Coty Q3 2023 Prepared Remarks Earnings Call Transcript

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May 9, 2023

There are 4 speakers on the call.

Operator

Good morning and good afternoon, 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 Q3 fiscal 2023 earnings. Later this morning at approximately 8:15 a. M.

Operator

Eastern Time, we will hold a separate live Q and A session on today's results, which you can access via our Investor Relations website. Codi's CFO. Joining me this morning for our presentation are Sue Nabi, Codi's CEO and Laurent Mercier, Codi's CFO. CODI. Before I hand the call over to Sue, I would like to remind you that many of the comments today may contain forward looking statements.

Operator

CODI'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 CODI's financial results and CODI's expectations reflect certain adjustments as specified in the non GAAP financial measures section of the company's release. Thank you. I will now turn it over to our CEO, Sue Nabi.

Speaker 1

Thank you, Olga. Welcome, everyone. We are once again proud to report strong operational and financial performance with today's Q3 results marking the 11th consecutive quarter of results in line COVID-nineteen. In a complex global environment, beauty remained an advantageous category with consumers at the sweet spot of affordable luxury, self care and confidence boosting. We saw no signs of slowing in consumers' appetite for fragrances as the fragrance index, as we like to call it, remained in full effect.

Speaker 1

Our conference call. And we once again delivered another quarter of balanced growth with like for like growth across both divisions, across each of our regions and across our key categories, including Fragrances, Cosmetics and Body Care. This has allowed us to again report growing our profit ahead of sales and steadily deleveraging our balance sheet, positioning our company to become a true beauty powerhouse. I'm also very grateful to our Board for their continued support and trust in me as we've recently announced the extension of my long term partnership with Coty, anchored on the long term equity program, which runs through 2030. Cointe.

Speaker 1

As you can imagine, very excited to continue to work with my leadership team to drive Coty forward to build substantial value our shareholders for many years to come. Now I would like to call out a few highlights from our results. Q1 2019. First, we once again delivered revenue growth ahead of expectations and guidance, fueled by the strong beauty demand, Retailers Restocking Post the Holidays and Successful Key Brand Initiatives in Both Divisions. Our Q3 core like for like revenues grew 15%.

Speaker 1

2nd, beginning in Q3, we've kicked off the full multi pronged growth acceleration of our strategic skincare business, including new launches, merchandising updates, our distribution expansion and PR events. As such and consistent with what we've discussed in recent months, We are reinvesting behind these strategic initiatives and the underlying organization to drive our future growth. Slide 12, we will in the coming years, while at the same time confirming our profit delivery in fiscal 2023 and beyond, in line with our guidance our leverage target towards 3x exiting calendar 2023. 3rd, we continue to execute and make progress across our strategic growth pillars. Finally, we are raising our core like for like fiscal 2023 revenue guidance cost of capital expenditures to plus 9% to plus 10% while maintaining our fiscal 2023 EBITDA guidance of $955,000,000 to $965,000,000 And excluding the Equity Swap benefit, we now expect a fiscal 2023 adjusted EPS of $0.38 to $0.39 our financial results, reflecting very strong growth of roughly 35% year on year, up from previous guidance of $0.35 to $0.36 our financials.

Speaker 1

I will now take a few moments to cover our revenue trends during the quarter before Laurent takes you through our financials. Then I will finish with an update on our strategic progress and our outlook. Starting with our revenue performance, our Q3 core revenues grew 15% like for like adjusted for our exit from Russia. This brings our fiscally up to date core business revenue growth to plus 10 percent like for like ahead of our original 6% to 8% like for like growth guidance. Q3, our core Prestige business grew 16% like for like, adjusting for the Russia exit, Q3 resulting in plus 10% core like for like growth fiscal year to date.

