Coty Inc. (COTY) Q1 2027 Earnings Call Transcript

Hello, everyone. This is Olga Levinson, CODI's Senior Vice President of Investor Relations. Thank you for joining us today for the prepared remarks portion of CODI's first quarter fiscal 2027 earnings. On Thursday, November 5, 2026, at approximately 9.30 a.m. Eastern Time, or 3.30 p.m. Central European Time, we will hold a separate live Q&A session on our results, which you can access via our Investor Relations website. Joining me for our presentation are Marcus Strobel, CODI's Executive Chairman of the Board and Interim Chief Executive Officer, and Soraya Benchik. Cody's Chief Financial Officer. Before I hand the call over to Marcus, I would like to remind you that many of the comments today may contain forward-looking statements. Please refer to Cody's earnings release and the reports filed with the SEC, where the company lists factors that could cause actual results to differ materially from these forward-looking statements. In addition, except where noted, the discussion of Cody's financial results and Cody's expectations reflect certain adjustments. As specified in the non-GAAP financial measure section of the company's release. With that, I will turn it over to our Chief Executive Officer, Marcus.

Thank you, Olga. Hello, everyone, and thank you for joining us. I am pleased to be joined in this call by Soraya Benjic, CODI's Chief Financial Officer, who has now been in the role for a little over two months, and she will share her initial impressions of the business and the progress we have been making. Q1 performance was ahead of our guidance and expectations, but we still have work to do. BISCAL 2027 remains a transition year, and the recovery won't be linear. With that context, let me walk you through the sales and sellout trends for the quarter. Looking first at our sales performance, like-for-like sales declined 1.6% in Q1, compared with declines of 6% in the first half of fiscal 2026 and 4% in the second half. Q1 was better than the fiscal 2026 trends and remained broadly in line with Q4. Our Q1 performance was ahead of our guidance for a low- to mid-single-digit decline, supported by stronger trends in the U.S., and a milder-than-expected decline in the Middle East. Our priority in both divisions is to build consumer demand and align shipments with that demand, while keeping our focus on improving sellout. Our data suggests that overall sell-in and sellout were broadly aligned. Several priority prestige brands showed encouraging early progress as we applied a more focused approach. While these trends are encouraging, there is still more to do to put the business on a more sustainable growth trajectory. Soraya will discuss these data points in more detail. While we execute our transformation, it is important to emphasize that externally, the beauty market continues to demonstrate resilience despite macroeconomic uncertainty. As this chart illustrates, U.S. prestige beauty sales have trended higher over recent years, even as economic sentiment has weakened. This reinforces our confidence in beauty's long-term potential. For Cody, the priority is to capture that demand through stronger execution, compelling innovation, and consistent support behind our core brands. Both the prestige and mass beauty markets continue to grow in Q1. Prestige beauty market growth moderated to 3% in Q1, compared with 6% in the second half of fiscal 2026. Market growth in our core prestige fragrance category grew 5% in Q1, in line with the growth in the second half of fiscal 2026. Against that backdrop, our sellout remained below the market, declining 2% in prestige. Importantly, though, our top six core prestige brands returned to sellout growth, up 1% in Q1. This is an encouraging sign for our top six core prestige brands, but more work is necessary to translate improvements into division-wide sellout growth and strengthened market share. The mass beauty market grew 5% in Q1, while Kodi's sellout declined 3%. We are seeing narrower sellout gaps in parts of the consumer beauty business, including in CoverGirl and Sally Hansen in the US. However, there is further work necessary to improve the competitiveness across the wider consumer beauty portfolio. Sellout for our top four core consumer beauty brands was in line with the overall division. Our priority in both divisions is to translate more focused investment into stronger consumer demand, improved sellout, and better market share performance. Before I hand the call over, I'd like to welcome Soraya. She brings deep financial expertise and valuable experience running businesses and leading transformations. We share a clear focus on disciplined investment, stronger cash generation, and consistent delivery. And I'm very pleased to have her on the team. Soraya, over to you.

