科蒂 (COTY) 2026 財年第四季法說會：2027 財年過渡期與古馳重組

Coty 2026 財年第四季法說會重點聚焦於從批發出貨 (sell-in) 轉向消費者端銷售 (sell-out)、2027 財年的轉型計畫，以及針對預期受 Gucci 品牌授權影響所做的準備工作。管理層表示，2027 財年的優先事項為提升市場份額、穩定獲利能力並降低庫存波動。

主要重點

• Coty 的目標是將 2027 財年的 EBITDA 和自由現金流保持在接近 2026 財年的水準，不過管理層目前僅針對第一季發布了正式的財務預測。
• 管理層預計第一季趨勢將與前兩個季度相似，隨後隨著創新、集中支出與終端銷售企劃顯現成效，將出現逐季改善。
• 市場份額與終端銷售額已與銷售額及極具份量的 EBITDA 指標一同列為 2027 財年員工激勵機制的主要考核指標。
• Coty 計劃將大眾美容產品的上架 SKU 減少約 20%。管理層預期這不會對銷售額產生重大影響，並表示整體上架空間應保持基本穩定。
• 2027 財年潛在的有利因素包括約 3,000 萬美元的關稅退款，以及低於預算的原油相關成本。Coty 基於每桶 90 至 100 美元的原油價格，已納入 2,000 萬至 3,000 萬美元的成本準備。
• 公司極有意願在 2026 日曆年底前完成對大眾美容業務的戰略評估，但若給予額外時間能帶來顯著更佳的結果，則保留有限的彈性空間。

核心財務數據

業務與營運表現

Coty 主要的營運目標是縮小其終端銷售表現與整體市場之間的差距。管理層坦承，近幾季終端銷售落後於同類別產品，導致出貨拉貨動能放緩及庫存相關干擾。

公司正將投資集中於數量更少、規模更大的企劃上。在 Coty.Curated 以及聚焦於大眾美容的「Color the Future」計畫下，Coty 正優先發展核心主力系列、更多增量創新，以及能鞏固長期品牌價值的廣告宣傳。

在美國市場，CoverGirl 與 Sally Hansen 在 2026 財年大幅縮小了與市場的表現差距。在全美廣告及包含 Insta-Dri 等產品的推動下，Sally Hansen 的銷售額成長超越整體市場。CoverGirl 則重新展開全美電視廣告投放，預算重點投入 Simply Ageless 與 LashBlast。

管理層預計 SKU 削減計畫將隨時間降低退貨率與過期淘汰率。銷售速度較快的產品將獲得更多上架空間，而滯銷商品則在零售商春秋兩季調整鋪貨時下架。Coty 表示，儘管在某些領域上架空間有所增加或減少，但整體而言應保持穩定。

大眾美容計畫目前正擴展至歐洲市場。Coty 指出 Rimmel 在英國已出現早期改善，並計劃對 Manhattan、Max Factor 及 Bourjois 採取類似措施。巴西市場亦已恢復成長，管理層預期該業務將重新奪回市場份額。

在高端美容產品 (Prestige) 領域，Coty 正尋求能拓展整體品牌系列、而不僅僅產生新品上市初期銷售的創新。管理層強調 BOSS Bottled Beyond 以及在免稅零售通路推出的 Boss Beyond for Her，就是旨在增加女性產品線同時支持男性主力系列創新的典型案例。

免稅零售 (Travel Retail) 在銷售與品牌形象展示方面仍具戰略重要性。管理層表示，該通路成長良好，提供醒目的新品上市展示、店內體驗及美容顧問支援。

管理層財務預測

Coty 將 2027 財年定義為轉型年。管理層預期第一季的趨勢將與前兩個季度相似，隨後的逐季改善將取決於終端銷售與市場份額對新品創新及更嚴格預算管制的反應速度。

公司目標是將 2027 財年 EBITDA 與自由現金流保持在接近 2026 財年的水準。潛在的上行空間可能來自低於預期的原油相關費用、收到約 3,000 萬美元的關稅退款，以及額外的生產力提升或成本節省。