Speaker 1

The strong sales growth acceleration in Q3 Corning's financial results reflected continued robust fragrance demand, which actually strengthened further in recent months, improving in our Prestige Fragrance supply and retailer restocking, which we estimate provided a mid single digit percent benefit Q3 growth. We estimate that retailer inventories are now at normalized levels, which should drive Q3 Q4 call sell in to be relatively aligned with sell out. Within the Q3 Prestige Growth, we saw mid single digit volume growth and double digit expansion Q3 in price and mix. Now in Consumer Beauty, our Q3 core revenues grew 12% like for like, Corning, bringing the fiscal year to date core like for like growth to +11 percent. Our Q3 Consumer Beauty growth included low single digit volume growth and double digit price and mix.

Speaker 1

Now geographically, I'm very pleased to say that the like for like our earnings. Americas revenue grew 15% like for like in the quarter Asia Pacific revenue grew 4% like for like in Q3 with strong momentum in broader Asia and Travel Retail and negative April sales in China, including Hainan, have increased both versus last year and versus 2 years ago, speaking to the strong signs of recovery in the market. I will now hand the call over to Laurent to take you through our financial results.

Speaker 2

Our Q3 results, marking the 11th consecutive quarter Q3 results marking the 11th consecutive quarter of results in line to ahead of expectations. COVID-nineteen. Let's start with an update on the global supply and inflationary backdrop and how we are navigating through this difficult environment. COVID-nineteen. As we spoke about last quarter, the continued robust demand for fragrances resulted in industry wide supply chain shortages Key Fragrance Components.

Speaker 2

The biggest constraints have been felt in glass bottles, though the supply of fragrance caps cost savings. As we discussed in recent months, our Prestige service levels improved significantly in the Q3, Corning, reaching a high 80s level exiting the quarter and only a few percentage points below targeted levels. This improvement was driven by strong efforts by our supply chain team to systematically address component constraints by qualifying additional suppliers COVID-nineteen as well as by industry capacity coming online. As a result, retailers restocked on fragrances COGS following the trade inventory depletion during Q2. Turning to the inflationary backdrop.

Speaker 2

In the Q3, COGS inflation rose sequentially to over 2% of sales, in line with our expectations. COGS. We expect a further increase in COGS inflation to approximately 2.5% in the 4th quarter COGS. And as such, we continue to estimate COGS inflation of approximately 2% of revenues in fiscal year 2023. COGS.

Speaker 2

Looking to fiscal year 'twenty four in the first half of the fiscal year, we currently expect COGS inflation to be consistent with the levels COGS, observed in the second half of fiscal twenty twenty three with a moderation in COGS inflation closer to 1% in the second half of fiscal year twenty twenty four. Our financial results. In addition, we expect somewhat higher inflationary pressure in SG and A. Our execution on savings, strategic revenue management and pricing is helping us balance this inflationary impact. We are currently evaluating another round of pricing in the Q1 of fiscal year 2024 as we continue our portfolio transition to cleaner our products, including for the majority of our fragrance portfolio to be produced using carbon captured ethanol by end of calendar 2023, while simultaneously driving category value expansion.

Speaker 2

Our call. I will now provide an update on our all in to win program. In Q3, we delivered savings of approximately 60,000,000 our earnings release, bringing our year to date savings to approximately $130,000,000 And as savings ramp up from key initiatives, our financial results, including our Fragrance plant consolidation and material value analysis. We continue to target savings of approximately $170,000,000 in fiscal year 2023. We also continue to target savings of approximately $90,000,000 our financial results.

Speaker 2

In fiscal year 2020 $75,000,000 in fiscal year 2025, reaffirming the savings targets announced in Q2. In sum, having delivered over $550,000,000 of savings life to date, we continue to optimize all of our COTI to be both flexible and fully equipped Citi and Company's strategic priorities. And importantly, we are now entering Phase 2 of our transformation COVID-nineteen as we put in place more enablers for sustainable growth across the brands and markets, supplementing our savings initiatives. Now turning to our adjusted EPS, where we reported strong momentum in the quarter. As you know, we are obligated to include in our adjusted net income and adjusted EPS to mark to market changes our financial results on the equity swaps we entered in calendar year 2022, which locked in an effective stock price below $8 our financial results for close to $400,000,000 of future buybacks in calendar year 2024 and calendar year 2025.