Thank you, Marcus. Let me start with a little about myself, but more importantly, what you can expect from me as CFO. I've spent more than two decades across finance and general management in a number of executive roles at BAT and Diageo, most recently as CFO of BAT. I've had the opportunity to lead businesses as well as finance departments, and that combination has shaped how I think about performance and value creation. I am passionate about transformative leadership. Throughout my career, I have led and executed significant business and finance transformations. And that experience has reinforced for me that successful transformation starts with clear priorities, empowered teams, and rigorous accountability for delivery. I am energized to join Coty at this important moment. There is clearly much to do, but also significant value to unlock. Over the past two months, I have spent time in several of our largest markets, including the U.S. and Germany, and visited our fragrance manufacturing facility in Barcelona, one of the largest in the industry. I have been impressed by Coty's passionate people and teams, deep fragrance expertise, and strong end-to-end capabilities. At the same time, I see considerable opportunity to translate these strengths into stronger and more consistent financial performance. And importantly, there is meaningful work already underway to reshape the business. My initial view is that the direction of many of these actions is right. My focus will be on accelerating execution, bringing even greater discipline to where we invest, and ensuring that improvement translates into stronger financial returns and cash generation. As I look ahead, my priorities are very clear. First, quality growth. That starts with strengthening the core. We need our key brands to win with consumers and gain market share supported by focused investment behind the priorities that can generate the strongest returns. Second, productivity-funded reinvestment. For me, simplification is not simply about taking cost out. It is about right-sizing our cost base to the size and potential of the business, while creating the capacity to selectively reinvest behind our highest return opportunities, particularly ANCP, with clear accountability for returns. And third, Enhance cash returns. We need to translate to stronger operating performance into consistent and sustainable cash generation, supported by disciplined capital allocation, and a priority focus on the leveraging over time. So the framework is simple. Strengthen the engine. Create the fuel to reinvest, and convert stronger performance into sustainable cash generation. And underpinning all three is something I care deeply about, creating an organization with clarity on priorities, flexibility to execute, and accountability for outcomes. Let me now turn to our first quarter results. I'll begin with a snapshot of our key metrics, which will serve as our quarterly scorecard. We delivered results ahead of expectations, alongside a significant improvement in year-on-year cash generation. At the same time, I want to reiterate what Marcus has said in recent quarters. We are not satisfied with our performance. Our focus is on putting the business on stronger and more sustainable sales, profitability, and cash trajectory over time. Q1 net revenue was $1.56 billion, down 1.6% on a like-for-like basis. Adjusted EBITDA was $274 million, down 7% year-on-year. Both revenue and adjusted EBITDA were ahead of consensus. Adjusted gross margin was 63.3% and our adjusted EBITDA margin was 17.6%. Both are down 120 basis points. I'll come back shortly to the drivers of the margin performance and the actions we are taking. Free cash flow was $85 million, up $73 million year on year. We ended the quarter with net debt approximately at $2.6 billion, down $300 million since June. So while the quarter showed some early signs of progress in several areas, it also reinforces my priorities and where we need to improve. Looking at our divisions. Prestige revenue was 1.06 billion, down 1%, like for like, while consumer beauty revenue was approximately half a billion, down 3%. Q1 represented a sequential improvement in both divisions versus the first and second halves of fiscal 26. Although performance across brands and markets remain mixed, with Prestige continuing to perform ahead of consumer beauty. We'll share more detail on the drivers of Prestige and consumer beauty performance momentarily. At a regional level, Performance remains uneven. In Prestige, Asia-Pacific grew strongly, led by China and Southeast Asia, while the Americas and EMEA declined. Within the Americas, our U.S. prestige business returned to growth, supported by strong launches, including Marc Jacobs' makeup and Kylie Cosmetics' Moodstone's fragrance collection. In Europe, most countries remained under pressure. Reflecting softer market consumption and our own performance. In consumer beauty, all three regions remained under pressure. EMEA was the most pressured, reflecting lower net revenues across most European countries, as well as the impact of the Middle East conflict. This reinforces the need to be highly selective in where