assets remain high.