Speaker 2

As these are non cash and non operational impacts, which will be mechanically calculated based on the quarter end stock price, We are tracking and measuring our EPS performance, both including and excluding the impacts from the equity swaps. Call. We will therefore guide on EPS both including and excluding the swap and to explicitly call out the swap impact in our earnings report CAGR to easily enable investors to understand our operational performance. As a result, We recommend for investors and analysts to include in your models the 2 EPS figures, our operational EPS excluding the swap and the EPS inclusive of the swap, which by necessity will be shown in our earnings releases. Our Q3 diluted adjusted EPS was $0.19 which includes a non cash our financial results.

Speaker 2

Our operational EPS excluding the swap CoreCard Holdings was $0.06 reflecting a $0.03 increase year on year, driven by the operating income growth as well as a lower effective tax CORE. On a fiscal year to date basis, our adjusted EPS, including the swap, was $0.52 our earnings release for almost 80% higher year on year and our adjusted EPS excluding the swap was $0.38 our financial results, which reflects very substantial growth of 31% versus last year. Looking ahead to the remainder of fiscal year 2023, the quarter. We now expect an adjusted effective tax rate for fiscal 2023, our earnings release, excluding the equity swap of mid to high 20s, a little below our previous outlook of high 20s. Our financial results.

Speaker 2

Finally, on fiscal 2023 share count based on GAAP accounting provisions around anti dilution, our Q3 adjusted operating income grew 8% to 123,000,000 our year to date operating income expanding a strong 15% year on year. This delivery was particularly impressive our presentation. The Prestige division delivered double digit operating income growth in the quarter, while the Consumer Beauty division saw an operating loss, Q3 reflecting both the stepped up investment in A and CP around the Keyspring initiatives coupled with certain transactional ForEx costs. Our Q3 adjusted operating margin was relatively stable at 9.5% year over year our year to date margin up strongly by 180 basis points to 15.1%. Importantly, we continue to expect strong income growth and margin expansion in both divisions in fiscal year 2023.

Speaker 2

Our adjusted EBITDA was CNY182,000,000 with 4% growth year to date to 807,000,000. Our earnings release. As a result, year to date adjusted EBITDA margin reached 19.2%, up 50 basis points versus last year. Our financial results. Moving to our gross margin performance.

Speaker 2

Q3 adjusted gross margin of 62.9% CoreCard Holdings decreased by 170 basis points from last year, bringing the year to date adjusted gross margin to 64.2%, our Q3, which is stable year on year and up by a very significant 4.50 basis points versus 2 years ago. Our Q3 gross margin was impacted by close to 100 basis points of one time negative impacts, COGS, including the benefit from the VELA TS exit in the prior year, an increase in COGS inflation to over 2% of sales CoreCard and a negative impact from transactional ForEx. These impacts on gross margin were partially offset the execution of additional pricing increases at the end of the quarter, which will have a more sizable benefit to gross margin in Q4 the quarter and the positive benefits from mix and supply chain productivity. Despite these high headwinds, we continue to expect modest gross margin expansion in Q4 fiscal year 2023 with further expansion in the following years. Going forward, we will continue executing on our multi pronged, multiyear gross margin attack plan as we drive our gross margins to the mid-60s and beyond.

Speaker 2

Our earnings call. Let me now walk you through our marketing investment. In Q3, A and CP investment represented approximately 27% of sales, stable with Q2 levels and with the prior year as we continue to support our key initiatives. Our earnings release. This brings the year to date A and CP level to approximately 26% in line with our expectations.

Speaker 2

Our earnings release. As with prior quarters, our marketing spend was concentrated behind key launches in Prestige and Consumer Beauty corporate and administrative expenses as well as white space opportunities. For the Q4, we expect A and CP to remain in the high 20s level of sales, quarter results, resulting in full fiscal 2023 ANCP, also ending in the high 20s level of sales. Our financial results. Moving to our free cash flow.