we deploy our resources. Focusing behind brands, categories, and markets where we see the strongest opportunities and returns. Let me show you how the actions already underway are being applied across each division. As part of COTI Curated Framework and aligned with my priorities, our focus has been on returning the business to sustainable quality growth through more disciplined and concentrated investment. In Prestige, we are beginning to see some early evidence of the potential of that approach. Over the past year, we have increasingly concentrated our ANCP investment behind our top six call brands. Together, these six brands represent 73% of prestige sales. So reigniting growth across these brands is critical to returning the division to sustainable growth. The proportion of total ANCP investment behind our top six increased from 64% in the first half of last year to 68% in the second half of last year and to 76% in this quarter. We are beginning to see evidence of stronger performance alongside this increased focus. Our six core brands moved from 6% like-for-like decline in the first half of fiscal 26 to down just 1% in the second half and to 5% growth in this quarter, this year. Importantly, Q1 growth was broad-based, rather than dependent on a single brand or a single initiative, such as the rollout of Marc Jacobs' makeup, which contributed to a couple of percentage points to the growth. Five of the six core brands were growing in Q1. I do want to note that while Gucci is not included amongst these core brands, as the brand will exit the portfolio next year, we are continuing to invest behind the brand in line with our contractual commitments. For me, this is what quality growth looks like in practice, making clear choices, concentrating resources behind our biggest opportunities, and demanding stronger returns from our investment. There is more to do, but Q1 provides initial evidence that greater concentration behind our core brands can support stronger performance over time. We also recognize that quarterly progression will not necessarily be linear, but we will remain disciplined in applying this approach. Turning to consumer beauty, performance remains challenging, although we have seen some improvement versus the first half of fiscal 26, supported by greater concentration of resources behind our largest brands and a much more focused innovation strategy. Our top four core brands represent 58% of consumer beauty sales. Here too. We are becoming much more selective in how we invest. ANCP, allocated to these top four core brands, increased from 64% to 71% year-on-year. These brands improved from down 6% in the first half of fiscal 26 to down 3% in the second half, outperforming the overall division in both periods. In Q1 fiscal 27, the call brands remained broadly in line with the second half trend, while the remainder of consumer beauty performed at a similar level with growth in Brazil offset by weaker trends across smaller brands. There is clearly more work to do, and the performance is not yet where we want it to be. The recovery in consumer beauty will take time, but we will apply the same discipline and framework as in prestige to strengthen performance and return to sustainable growth. Now turning to gross margin. Adjusted gross margin was 63.3%, down 120 basis points year on year. This was below our previous expectation of 50 to 100 basis points decline, primarily reflecting higher freight costs and excess and obsolescence than anticipated. Higher freight and material costs linked to the Middle East conflict weighed on the quarter. Excess and obsolescence costs also remained a headwind, reflecting elevated demand forecasts in the prior year. In addition, increased volumes from Brazil created unfavorable mix impact. We are taking actions on the factors within our control. We are improving forecasting capabilities to better align inventory with demand. Our move toward fewer, bigger innovations is also critical to reducing excess and obsolescence over time. At current oil prices, we expect the Middle East cost headwind to remain elevated throughout the remainder of fiscal 27. So while some external pressures remain, our focus is firmly on the levers we control. Better planning, stronger inventory discipline, and rigorous cost management as we work to improve the underlying economics of the business over time. While our Q1 gross margin was somewhat lower than targeted, disciplined cost management enabled us to deliver adjusted EBITDA ahead of expectations. Total ANCP was 25% of revenue and slightly lower year-on-year, with a significant step-up in investment behind priority brands and continued reallocation toward consumer engagement activities. On fixed cost, we made good progress, reducing non-people costs by 9%, with savings across consulting, depreciation, and IT. While we are advancing the previously communicated headcount reductions, the near-term benefit is being largely offset by underlying labor cost inflation. Beyond this, we continue to see significant opportunity to simplify the business and improve productivity over the coming years, which will be an important part of the financial