針對 2028 財年，Coty 的目標是使不含 Gucci 的基礎產品組合恢復成長。管理層表示，單憑計劃中的重組計畫就旨在彌補 Gucci 帶來的缺口，而品牌成長將提供額外的緩衝支援。

該重組預計將涵蓋 Coty 的市場進入模式、製造與配送網路、組織層級以及中央企業職能。在處理完與大眾美容戰略評估相關的依存事項後，預計將提供更多細節。

風險與關注焦點

• 2027 財年改善的速度取決於 Coty 恢復終端銷售成長與市場份額的快慢。
• 若復甦速度較慢，將限制上行空間，並需要更嚴格的成本管理。
• 約 3,000 萬美元關稅退款在發放時間與是否能收到方面仍存在不確定性。
• 原油價格可能會影響公司規劃框架中納入的 2,000 萬至 3,000 萬美元成本準備。
• 歐洲大眾美容業務的企劃進展不如美國成熟，能否成功複製將是重要的執行力考驗。
• Gucci 品牌授權的到期終止，在 2028 財年前帶來龐大的銷售額與營運費用挑戰，需要對營運與公司整體職能進行重組。
• 大眾美容業務仍處於戰略評估階段，最終的結構或交易結果尚未確定。

分析師問答環節精華

管理層表示，修訂後的激勵機制旨在防止過度促銷活動。市場份額已透過銷售額與份量十足的 EBITDA 指標達成平衡，限制了以犧牲獲利能力來追求銷量的動機。

在定價方面，Coty 觀察到高端美容產品在 10 月至 12 月節慶期間競爭激烈，隨後略有放緩。在大眾美容領域，管理層預期各公司將採用更有針對性的 SKU 層級定價，而非全面性調漲或調降。

關於 Gucci，Coty 表示其與開雲集團 (Kering) 的協議提供了相當於一年利潤與現金的補償金、用於支持減債與重組的資金，以及庫存的解決方案。Coty 計劃調整營運費用與營運網路規模，以反映初期較低的銷售基期。

針對大眾美容業務評估，管理層表示正將該業務作為一個整體進行評估，而非優先出售最容易處置的單一資產。無論評估的最終結果如何，持續的品牌投資與營運改善皆旨在創造價值。

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管理層陳述

Operator

Good morning and good afternoon, everyone. My name is Chelsea, and I'll be your conference operator today. At this time, I would like to welcome everyone to Coty's Fourth Quarter Fiscal 2026 Question-and-Answer Conference Call. As a reminder, this conference call is being recorded today, August 20, 2026, at 8:00 a.m. Eastern Time or 2:00 p.m. Central European Time. Please note that on August 19, at approximately 4:30 p.m. Eastern Time or 10:30 p.m. Central European Time, Coty issued a press release and prepared remarks webcast, which can be found on its Investor Relations website.

On today's call are Markus Strobel, Executive Chairman of the Board and Interim Chief Executive Officer; and Laurent Mercier, Chief Financial Officer.

I would like to remind you that many of the comments today may contain forward-looking statements. Please refer to Coty's earnings release and the reports filed with the SEC where the company lists factors that could cause actual results to differ materially from those forward-looking statements. In addition, except where noted, the discussion of Coty's financial results and Coty's expectations reflect certain adjustments as specified in the non-GAAP financial measures section of the company's release.

With that, we will now open the line for questions.

Operator

[Operator Instructions] And our first question will come from Filippo Falorni with Citi.

分析師問答

Filippo Falorni

So I wanted to ask a bit about fiscal '27. Obviously, you characterized it a transition year and the framework you provided in the prepared remarks was helpful. But I love to hear a bit more of your KPI internally that you're looking to achieve throughout this transition year. And maybe talk a little bit more about the potential sources of upside, both from a top line and profit standpoint and any risk that you see as you think about this transition year?

Markus Strobel

Okay. Yes, Filippo, you probably know that in the last couple of quarters, our sellout has been trailing below the category, okay? And obviously, that has led to lower sell-in and has led to all of the problems that we have. So our objective is to drive sell-out and to drive market share. This is new thinking for the organization. The organization was traditionally sell-in focused, and it takes some time to this adaptation. So we believe, as we outlined in the first quarter, probably see a similar trend that we have seen in the last 2 quarters, but then we want to sequentially improve that. We have some strong incremental innovation coming up. We have a more disciplined approach to spending. We focus on fewer bets. And we believe that this will, over time, decrease the sell-out gap versus the market.

