NTCO Natura and Co Holding SA

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 5, 2021

Item 1

Earnings release of Natura &Co Holding S.A. for the fourth quarter of 2020. 

São Paulo, March 4, 2021

Q4-20: Natura &Co reports strong sales growth of 24%¹ and net profit up 200%

The Group strongly outperformed the global CFT market by over 6 pp² in both the quarter and year,  

with strong contribution from digital social selling and e-commerce.  

Phased investments in branding, R&D and technology in Q4 to support continued sustainable growth.

¹ For comparison purposes, Q4-20 and Q4-19 results and analyses include: i) Q4-19 aggregated figures including Avon Products, Inc. results in IFRS; ii) Natura &Co’s results in Latin America, which includes the operations of Avon, Natura, The Body Shop and Aesop brands in the region; iii) the results of Avon International, The Body Shop and Aesop brands, except in Latin America; iv) Q4-20 results and analyses including the effects of the fair market value assessment as a result of the business combination with Avon as per the Purchase Price Allocation – PPA.

² Cosmetics, Fragrance and Toiletries market performance: Company estimate based on global peers’ net revenue vs prior year of approximately -0.4% in Q4and -8.3% in FY20 (in reported FX), as reported by the companies or estimates published on Bloomberg for those who have not yet reported; Natura &Co Q4-20 growth of 6.4% (at CC) vs. -0.4% market = +6.4pp; Natura &Co FY20 revenue -2.3% (at CC) vs. -8.3% market = +6.0pp;

³ Source: Based on Company’s estimates for Latin America;

⁴ Source: Kantar;

⁵ Source: ABIHPEC of +6.3% in Q4 and +6.2% in FY20; Natura brand in Brazil Q4-20 revenue +16.3% vs. 6.3% market = +10 pp; Natura FY20 revenue +16.5% vs. 6.2% market = +10.3 pp; According to Kantar, the market grew 6.4% in FY20;

⁶ Source: Kantar Household Panel.

⁷ Excluding effects that are not considered recurring nor comparable between the periods under analysis.

Roberto Marques, Executive Chairman and CEO of Natura &Co, commented:

“2020 was a year that changed the world. A year that showed us how vulnerable and interdependent we all are, a year that has transformed Natura &Co for the foreseeable future.

It was a time to care and a time to adapt. A time to care, making the health and safety of our associates and of our network of consultants and representatives our utmost priority and providing financial and workplace support to our workforce and business partners. A time to adapt, as we rapidly pivoted across our brands to online sales and digital social selling when lockdowns across the world temporarily shut down retail operations. We also quickly shifted production to essential products such as soaps and hand sanitizers and mobilized significant donations across the world from our four brands.

This agility allowed Natura &Co to post double-digit sales growth in the full year, significantly outperforming the global CFT market both in the fourth quarter and the full year, delivering robust EBITDA and strengthening our balance sheet, notably through two capital raisings totaling R$7.6 billion. This performance is testament to the incredible dedication of our teams across our iconic brands around the world, who demonstrated throughout the year compassion and empathy, resilience and agility, determination and boldness, and I would like to express my gratitude for their efforts and solid results. It is also a strong validation of the Group’s omni-channel and multi-brand strategy, and a clear demonstration of Natura &Co’s purpose-driven approach, nurturing beauty and relationships, even in a virtual world, for a better way of living and doing business.

This extraordinary year, which began with us welcoming Avon into our family of iconic brands just as the pandemic began to spread, actually accelerated many of our strategic initiatives and made us truly omnichannel. Our digital transformation became a reality, with 79% growth in total digital sales across the Group, including e-commerce and social selling. We made further significant strides in digitalization through our strategic partnership with Singu, and the launch of &Co Pay, our proprietary financial services platform. We also took decisive steps towards geographic expansion in the past year, buying back The Body Shop’s operations in Japan, launching At-Home in the U.S., and making further advances on entering China. And we launched our 2030 Commitment to Life sustainability vision, a very comprehensive and ambitious plan to maximize our social and environmental impact over the next 10 years and help build common standards to guide all who are committed to positive change.

The fourth quarter provided a clear demonstration of the strength and resilience of our business and the power of our brands, and we are very pleased with our results. All of our brands contributed to revenue growth, and our consolidated EBITDA margin remained strong while reflecting phased investments in branding, R&D and technology to support continued sustainable growth. The Natura brand continues to post double-digit growth both in Brazil and Latin America, boosted by a strong Christmas campaign, while the Avon brand grew for the second consecutive quarter in Brazil and returned to growth in Hispanic Latam. The Body Shop quickly and successfully switched to online and At-Home, which together grew 130%, and Aesop posted another stellar performance, accelerating its e-commerce strategy, growing 190%, and benefitting from its geographic footprint and strong brand preference, notably in Asia.

The integration of Avon has advanced well, with synergies materializing ahead of plan from initiatives in administrative, procurement and manufacturing. We also initiated the Avon’s brand rejuvenation with the launch of impactful campaigns around the world, reconnecting the brand with social causes it defends, such as fighting domestic violence and promoting gender equality and antiracism. Despite the higher impact of Covid-19 in Europe and in key categories like makeup and fragrances, we are pleased to see market share gains in the UK and sequential share improvement in Russia.