framework we intend to share following completion of the strategic review. As a result, adjusted EBITDA of 274 million declined 7% year on year. Moving down the P&L, our continued debt reduction is also translating into tangible interest savings, with interest expense declining 15 million year on year to 31 million. Adjusted EPS, excluding the equity swap, was $0.15 flat year-on-year and ahead of our guidance of $0.11 to $0.13. So even as we prioritize investment to strengthen our priority brands, we remain highly disciplined on the cost base and focused on protecting profitability. Turning to cash. Free cash flow increased to $85 million, an improvement of $73 million year-on-year. This compares with approximately $11 million in Q1 last year and an outflow of around $8 million in Q1 fiscal 2025. Cash conversion, measured as free cash flow as a percentage of adjusted EBITDA, improved to approximately 31% from 4% in the prior year quarter. This improvement was driven primarily by better payables and receivables performance, which more than offset lower EBITDA and higher inventory. Looking forward to embed more consistent and sustainable cash conversion across the business, we will improve inventory productivity and working capital generally. Finally, turning to our balance sheet. We ended Q1 with net debt of approximately $2.6 billion, down around $300 million since June, resulting in leverage of approximately 3.1 turns exiting Q1. Our Q1 free cash flow and the $250 million in proceeds received in July in connection with the Gucci transition contributed to that reduction in the net debt. De-leveraging remains a top priority. The most sustainable way to achieve that is through stronger operating performance and consistently higher cash conversion. We also remain committed to completing the strategic review by the end of calendar 2026. Now, let me turn to our outlook. Fiscal 27 remains a transition year, with several important moving parts. We will therefore continue to provide guidance for the next quarter. Following completion of our strategic review, my intention is to provide a longer-term outlook and financial framework that gives greater visibility into the performance we expect from the business over time. With that in mind, let me lay out our outlook for Q2. We expect low single-digit like-for-like revenue decline, reflecting continued volatility across brands and markets as we work through this transition year. Importantly, we anticipate continued like-for-like growth across our top six core prestige brands. Albeit at a more moderate pace than Q1, which benefited from the rollout of Marc Jacobs' make-up in bricks-and-mortar stores. FX is anticipated to be a low single-digit headwind to revenues driven by the recent depreciation in the Brazilian real. At the EBITDA level, we expect a high single-digit decline as we continue to prioritize investment behind the brands and opportunities where we see the strongest potential for quality growth and return. We expect adjusted EPS, excluding the swap, of $0.16 to $0.18. And finally, cash. We continue to expect more than $300 million of free cash flow in the first half, consistent with our prior outlook, supporting further deleveraging. Overall, we are seeing early signs of progress in some of our priority areas, while recognizing that performance is not yet where we want it to be, and that quarterly progression will not necessarily be linear. Our focus remains on execution, disciplined investment, and delivering sustainable growth, profitability, and cash generation over time. Let me bring all of this together. Our objective is straightforward to create a virtuous flywheel of sustainable value creation. It starts with the three priorities I set out at the beginning. First, quality growth. We are focusing our resources behind the core brands and markets, where we see the greatest opportunity to win, with the objective of driving sell-out, and translating that into sustainable revenue growth. Second, productivity-funded reinvestment. We need to improve the economics of our growth through stronger gross margin and a simpler, more efficient cost base. Creating the capacity to selectively reinvest behind our highest return opportunities. Third, enhance cash returns. We need stronger and more consistent free cash flow conversion, ensuring that improvements in earnings translate into cash. This cash creates choices. It gives us the capacity to deliver while continuing to selectively reinvest behind our highest return opportunities and ultimately creates greater capacity for shareholder returns. That is the flywheel. Focused investment drives quality growth. Quality growth, better gross margin, and more efficient cost base drive stronger earnings, and stronger earnings convert into cash. Cash enables us to deliver and reinvest, creating the fuel for the next phase of sustainable growth. This is the model we are focused on executing with discipline and accountability quarter after quarter. Progress will not always be linear, but the priorities are clear. Quality growth, productivity-funded reinvestment, and enhanced cash returns. With that, let me turn it back to Markus.