Now the question is how long this will take? I cannot answer you that today. If this takes -- if this catches on faster, there will be upside. If this takes longer, then we better manage. And so far, we have tried to give a 50-50 balanced picture on that. But it all depends on how fast can we drive sellout, how fast can we drive market share. That's an important KPI for us. We have even changed all our bonus systems for fiscal '27, where market share sell-out is now a very important KPI and it has not been the case before. So we believe the whole organization will be focused on this, and we hopefully see some upside here. This is about sales.

And we talk about EBITDA, obviously, we're reducing the decline rate we have seen in the last 2 quarters. And is there upside? Yes, that depends on how the Middle East is going to shape up, how oil prices are going to shape up. We've built in $20 million, $30 million of costs for an oil price between $90 and $100. This is getting better, might be getting a little bit better. And also, we are still waiting for a potential tariff refund, which is about $30 million that comes or comes not depending when it comes, but there's an upside. And of course, we keep working on future productivity and cost savings effort on which we have delivered quite a good result in the last couple of years. So that's kind of my balanced view on this.

Operator

Our next question will come from Javier Escalante with Evercore ISI.

Javier Escalante Manzo

Laurent, thank you very much for all the help, you're going to be missed. I have 2 questions on the presentation. One, if you can talk about what's happened in EMEA, excluding the Middle East. I believe that most of it is consumer brands in Europe. But if you can talk about why there is no improvement there, that would be helpful. And particularly on the consumer side, if you can give us -- if you can walk us through what is the portfolio there beyond the core brands that you always talk about more kind of like the smaller brands, what's happening there?

And moving into the U.S. is the second question. You made some comments about SKU reduction and also there is some comments about capital spending related to marketing equipment. So if you can talk about whether that pertains to the U.S., what does it mean for CoverGirl? And if you can give us an update in terms of shelf reset heading into the fall?

Markus Strobel

Okay. Let me just unpack this. Javier, for your first question, the European -- more European brands versus the U.S. brands. I mean we have started our Color the Future performance improvement program in the consumer business in basically in January, and that's a version of Coty.Curated for consumer. And we have started this program in the U.S. So we have started all the interventions we have been making a simpler lineup, more powerful innovation, but fewer SKUs that we ship in and all these kind of things on -- since it's U.S., mostly on brands like CoverGirl and Sally Hansen. We see great traction. They have -- both brands have reduced the gap versus the market substantially over the year. And Sally Hansen is now even growing ahead of the market even in value. So we have been positively surprised by how quickly the interventions take on.

We also believe these interventions will help our EBITDA over time because part of our EBITDA decline on Consumer Beauty is returns, obsolescence because you get -- when the innovation is not selling, you get it back in the U.S. trade. And if you're selling less, more powerful things and we have fewer SKUs on the shelf that are turning much more quickly, we're going to have less excess and obsolescence as we move along. So this is a very big part of our EBITDA building plan in Consumer Beauty.

So having said that, we started this program in the U.S. and now we are rolling it out to the rest of Europe, the last country is the U.K. where some good traction now on Rimmel, especially in the last month where Rimmel is catching up with the category finally. And as a final step, in the next few weeks or months, we're going to roll this out to our mostly European brands. These are brands like Max Factor and Gua Sha that are mostly prevalent in Central Europe and in parts of Western Europe. And we have not implemented these interventions there yet, but they are about to come. So I'm expecting that we're going to see some improvements there as well.

Coming back to the SKUs and the CapEx, you know that CapEx in makeup in cosmetics is very expensive. So we're going to be -- we've done a lot of improvements with procurement and in the work with our vendors to have great quality installations, but at a lower price. So our CapEx is going down. And we will -- when we look at the 20% SKU reduction on shelves, we don't believe this is going to have any material impact on our sales. On the contrary, that's going to leave the space for the fast turning SKUs because in the past, with an innovation not working, you put in a slow turner and the fast turner goes out of the shelf. It doesn't make much sense. So we're very, very deliberate about that. So we believe we're going to see a continuous uptick in our consumer business over the next couple of months.