Speaker 2

We had free cash outflows of $178,000,000 in the quarter. COPD. This was consistent with Coty's seasonally weaker cash flow period and our active efforts to build Prestige Fragrance inventory to secure the call 2023 holiday season in the midst of persistent constraints in key fragrance components. Our earnings release. Year to date, we have generated $365,000,000 of free cash flow.

Speaker 2

Consistent with our previous guidance, We remain on track to deliver over $400,000,000 of free cash flow in fiscal 2023 with steady expansion in the coming years. Our intent is to continue to use our strong free cash flow and opportunistic asset monetization We ended Q3 with net debt of approximately $4,100,000,000 reflecting the seasonally negative free cash flow in the quarter and the negative translational ForEx impact on our debt from the strengthening Europe. As a result, Our leverage at the end of the quarter was around 4.4 times, up from around 4.1 times at the end of Q2 JPY 1,040,000,000 consistent with Q2. Factoring in our Vela stake, we ended the quarter with economic net debt of approximately 3 point JPY1 1,000,000,000. We continue to expect an attractive return when we divest our VelasTech by fiscal 2025.

Speaker 2

Our financial results. In addition, given the rising interest rate environment, it is important to note that currently approximately 70% of our debt Looking beyond 2023, our strong continued progress on deleveraging and debt pay down support our expectation for Interest expense to steadily decline in the coming years despite the currently rising interest rate environment. To sum up, we are confident in our next major leverage milestone as we continue to target exiting calendar 2023 COVID-nineteen with leverage towards 3 times. Before I turn the call back to Sue, I want to comment on our recent announcement COPIK that we are exploring a potential dual listing on the Paris Stock Exchange. Such a dual listing will further strengthen Coty's presence in Europe Cote and will provide an additional vehicle to reach untapped investors in the market.

Speaker 2

At this time, we will anticipate listing existing Coty shares on the Paris Stock Exchange with no additional share issuances being contemplated. The structure aligns with Coty's over 100 year heritage in France and our substantial business footprint in Europe.

Speaker 1

Our continued execution on our 6 strategic pillars. Starting with our first strategic pillar, which our Consumer Beauty business. In the quarter, both the mass beauty market and our Consumer Beauty division Q3, in part aided by easier comparisons earlier in the quarter. At the same time, both our Consumer Beauty like for like revenues and sellout grew low double digits, marking the 5th consecutive quarter of share gains for the business globally. And as you can see on this slide, our top color cosmetics brands CoverGirl, Rimmel and Max Factor.

Speaker 1

CoverGirl led the booming trend in lip with the viral launch of its clean fresh yummy gloss, which has become the number one lip launch nationally household penetration, particularly amongst Hispanic and Gen Z consumers. Our focus for CoverGirl continues to be on driving penetration with Gen Z and the collaboration with Gen Z and millennial consumers. This will help the brand close the sales growth gap with the U. S. Cosmetics category.

Speaker 1

CoverGirl's recent launches of the Yumi gloss and skin priming serums are both aimed at these younger consumers. And as the next exciting step in this strategy, we've just announced the upcoming launch of CoverGirl's new LashBlast Cleantopia Mascara, the 1st brand plant powered clean mascara. Exclusive collection with Priyanka Chopra Jonas as well as its early but very successful entry into mass skincare with the launch of the Miracle Pure Skin Illuminating Priming Serum. Turning to our 2nd pillar focused on accelerating our Luxury Fragrance business. We continue to see the Fragrance Index in full effect with increased Fragrance usage by Gen Z, men and Hispanic consumers Q3, demand for Prestige Fragrances across North America and Europe 40% higher than 2019.

