Strong growth by Natura brand and Aesop,
further improvement in Avon
fundamentals
SÃO PAULO, Aug. 12, 2022
/PRNewswire/ -- Natura &Co's (NYSE – NTCO; B3 – NTCO3)
second--quarter performance continued to reflect the challenging
environment in which it is operating, but the Group recorded
positive signs including strong growth by the Natura brand in
Brazil and Latin America, another quarter of double-digit
growth by Aesop in constant currency and further improvement in
Avon's fundamentals.
Natura &Co posted consolidated net revenue of R$8.7 billion, up 0.4% at constant currency
(-8.6% in BRL) in the second quarter, on the back of a very strong
comparable base, as Q2 of last year saw sales growth of 31.7% at
constant currency (CC) and 36.2% in BRL. Adjusted EBITDA margin was
8.0% (-50 bps). Net income was R$ (766.0)
million and the Group ended the quarter with a solid net
cash position of R$ 4.3 billion.
Digitally-enabled sales represented 49.5% of total sales and
were above their pre-pandemic levels at all business units despite
a channel rebalancing as retail reopened, with continued growth at
Natura and Avon. Digitally-enabled
sales include online sales (e-commerce + social selling) and
relationship selling using digital apps. At Avon International,
penetration of the Avon On app (active representatives who logged
in at least once in the last three campaigns) reached 23% in Q2-22,
compared to nearly 16% in Q2-21. At Natura Latam, the average
number of consultants sharing content increased to 28% this
quarter, compared to 24% in Q2-21, while orders through the 1.5
million+ consultant online stores increased by 29% in the
region.
Fabio Barbosa, Group CEO of
Natura &Co, declared: "In my first few weeks as Group CEO, I
have focused mainly on two priorities: the first is redesigning
Natura &Co's organizational structure to make it lighter and
leaner. At this stage, we have mapped significant savings at the
holding company level. If the Company had implemented those changes
last year the impact would have been an annualized reduction of at
least 40% in recurring corporate expenses. Other changes and
estimated savings will be announced later. The second is a review
of the governance model and ways of working within Natura &Co,
with the holding company strongly concentrated on defining key
performance indicators, monitoring and tracking the performance of
more autonomous brands, leading the allocation of resources within
the group and continuing to promote our 2030 Commitment to life
sustainability vision. We are confident that a leaner and a
more agile structure, built on a strong foundation of
accountability for results, will empower the Business Units to
respond with agility to their current strategic and market
challenges. At the same time, we are strongly focused on improving
the fundamentals of our underperforming businesses, which we regard
as our principal challenge and main upside driver.
Though we expect our businesses' revenues to trend better in the
second half of the year, we believe the challenges in the macro
environment will persist and our margins will remain pressured in
the short term. In this context, our clear and immediate priority
is to focus on margins and operational cash-flow, and the teams at
all our brands and businesses are mobilized and incentivized on
those clear goals."
Performance by business unit:
Natura &Co Latam's net revenue was up 5.6% at CC (+0.4% in
BRL) in Q2. The Natura brand posted strong 14.8% growth in
Latin America at constant currency
(+12.2% in BRL) in the quarter. In Brazil net revenue grew by +14.3% in Q2-22,
supported by an acceleration in consultant productivity, up by
+17.5% in Q2. In Hispanic Latam, net revenue was up +15.5% (+8.8%
in BRL.) Growth was mainly driven by Argentina and Colombia, offsetting a decrease in
Chile. The Natura brand was again
ranked the strongest cosmetics brand in the world in Brand
Finance's brand strength index. The Avon brand's revenue was down -5.0% in CC
(-12.8% in BRL). In Brazil, net
revenue improved sequentially since Q3-21 but still decreased by
-10.7% in Q2-22. This was mainly due to a drop of -31% in Fashion
and Home sales, while Beauty sales increased nearly +5% in the
quarter. In Hispanic markets, net revenue was down -2.8%
at CC (-13.9% in BRL), also due to lower Fashion and Home sales and
reflecting a very strong comparable base in Q2-21 (+68.0% vs Q2-20
at CC). The new commercial model is showing significant progress in
Ecuador and Colombia, with sales growth and a sequential
improvement in the number of representatives, activity and
productivity. Adjusted EBITDA margin for Natura &Co Latam was
10.8%, stable vs last year, supported by synergies, revenue
management and strict financial discipline.
Avon International's net revenue decreased 11.4% at CC (-25.4%
in BRL) in Q2. Performance was mainly impacted by the war in
Ukraine (excluding Russia and Ukraine, sales were down -5.8% at CC), low
consumer confidence and eroding household purchasing power in
Europe as well as fewer
representatives in Europe.
Avon's business fundamentals
continued to improve as the new commercial model, now implemented
in 16 markets, resulted in higher productivity and activity as well
as a stabilizing number of representatives outside Europe. Adjusted EBITDA margin stood at 3.3%,
-100 bps vs Q2-21, due to substantially higher cost pressure, the
impact of the war in Ukraine and
lower volumes, mainly in European markets These were partially
offset by an effective revenue management strategy across markets
and cost reduction resulting from strict financial discipline and a
leaner operating model.
The Body Shop's net revenue was down 11.8% at CC (-25.3% in BRL)
in Q2, mainly impacted by post-lockdown channel rebalancing,
as the decrease in sales at TBS At Home ("TBSAH") and e-commerce
outpaced the progressive retail recovery. Store revenues were up vs
last year (excluding buybacks) and improved vs. Q1-22, with growing
footfall, albeit at a slower than expected pace, and are still
trading down compared to Q2-19. Sales to franchisees posted a
decline in Q2, but are showing increased retail sales month on
month, further reducing inventory as they recover from lockdowns.
Adjusted EBITDA margin was 3.3%, -970 bps vs Q2-21, driven by lower
volumes and channel mix, due to the decrease at TBSAH and in
e-commerce and lower sell-in to franchisee partners. To address
these challenges through H2, management has been focused on actions
to drive margin improvement, including leveraging recent
investments to drive store productivity, especially in the critical
fourth quarter; continued store footprint optimization; margin
improvement from focusing on category mix (skincare) and revenue
management, as well as a detailed review of SG&A costs.
Aesop posted another excellent quarter, with net revenue
increasing by 24.5% at CC (+5.7% in BRL). All markets delivered
double-digit growth, led by North
America and Asia-Pacific.
Aesop continues to consistently post superior sales growth on a
like-for-like basis, improving overall store productivity, while
continuing to roll out new stores in new cities such as
Madrid (Spain) and Cambridge (UK) as well as in existing markets
such as Japan, South Korea, Canada and Australia. Q2 adjusted EBITDA margin was
16.2%, -480 bps compared to Q2-21, mainly due to planned higher
investments in digital, categories, geographies (mainly
preparations for China entry by
end-2022) and human resources to continue driving future
sustainable growth.
About Natura &Co
Natura &Co is a global,
purpose-driven, multi-channel and multi-brand cosmetics group which
includes Avon, Natura, The Body
Shop and Aesop. Natura &Co posted net revenues of R$40.1 billion in 2021. The four companies that
form the group are committed to generating positive economic,
social and environmental impact. For 130 years Avon has stood for women: providing
innovative, quality beauty products which are primarily sold to
women, through women. Founded in 1969, Natura is a Brazilian
multinational in the cosmetics and personal care segment, leader in
direct sales. Founded in 1976 in Brighton, England, by Anita Roddick, The Body Shop is a global beauty
brand that seeks to make a positive difference in the world. The
Australian beauty brand Aesop was established in 1987 with a quest
to create a range of superlative products for skin, hair and the
body.