Javier Escalante Manzo

But just to double-click, if you can comment on the shelf resets getting into the fall. Do you think that the phasing -- the total phasing to the consumer in the U.S. for CoverGirl and Sally Hansen is going to held up? Or how is it going to change? And then the color on Europe was interesting, but I'm more interested in the brands that you don't talk about. Like you used to have brands at least that I remember, something called ASTOR, Manhattan. The brands -- what is happening to them?

Laurent Mercier

I'm happily talking about them. I'll come back to your first question in a second. Happily talking about ASTOR -- ASTOR?

Javier Escalante Manzo

The brands that are not -- that you rarely talk about.

Markus Strobel

Manhattan -- Manhattan is basically the equivalent of Rimmel in Germany, okay? It's the same portfolio that's just called the Rimmel brand in Germany. Manhattan has it's historical reasons. And in Europe and again, Manhattan, Max Factor, Bourjois are all brands on which we're going to bring the interventions now. We haven't done it on these brands in Europe yet, okay? But it's coming. So we hopefully can replicate the U.S. success model.

When it comes to shelf space and shelf resets, we have mostly managed to have stable shelf space. Shelf space is always under threat. If you sell out, it's not great. But the improvements we have seen in Q4, this is the time when shelf space is being decided. We have lost a bit. We have gained a bit. But overall, we should be stable. So we don't see a big risk from losing shelf space or anything like this for the time being.

Operator

Our next question will come from Anna Lizzul with Bank of America.

Anna Lizzul

I was wondering if you could comment on the promotional environment here. You mentioned in fiscal '26 that had been elevated throughout the year. And just wondering as well in terms of competitors' actions here, we've seen some pricing reductions being taken and then pricing being elevated again. I'm curious for your take on some of the competitor actions in the Mass side in particular.

Markus Strobel

Yes. On pricing, things are going a little bit back and forth. We have seen -- in the Prestige, we have seen a lot of pricing competition in the key holiday season from October to December, but this has abated a bit ever since then, which actually is good. And in consumer, I think what all the companies are doing now we've been doing, okay, what are the -- instead of going up in price or down or being broad-based, but being much more surgical, okay? What type of businesses, what type of SKU can I support a higher price and what kind of SKUs I cannot support a higher price, right? So that differentiation is, I think, going to help us stabilize this pricing and promotion environment a little bit in the next couple of months.

Anna Lizzul

Great. And then in terms of your strategic review for the Consumer Beauty business by the end of calendar '26, is that really a hard deadline? Is that something you're working towards that there's room to see if there's maybe not an agreement made by that time? Curious on just how flexible you are there.

Markus Strobel

I know I'm sticking my neck out on this 2026 thing. So it's our very, very, very strong aspiration to get it done by then. I mean, at the end of the day, if the results are 10x better, if we have another month, then yes, of course, we would do that. But it's our intent to finish this by calendar '26.

Operator

Our next question will come from Susan Anderson with Canaccord Genuity.

Susan Anderson

I guess maybe just to dig in a little deeper on the Consumer Beauty business, particularly the improvement you saw in the U.S. with CoverGirl and Sally Hansen. I guess I'm just curious, is that being driven by the better marketing, sharper price points? Are you guys being more promotional there? Or is it new innovation? I guess maybe just a little bit of color on what's driving that? And then just the performance internationally versus the U.S.

Markus Strobel

Yes. So I think it's actually on the contrary, it's less driven by promotions. It's more driven by actually building advertising because on brands like CoverGirl or Sally Hansen, we have been in and out of advertising over the years. But we have made a choice to concentrate our funds in really actively building advertising. We are back on television with CoverGirl mentioned that we are targeting Gen X, Gen X still watches television quite a lot. So we're back nationally on air, and we are focusing our efforts on our 2 biggest franchises, which is Simply Ageless and LashBlast really focusing on the core.