Speaker 1

And once again, the market data confirms no slowing in the premiumization trend in Fragrances. And with expected growth in fragrance consumption in China and further rebound in travel retail still ahead, COVID-nineteen. Coupled with the resurgence of demand in Europe, similar to what we've seen in the U. S, we remain optimistic about the strong momentum ahead the Fragrance category. At the same time, we continue to strengthen and extend our license portfolio with the recent renewal of the Davidoff license beyond 2,040, which follows the license renewals in the recent months of both Hugo Boss Cote's Sander.

Speaker 1

As a result, the average remaining duration of Coty's top 7 licenses, which account for approximately 90% of our Prestige Fragrance business is now 11 years. On Prestige Cosmetics now, trends our strategy to enter the higher loyalty complexion subcategory. The new Burberry Beyond Wear Perfecting Matte foundation is inspired by the revolutionary fabric of Burberry's iconic trench coat Cologuard and provides 24 hour wear and protection against the elements. The launch is off to a great start with consumers Codrington, Nicknaming it the Trench Foundation and with sales well above our targets. In the U.

Speaker 1

S, our prestige makeup brands continue to outpace the category with both Gucci makeup and Kylie makeup set out growing over 30% Q1 2019, we are now in the Q1 of 2019. Finally, on Kylie Cosmetics, the brand's makeup sales Q4 and the recent successful launches in Dubai as well as the brand's expanded assortment with more innovation already launched in Q4 Kailash, Kylie's first ever mascara, which is off to a great start. Our strategic pillar, building our skincare business. In the last few months, we've ignited our comprehensive strategy as planned our key skincare brands, Lancaster, Aveda and philosophy and many more to come in the coming quarters years. As we've continued to share, accelerating our STICARE presence will be a multiyear journey, the combination of the strong business momentum we are seeing in the rest of our business and our savings generation, COVID-nineteen.

Speaker 1

Let me start with Lancaster. In mid March, we launched Lancaster's ultra premium skincare line called L'Ene Pranciere, Bringing to the forefront Lancaster's heritage as the exclusive brand of the Monaco Princely family backed by patented COP and TOP testing formulations. We have executed a fully omnichannel launch around L'impres. We can see in this video the very first Lancaster flagship stores launched in Hangzhou, China on March 21st in partnership with China's number one department store retailers in time. And we are continuing to open new lean Prancer doors the most luxurious locations in the Chinese mainland and Hainan while also launching Lintrancyr, Antimo and Douyin.

Speaker 1

And while we are still at very early stages in the Linde Franciair launch, the initial results are promising. The Linde France airline has reached the number one spot in social buzz across social media in China, which is a critical component in driving consumer awareness and of course trial. In fact, consumers are now calling our cream the Kelly Creme online. The conversion rate at our initial counters in the Chinese mainland and Hainan are currently in line Q2 ahead of the leading beauty brands. And the consumer comments and reviews are overwhelmingly positive We view these KPIs, social buzz, sales conversion and product reviews as the 3 most important metrics any new skincare launch and we will be focusing on these areas for each of our key skincare brands in the coming quarters.

Speaker 1

Our Q4. Shifting to Orvida. In the last few months, as we have begun to build the awareness, buzz and desirability of this ultra premium skincare brand amongst our target consumers, ultra high net worth individuals, Corvida's opinion leaders, especially in the scientific community and leading figures in the art world. AURVIDA partnered with Paris Art Design Show in Paris to connect with contemporary art and its influential global community of high net worth collectors. During the recent Paris Fashion Week, Orvida also partnered with 3 of the most trendy our fashion designers, Kourej, Jean Baptisteavalli and Anne de Meulemiser to bring its exclusive signature glow to the models backstage CorMedix with the post procedure lines of Aveda helping the models' sensitize skills.

Speaker 1

And Aveda has been awarded 3 times recently Q3 by beauty editors in UK, USA and Spain, including the most coveted award, the Prix de Excellence Marie Claire, making Orvida our most awarded skincare brand. This lays a strong foundation for Orvida's critical commercial Carla Grande and L'Oche initiatives slated for fiscal 2024. Turning now to our largest sneaker brand, philosophy. Our comeback of the brand kicked off in the last month across all touch points in the U. S.