Thank you, Soraya. Let me turn to our broader strategy and the progress we're making under our CODI-curated strategic framework. CODI-curated is about focused investment and clearer priorities. Applying this framework to the CODI business means disciplined execution, operational effectiveness, and sufficient multi-year marketing support. The changes we are making are intended to strengthen the business over time. Let me now turn to how we are implementing CODI Curated. At its core, the framework is about making choices and backing them with resources. As Araya discussed, our ACP allocation is more focused. 76% of prestige ANCP supports the core top six brands, compared with 64% in the first half of fiscal 2026. While 71% of consumer beauty ANCP supports the top four, up from 64% in the first quarter of fiscal 2026. This is an important shift. We are concentrating investment behind the brands where we have the greatest opportunities to drive sustainable growth and returns. But focus is not just about where we spend. It is also about how we measure success. We are reinforcing an organization-wide focus on sellout and market share, including through our updated fiscal 2027 incentive structure. The objective is to ensure the organization is aligned around what ultimately matters, consumer demand and winning in the market. We are bringing the same discipline to innovation. In prestige, our launches in the first half of fiscal 2027 are tracking ahead of target to date. And in consumer beauty, we are moving toward fewer, more creative and focused innovations to improve overall profitability. We are also evolving the way consumers discover our brands. Our global partnership with Brandlight is designed to strengthen our visibility in AI-driven search and large language models, initially supporting six prestige brands across five markets. And finally, the ROI lens. We are increasingly rigorous about where we deploy capital and what return we expect from it. We are already seeing focused investment support improved profitability in prestige skincare. So across each of these initiatives, the principle is consistent. Fewer priorities, greater focus, and stronger accountability for returns. Let me spend a moment on innovation, because this is an important part of the Kodi-curated framework. Our philosophy is clear. Fewer, bigger, and more accretive innovations. By continuing to support growth in the core. Starting with Prestige, we are encouraged by the early progress. Our first half of fiscal 2027 key launches, including Boss Bottle, Beyond For Her Fragrance, Marc Jacobs Beauty Makeup, Burberry Goddess, Amber Vanilla, and the Mood Stones by Kylie Jenner Fragrance Collection. Several months into the launch, these innovations are tracking ahead of plan. Sales from prestige innovation are up low single digits from the prior year and are accretive to the prestige divisional gross margin. So the objective is not to simply launch more. It is to build fewer, more meaningful innovations that can scale, support the core, and strengthen the economics of the business. In consumer beauty, we are applying the same discipline but from a different starting point. We are moving towards smaller, more impactful innovation bundles, and in parallel, platforming our key innovations across our cosmetics brands, given their limited geographic overlap. Consumer beauty returns and markdowns are lower than in prior years, benefiting from a more focused innovation approach. Meanwhile, the recently launched CoverGirl Lash Blast Showstopper Mascara is underpinned by a unique mascara brush technology, which we are platforming and launching in parallel under Rimmel with the Double Dare Mascara. It is worth highlighting that CoverGirl Showstopper is also a great example of the new ways of working under Color the Future. Upgraded packaging, unique innovation, and strong commercial and digital activation, including early success on TikTok shop. So, across both prestige and consumer beauty, the principle is consistent. Innovation needs to earn its place. Ultimately, our measure of successful innovation is not how much we launch. It is whether that innovation strengthens our brands, grows the core, and creates attractive returns. Now, I want to update you on several of our top brands, starting with Burberry, which delivered low single-digit percentage like-for-like growth in the first quarter. Makeup supported Burberry growth, with Q1 sales more than doubling year-on-year. We saw encouraging results for Burberry Goddess Ember Vanilla, a top-five female launch, propelling the overall Burberry Goddess fragrance franchise up one rank. As we focus on amplifying consumer engagement, we're also seeing continued improvement in Burberry's consumer advocacy, with Burberry's prestige fragrance category share of influence increasing by 50 basis points. Looking ahead, our next steps are to amplify fragrance