And on CoverGirl has really helped us dramatically to improve the gap -- the sellout gap versus the category, and we're getting now very close. Same thing on Sally Hansen. We're back on national advertising on Sally Hansen in the nail care category, coupled with some very good innovation like our Insta-Dri innovation has found an extremely good reception.

So if I have to sum it up, I think where we're going with Coty.Curated and Color the Future is much more putting the money where we have a return and where we also have long-term equity building to drive our brands and drive our core franchises versus competing everywhere and in every SKU and so on and so on and so on. I would say focus and focused spending.

Susan Anderson

Okay. And then just the performance internationally versus the U.S. because I think you noted that Mass body and skin care helped to drive the growth. So I guess, was that the Brazilian business as well?

Laurent Mercier

Yes. Yes. I mean Brazil is also back to growth, which is where the skin care part comes from. So Brazil is a bit of a wobble at the beginning of the year, but they're doing well now. They're back. The market is growing. We are growing, and we are about to grow share again in Brazil. So that's going in the right direction. And again, Europe, I think I have mentioned in the question before, where we are not as far advanced yet in the implementation as we were in the U.S., but we see the U.S. working. And obviously, we're going to replicate this in Europe. And good initial response on Rimmel in the U.K.

Operator

Our next question will come from Steve Powers with Deutsche Bank.

Stephen Robert Powers

Markus, I wanted to ask on -- you explicitly stated the goal of returning the underlying portfolio, excluding Gucci to growth in fiscal '28. There are a lot of balls in the air as you think about fiscal '27. But I guess I just wanted to get a better sense of your confidence around that goal. And I guess the key building blocks, the most critical assumptions or the things that we should be looking for to develop over the course of '27 to be able to hit that target.

Markus Strobel

Yes. I think that Steve 2 or 3 points that are extremely important. One of them is for us really the focus on our big brand franchises, okay, and the role that every brand franchise plays in our portfolio. For example, our big global brands, Burberry, Hugo Boss, there's no excuse if you don't grow. So we've got to make these products grow. And for us, one of the most important things apart from focusing and spending the money of them, is to create more incremental innovation that creates a halo effect on the total business. We have not done that successfully last year because our innovation has been performing well, but it was not incremental enough. It didn't create a halo.

I'll give you one example on Hugo Boss that we had a very good launch with BOSS Bottled Beyond. I mean, one of the top 2 male launches of the year, doing very well, building share in the U.S., but it hasn't driven up the total franchise. What we're just in the process of doing, we have just launched starting in Travel Retail, Boss Beyond for Her -- women, right? So we are creating a female business for Hugo Boss, which obviously by definition is going to be incremental. And we have constructed in a way and tested it and confirmed it in a way that every dollar that we spend on the female campaign has a halo effect on the male campaign as well. So that's kind of what we're trying -- the way we look at our big brands and our innovation to construct innovation for better for incrementality and also better for the total halo effect.

And then playing our portfolio where the strengths are, again, big global brands and then we have probably more regional brands at the moment in Marc Jacobs, where we are very strong in English-speaking countries, U.S., U.K., even Australia, where we have actually double-digit fragrance growth in the last 6 months. And now we're bringing the makeup, cosmetics line on top but we are concentrating it on the markets where we can win with this proposition. So it's all about focused investment, having a right to win and incremental innovation that creates a halo effect.

Stephen Robert Powers

Yes. Very good. Okay. If I could ask a follow-up. You mentioned efforts underway to develop plans to moderate the sales and profit impacts as we look to fiscal '28 from the Gucci departure. I guess how much of that planning is dependent on the rest of the portfolio resuming growth, as we just talked about versus you being able to actually restructure some costs specifically to mitigate the financial impact through restructuring? How much is growth-oriented versus cost out, if that makes sense?

Markus Strobel

Yes. What we're trying to do, I mean, I think we -- on this one, we are trying to go with belt and suspenders, okay? So we're going to grow these brands. That's a big part of the building blocks. And we're also bringing new brands like Swarovski [ HO ] next year. But our cost savings program, restructuring program alone can get the gap. That is our intention, okay? Because if we achieve that and we bring the growth on top of our big global brands, I think then we're going to be in very good shape, right? So it's a belt and suspenders approach. And hopefully, all these activities are going to add up to more than what we need because in the end, we always get a little bit less and then it's going to be good. So that's our approach. And you will hear more about our restructuring program in the next few months because we're also still working on the study for the consumer business, there are a lot of independencies. So we just want to come to the market once and say this is, this is what we're going to do, and then it's execution.