Speaker 1

First, our Q1 results. Philospi announced a new brand formulation principle, Dermatologic Wisdom. 2nd, Philospi has launched its latest product innovation, Q1. While still very early, sales results are over 20% our targets. 3rd, we've relaunched Philosophie's DTC website, which is a significant portion of the brand sales.

Speaker 1

The new site offers a more elevated brand experience and includes many new features such as immersive content modules, our enhanced product detail pages, subscription program for replenishment orders and personalized product recommendations. While still early, we have already begun to see an improvement in the conversion rate on the new website COVID-nineteen as compared to the previous one. Finally, we have updated our in store displays and merchandising beginning with Alta. Let's take a look now at the video campaign for philosophy's new dose of wisdom serum.

Speaker 3

Do repair serums really keep skin at peak performance? Our philosophy introduces a better way based on dermatologic wisdom. The new dose of wisdom serum supports skin's own natural function with the patented vitality booster. Loaded with oxygen, it's the life course of healthy, bouncy skin. 92 percent agree skin looks more plump.

Speaker 3

After all, bouncy is the new healthy, the new dose of wisdom C.

Speaker 1

As you can see, our skincare acceleration has begun in earnest over the last few months, expanding new innovations, elevated online and offline merchandising and unique differentiating storytelling Corporate and Brand Equity Building. While all of these foundational activities require upfront investment, We are, of course, very mindful of key metrics to track our success and ROI as we ramp sales our target of over $500,000,000 in the next few years. This includes pace of store openings the productivities of those stores, consumer utility and repurchase rates, PR buzz, desirability and reach, building successful hero products for each brand and trust and reputation with the scientific community. Our Q4. Moving now to our 4th strategic pillar, which is digital and e commerce expansion.

Speaker 1

There, we continued our broad based momentum across e com, social commerce and consumer advocacy. On e commerce, our prestige fragrance brands, Hugo Boss and Chloe Southeast Asia region. With the reach of over 19,000,000 consumers, we are building on this success with the opening of the Marc Jacobs flagship store Q3 in April. In Q3, we also activated a very successful omni channel launch of Kylie Beauty in the Middle East by partnering with Namshi, the region's fastest growing e retailer. The online activations were coupled with a brand pop up the largest mall in the world, Dubai Mall, and also taking over the tallest building in the world, which is Broads Halifa.

Speaker 1

The results have been very promising with the brands maintaining a top 5 cosmetics brand ranking with a retailer, nearly reaching our fiscal 2023 retail sales COVID-nineteen. Finally, as mentioned earlier, CoverGirl's Yummy Glos has been a viral hit with Gen Z consumers reaching over 100,000,000 views on TikTok. This marks the 2nd phase of our CoverGirl reinvention strategic pillar building our presence in China. Since the lifting of COVID restrictions at the end of calendar 2022, We have seen a steady return of consumer traffic to stores and resumption of flights to Hainan. While inventory worked down at some of our China retailers and distributors weighed down our Q3 sales in China, It's important to highlight that in April, our sales in China, including Hainan, have increased both last year COVID-nineteen and versus 2 years ago.

Speaker 1

This reinforces our confidence in the strong multiyear potential of China of our business as we expand our presence in this critical market. Chinese consumers continue to actively engage our brands and key launches in the quarter, including Lancasterelineprancier, where our announcement of Chinese actress Q1 Chai Tong as the brand ambassador is driving a lot of excitement and awareness, Chloe on Timol and new Atelier Deflur fragrance building on the brand's already strong momentum, having reached the number 4 position Fragrance brand in China Travel Retail in calendar 2022, Burberry new launched Beyondwear Foundation and of course Gucci newly launched Eternite De Beaulieu Foundation. Finally, we are continuing to see incredible momentum in our Travel Retail sales, both in Q3 approximately 8% of our overall business. This is consistent with our Travel Retail penetration in 2019, Here, we've continued to gain share in the mid high growth and highly profitable Travel Retail channel, particularly in EMEA and in the Americas, COVID-nineteen, fueled by distribution expansion, travel retail exclusivities, successful innovations and of course, our growing multi category presence. With no signs of slowing in global consumers' appetite for travel, coupled with the return of Chinese travelers Cote d'Ivoire.