and makeup in fiscal 2027 through a higher marketing investment, increased consumer engagement, and a new campaign for a core Burberry franchise. Turning to Hugo Boss. Frequent sales grew by a low single-digit percentage on a like-for-like basis in the quarter. Growth was led by Boss Bottled, including Beyond Intense and Beyond for Her, alongside moderate growth in descent as we increased support behind these core franchises. Growth in the quarter was partially offset by softness in other franchises. In Germany, Hugo Boss' largest market, we are back to market share growth in Q1. We're also seeing encouraging momentum in consumer advocacy and engagement with Hugo Boss' prestige fragrance category, Share of Influence, increasing by 100 basis points. Our priority is to focus investment on the core of the brand, strengthening the connection between innovation and the base business, supported by a halo effect from recent launches like Boss Bottle Beyond and Beyond for Her. In parallel, we plan to relaunch the send in the second half with refreshed positioning to appeal to Gen Z consumers. Turning to Marc Jacobs, we are pleased to have secured a 40-year term for a license with the WHP Global NG3 Apparel Group, extending a partnership that began in 2003. While we extended the license only a few years ago and still have over a decade remaining, this extended license reinforces Cody's position as a partner of choice for the world's leading luxury fashion brands and increases the long-term visibility of our prestige portfolio. Over more than two decades, we have built Marc Jacobs into a powerful beauty brand with its fragrances ranking within the top 10 to top 15 prestige female fragrances across the U.S., the U.K., Canada, Australia. And Marc Jacobs' beauty makeup is also off to an outstanding start. With this long-term agreement in place, we see significant opportunities as we build Marc Jacobs into a multi-category beauty powerhouse. We successfully launched Marc Jacobs Beauty Makeup across approximately 600 Sephora stores in the US, UK, Australia, and Canada, and online. Encouragingly, retail sales are already exceeding targets. Only a few months into the launch, Marc Jacobs Beauty is a top 20 maker brand at Sephora UK and ANZ and a top 30 maker brand in Sephora US. The launch marks Cody's first ever coordinated multi-market Sephora launch executed simultaneously across four geographies with Sephora. We've also led with an advocacy-first launch model, combining influencer amplification, paid boosting, experiential activations, and always-on social engagement. The engagement with Marc Jacobs' beauty makeup is also benefiting the brand's fragrance business. Marc Jacobs' fragrance sales grew by a double-digit percentage on a like-for-like basis in the first quarter, driven by a very strong performance from the iconic Desi franchise. Advocacy momentum is also accelerating, with Marc Jacobs' prestige frequency category share of influence rising by 90 basis points. Looking ahead, our priorities are to scale make-up through strong retailer execution and build long-term brand desirability through an advocacy-led strategy while strengthening cross-category recruitment. Turning to Calvin Klein, sales trends were moderately lower year-on-year. Our renewed focus on CK1 supported sales growth in the CK franchise, and the newer Euphoria innovations also contributed positively, but those gains were more than offset by lower sales from other collections. CK Mists continue to perform well, ranking number three in the European body spray market. New sense and expanded distribution are also supporting the broader collection. Advocacy momentum also accelerated with Calvin Klein's prestige frequency category share of influence up 100 basis points. Looking ahead, we're continuing to amplify Euphoria Elixir and are reigniting CQ1 by tapping into renewed 1990s nostalgia and the franchise cultural relevance. Turning to Kylie Cosmetics, performance remains robust. The brand delivered double-digit like-for-like sales growth in Q1, supported by fragrance sales up double-digit and makeup growing high single digits. We also saw strong momentum with market share gains in stores and online. Looking ahead, we are building on the mood stones by Kylie Jenner Fragrance Collection and new lip kit launches to strengthen Kylie's positions across fragrance and makeup. Turning to Chloe. Frequent sales grew by a low single-digit percentage on a like-for-like basis in Q1, supported by very strong growth in Atelier de Fleur. Our ultra premium fragrance collection. Looking ahead, we are focused on accelerating momentum for Atelier de Fleur and reinforcing the Chloé signature franchise through increased marketing support in key markets. The combination of our expansion of Chloé Atelier de Fleur, the recent launch of the Burberry Prosome ultra premium fragrance collection and Atro's upcoming