Operator

Our next question will come from Olivia Tong with Raymond James.

Olivia Tong Cheang

I'm not sure how much you can share, but can you give us an update on the strategic review of Consumer Beauty that you expect to be done by calendar year-end? In the past, you had flagged that Brazil would be a cleaner exit potentially versus the U.S. business. So just a little bit of more color there would be great.

Markus Strobel

Yes, it's very ring-fenced and it would be easier in isolation, but we are not looking for necessarily the team and easy looking for the best solution that creates the most value for us. So we keep working on the future review as a total, including everything in consumer.

Olivia Tong Cheang

Got it. And then you just mentioned to Steve about the plan to -- with respect to Gucci and absorbing the incremental costs and how you will look at cost overall. But now that we know that it's a low double-digit percentage of sales with healthy profit, can you give us a sense on some of the specific actions you're going to take to minimize the overhead challenges. Presumably, some of that cost may go to L'Oreal, but maybe not very much. And I understand that you'll be satisfying the inventory for a period of time. But just given that they probably don't need a ton of handholding in this category beyond the initial inventory, what can be done?

Markus Strobel

Yes, I would imagine they're not -- they don't take too much handholding. You probably got that right. But I think, first of all, we are super happy with the deals we made with Kering because it was our objective. And we did it in our terms. It was really our objective to get the full compensation of a year of profit and cash. We wanted to get funds that help us to pay down debt, and we wanted to get some money that help us with the restructuring plus you want to solve the inventory question. So all of these things have been addressed. So that's why we're happy with that deal.

When it comes to our fixed cost savings, there's obviously quite a chunk of money in allocated overhead, okay? Because the way you have to look at the business is that we have -- in Prestige, we have a scaled R&D organization. We have a scaled manufacturing, distribution organization. And we also have our central VP, all the corporate functions, they're all working for Prestige. So with the brand in the low double digit teens, that's quite a sizable money. So we are looking at a very serious restructuring program that will encompass our go-to-market setup, manufacturing and distribution network a continuous delayering of the organization, which we have started anyway to get to faster decision-making and more agility and of course, also a rightsizing of our central organization to reflect initially lower sales.

Operator

Our next question will come from Sydney Wagner with Jefferies.

Sydney Wagner

So you've now built market share into the fiscal '27 incentive structure to help reinforce the sell-out culture. How are you thinking about making sure that doesn't inadvertently encourage chasing volume promotionally in a market that's already quite competitive. Just curious what guardrails you have in place so the comp structure and the margin discipline stay aligned?

Markus Strobel

Yes. No, I mean, our total bonus structure, which I'm not going to go into the details, probably taking half an hour to explain this, is -- has market share as a big KPI, but there's also a sales component and there's an EBITDA component. There's a very, very strong EBITDA component. So we cannot just really, really do promotion to increase sales, it comes at the expense of profit, right? So I think the way it is calibrated, I think then we have done a decent job to put the guardrails already into the design of the program. And while we believe this is superior is you just focus on sales, especially then end of the year, end of the quarter and people are starting selling stuff in that doesn't sell out, then you get exactly to these wide swings in inventory that we want to avoid. We want to have sell-out growth, but sellout growth then pretty much in line to with sell-in so that we get out of these inventory swings.

Operator

Our next question will come from Andrea Teixeira with JPMorgan.

Andrea Teixeira

So Laurent, I want to expand also my gratitude and wish you well. We -- so just thinking of what you discussed about the Consumer Beauty brands, I was like you obviously said that you want to maximize returns and make bigger bets. But you also mentioned that some of the European brands you want to also reinvest like Bourjois, I think you mentioned Manhattan and [indiscernible], if I'm not mistaken. But just to make sure that we understand and layering that with that strategic review for Consumer Beauty in the middle of this kind of promotional environment. So I was just wondering how to think through the end of the calendar year, which is your first half, how we should be thinking of that improvement? And in terms of like I believe you mentioned the number of SKUs that you're going to be taking out. Is that something you implement? And what is the time line for that?