Speaker 1

In the coming quarters, we remain highly optimistic about the growth potential of this channel for the beauty industry as a whole and Coty in particular. Our earnings release. Turning now to our 6th and final strategic pillar, which is becoming a leader in sustainability. We had several ESG milestones over the last few months. First, we launched the world's 1st globally distributed fragrance CarPlay manufactured using ethanol from 100 percent recycled carbon emissions in partnership with LanzaTech.

Speaker 1

Gucci's latest fragrance, where Maha beats, is a key development in Coty's beauty that lasts sustainability strategy. COVID-nineteen. And importantly, we are targeting for the majority of our Fragrance portfolio to be produced using carbon captured ethanol or alcohol our Q2 and sustainable products. Additionally, building our purpose, vision and values, Coty launched the UndefinedBeauty campaign. Our Undefined Beauty campaign recognizes that current English language definitions of the term beauty our outdated and calls on dictionary publishers to remove the implicit ageism and sexism from their definitions.

Speaker 1

COO. We've seen a very strong positive response from our employees, our brand partners and our retail customers to this campaign, COTI as a thought leader on this very crucial topic. Our outlook for the remainder of the year. We expect Q4 like for like sales growth of the core business to be relatively consistent with the fiscal year to date growth of plus 10%. As a reminder, there will be no impact from the Russia exit in Q4.

Speaker 1

At current rates, we expect Q4 ForEx headwinds on revenues in the low single digit percent. And importantly, we continue to expect modest Q4 adjusted gross margin expansion. Altogether, we expect Q4 adjusted EPS breakeven to $0.01 For total fiscal 2023, we now expect revenues for the core business adjusting for the impact of the Russia exit to grow 9% to 10% like for like, which reflects a significant increase from our original outlook for 6% to 8% core like for like growth adjusting for the impact of the Russia exit. Quarter of $955,000,000 to $965,000,000 based on current ForEx rates, our financial results, implying 50 basis points of adjusted EBITDA margin expansion and over 150 basis points of adjusted operating margin expansion. As a reminder, while our sales growth outlook has increased versus our expectations at the start of the year.

Speaker 1

Our EBITDA outlook remains unchanged, both because we have incurred over $50,000,000 of negative ForEx impact on our profits fiscal year to date and because also we are actively reinvesting our critical skincare organization and initiatives to fuel the growth flywheel in the coming years. Our earnings release. Based on the strong EPS momentum year to date, we are increasing our fiscal 2023 adjusted EPS outlook. Assuming the current stock price holds, we now expect an overall adjusted EPS of $0.52 to $0.53 Excluding the mark to market from the equity swap, we now expect approximately 35% growth in our fiscal 2023 creating adjusted EPS to CAD0.38 to CAD0.39 up from our previous guidance of CAD0.35 CAGR to $0.36 We also continue to target a mid-twenty percent adjusted EPS CAGR CAGNY through fiscal 2020 6 excluding any mark to market adjustments on the equity swap consistent with the targets we discussed recently CAGNY. And we continue, of course, to target further reduction in leverage towards 3x exiting calendar 2023 Cote.

Speaker 1

We remain confident in beauty as a structurally attractive category and the longevity of the Fragrance Index. Cote. And in this attractive market, Coty is poised to further outperform given the significant white space opportunities ahead of us within skincare CarPlay and in China and Travel Retail. In short, we are excited by the path ahead as we continue on our journey to transform our company Corning's vision and vision. With that, let me open up the calls for your

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