fragrance collection further strengthen Cody's position in the fast-growing ultra premium fragrance category. Call of the Future is supporting better trends in our cosmetics brands, with our U.S. pilot providing specific examples of improved competitiveness at CoverGirl and Sally Hansen, giving us a foundation for further operational progress. For CoverGirl, we continue to see encouraging progress in U.S. retail sales on both a value and unit basis. The client in retail's value sales moderated to 2% over the last 13 weeks. Compared with a 4% decline over the last 52 weeks. The improvement is even more evident when we look at unit sales, which were flat over the last 13 weeks, compared with a 4% decline over the last 52 weeks. CoverGirl continues to trail a growing category, but encouragingly, the gap has narrowed on both measures. Our focus is on translating destabilization into sustainable growth. Consistent media and advocacy behind our icons and core franchises, including Lash Blast and Simply Ageless, remain central to our approach, alongside creative assets that connect with a multi-generational audience, particularly Gen X. With Sally Hansen, we continue to see encouraging signs in the U.S., especially in unit performance. In retail value sales, the gap to the category narrowed from five percentage points over the last 52 weeks to two points over the last 13 weeks, with Sally Hansen growing 1% compared with 3% category growth. Unit performance remains stronger. Sally Hansen grew 1% over the last 13 weeks against a 4% category decline. Our focus remains on consistent media support behind our core brand pillars, alongside agile, on-trend color collections and display programs for InstaTri. In Q1, Sally Hansen's market share reached 17.9% on the combined nail color and artificial nail measure, about 160 basis points above the 16.3 fiscal 2026 level. On this measure, Sally Hansen regained the number one position among U.S. mass nail brands, a positive step as we work to implement Color the Future. Turning to Rimmel in the UK, retail trends continue to show encouraging signs. Retail value sales declined 1% over the last three months compared with a 3% decline over the last 12 months, narrowing the gap to a growing category supported by sellout growth in nail. Unitrends improved more significantly, moving from a 4% decline over the last 12 months to a 1% decline over the last three months, outperforming the category. Our priority is to return RIML to sustain growth over time as we continue to execute our turnaround actions. Let me now bring this together and close with a few thoughts on our progress and the priorities ahead under Kodi curated. As we close, our Q1 results were ahead of expectations, but we are not where we want to be. Kodi Curated gives us clear priorities for this transition year in fiscal 2027, but there is still work to do, and implementation will take time. Kodi has a strong foundation, including a top three global position in both prestige and total fragrances, even excluding Gucci, as well as in mass color cosmetics. Our fragrance expertise and core brands still have significant untapped potential. We are concentrating innovation and investment behind our top brands with opportunities to reach more consumers across price points and expand in priority markets. Our top six core prestige brands grew 5% like for like in Q1, and we expect continued growth from this group of brands on a combined basis in Q2, which is encouraging. Market share is now embedded in how we reward performance alongside continued profit discipline to incentivize a healthy business model. Improving the effectiveness of our marketing spending is another priority, with a focus on reaching consumers directly and driving sellout. That includes strengthening our data and measurement to direct more spending towards activity with demonstrated returns. We exited Q1 with leverage of approximately 3.1x and prioritizing stronger cash generation remains central to our efforts to reduce debt further. We remain permitted to completing a strategic review by the end of calendar 2026 with the objective of shaping a portfolio that delivers sustainable growth and stronger cash generation. In parallel, we are evaluating how our organizational and cost structure should evolve with fewer layers and faster decision-making closer to our markets. The aim is to strengthen execution, deliver significant savings, and create capacity to reinvest in our brands. This will take time, and we do not expect the recovery to be linear. Confidence is earned through consistent delivery. Our progress needs to translate and sustain growth in our core brands, improve cash conversion, and further the leveraging. We will be transparent about our progress and challenges and accountable for delivery. At the same time, we see significant opportunity to unlock value. Thank you for joining our call today.