Markus Strobel

No, I think -- here we go. Again, when we look at the investment profile and how we're running this, again, U.S., we are investing into advertising, equity building. We intend to do this in Europe as well. But again, we are behind in Europe. And this is -- no matter what the outcome of the strategic review is, this is the right thing to do. So this is the way we create value. We have a better business. We create value for our us so we create value for somebody else, and that value will be reflected at one point in time. So what we're doing, I think, is spot on and it's going to put us in a better position in any scenario. When it comes to the SKUs, it's basically part of the shelf resets that happen in spring and in fall. That's when we're going to be executing this in the next few months.

Andrea Teixeira

You quantified that's helpful. Because I mean, to be fair, this is happening for the last decade, right? I mean this has been always -- and this is natural for a lot of the CPGs, in particular in beauty, you're going to always have to take down as you layer innovation. What is this now? And what is the actual percentage of SKUs that you're taking out and how much you're losing shelf space? I'm assuming that comes at a cost of losing shelf space.

Markus Strobel

I think it's -- this is not necessarily directly related. It can be a time, but it doesn't have to because at the end of the day, every retailer is also interested to have on the shelf of high-volume SKUs. So if you take a slow-moving SKU out and then suddenly you negotiate for 2 facings on the fast-moving SKU, this helps everybody, helps the manufacturer and helps the retailer. So it's a very detailed fine-tuned discussion retailer by retailer, almost like store by store to have the right assortment for the retailer and have the right assortment for the store because what you want to see is turns on the shelf, right? And products that don't turn are not helpful for anybody.

Operator

We have one more question in the queue. This is one from Oliver Chen with TD Cowen.

Julia Shelanski

This is Julia Shelanski on for Oliver Chen. I'm curious as you think about the upcoming innovation calendar, how important is the ongoing recovery in Travel Retail versus realizing the full potential of those launches in terms of -- versus what you're seeing in domestic and specialty channels?

Markus Strobel

Can you just say that again because I just had a very bad connection for a second here. I just come to the other side of the table to the microphone. Could you ask the question again? I'm sorry.

Julia Shelanski

Yes, apologies. As you think about the upcoming innovation calendar, how important is the recovery in travel retail to realizing the potential of those launches versus what you're seeing in domestic and specialty channels?

Markus Strobel

I think Travel Retail is an important channel for us because Travel Retail is not only there to create sales, Travel Retail is there to create the image. So that's why we have -- like I told you an example with BOSS for Her, we started in Travel Retail because you can get amazing space and the travel retailers see their stores, especially in the airports more as drawing consumers. In the past, when things in the airports were cheaper than domestic, people went in there for the price. That's no longer the case. Now they go in there for the entertainment, for the in-store presence for what's happening in the store.

So if you come with launches in Travel Retail, you can get amazing placement because you have the retailer to stop the travelers and get them into the store. In return, it gives you a very good image because you don't have 2 or 3 SKUs on the shelf. You have a big display or a very nice stand with beauty consultants and so on and so on. So I think Travel Retail for us is important and Travel Retail for us is actually growing nicely.

Operator

We've now reached our allotted time for questions. So I'd like to turn the call back over to our speakers for any additional or closing remarks.

Markus Strobel

Yes. Before we wrap this up, let me just reiterate a few points. And I -- just be very clear. I mean, we had good improvements this quarter, but we're obviously not satisfied at all with our current level of performance, but we know what it takes to make it better. We have strong brands, leading positions in attractive categories and a clear framework to strengthen execution. While we've given guidance for Q1 only, we are targeting to deliver fiscal year '27 EBITDA and free cash flow close to fiscal '26 levels. Our priorities are straightforward: improve the sellout, close the gap to market, strengthen profitability. We are implementing the changes needed to achieve those objectives and we will continue to act with focus and urgency.

Thank you for your continued interest in Coty, and thank you for joining us today. Have a great rest of your day.

Operator

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation, and you may now disconnect.