The world is going through unprecedented times, and Natura &Co, as a purpose-driven group, is determined to continue to make positive impact. Besides the launch of our 2030 Sustainability Vision, we have just been certified as a B-Corp as a Group, attesting to our sustainable business practices. The Natura brand has reduced by 32% its carbon emissions, the Group replaced 2,500 tons of virgin plastic for recycled plastic and invested nearly a half billion reais in key causes: the Amazon, breast cancer awareness, the fight against domestic violence, public education and donations. As a beauty group, we know that women, in particular, are key to making a difference and following the upcoming International Women’s Day we will detail our many initiatives to tackle the gender gap. But to really make systemic change, we cannot act in isolation. It’s vital that we pull together as businesses and as society as a whole to share experiences and solutions.

Finally, as has been announced, José Filippo will be stepping down as Chief Financial Officer at the end of the year. We would like to thank him for his leadership and strong contribution since he joined the Group. During that time, he played a leading role in the acquisition of Avon in January 2020, which included listing Natura &Co both on the B3 and NYSE, managed the two successful capital raises last year, implemented Natura &Co’s global financial structure and strengthened our internal controls and liability management functions.

To ensure a smooth transition, we are pleased to announce that Guilherme Castellan will be joining the Group as Deputy CFO in April. He will work closely with José Filippo over the coming months and will become the Group CFO after Filippo completes his cycle. A Brazilian national, Guilherme Castellan joins Natura &Co after seven years at AB InBev Group, where he held senior financial positions in New York, Sao Paulo, Shanghai and Hong Kong. In his last position he was Chief Financial Officer at Budweiser Brewing Co. APAC Ltd, a listed company based in Hong Kong. We are looking forward to welcoming him to the Group.”

The Company is closely monitoring the evolution of the Covid-19 pandemic worldwide, particularly the recent new lockdown or restriction measures adopted in parts of Europe. The Crisis Committee created in Q2 continuously analyzes the situation and acts to minimize impacts, ensure continuity of operations, protect cash and improve liquidity. Natura &Co also continues to be attentive to the health and safety of its employees, consultants and representatives and customers.

Key impacts on the business

For comparison purposes, Q4-20 and Q4-19 results and analysis include the following:

In addition, Q4-20 results and analysis include the effects of the fair market value assessment as a result of the business combination with Avon as per the Purchase Price Allocation – PPA.

Consolidated net revenue growth in Q4-20 and FY-20

Q4-20 consolidated net revenue in BRL increased by 24.3% year-on-year (+6.4% at CC), driven by growth across all segments. In FY-20, net revenue increased by 12.1% in BRL (-2.3% at CC) vs. FY-19.

Gross margin 

Including PPA effects in Q4-20 at Natura &Co Latam and Avon International

Consolidated gross margin in Q4 was stable at 64.3%. Excluding PPA effects on COGS of -R$23.2 million (+R$5.0 million at Natura &Co Latam; -R$28.2 million at Avon International), adjusted consolidated gross margin reached 64.5% in Q4-20 (+20 bps), as shown below:

Without PPA effects in both periods

Consolidated EBITDA

Reported EBITDA was R$1,254.3 million in Q4-20 with margin of 10.5% (-20 bps vs. Q4-19). Adjusted EBITDA was R$1,485.7 million, with an adjusted margin of 12.4% (-130 bps), excluding transformation costs and impairment of certain stores at The Body Shop, impacted by phased investments in brand, R&D and technology, which were concentrated in Q4 after rigorous cost control steps taken in the first half of the year. FY20 reported EBITDA was R$3,508.5 million, with margin of 9.5% (-140 bps), and adjusted EBITDA was R$4,219.5 million, with margin of 11.4% (-80 bps), reflecting pandemic effects on revenue causing operational deleverage. See reconciliation below:

Financial income and expenses

Net financial expenses were R$248.9 million in Q4-20, a reduction of 36.2% vs. Q4-19, mainly driven by the prepayment of Avon’s 2022 bonds on November 2, 2020 of US$900 million, which resulted in lower interest expense and a positive PPA effect. The quarter also saw lower interest rates in Brazil and net gains on swaps and derivatives, partially offset by financial transaction fees related to the prepayment of Avon bonds and other effects (recorded in “other” below).

The following table details the main changes in our financial income and expenses:

Underlying Net Income (UNI)

Underlying Net Income was R$249.3 million in Q4, up 47.5% vs. last year, before Avon acquisition-related effects of R$72.0 million, which include: i) transformation costs of R$87.0 million and ii) discontinued operations expenses of R$31.9 million, offset by iii) PPA amortization effect of R$45.2 million and iv) non-controlling interests of R$1.7 million.

Reported net income in Q4 was R$177.4 million, reversing a loss of R$176.1 million in Q4-19, driven by higher EBITDA and lower income tax expense of R$332.7 million vs. Q4-19, partially offset by higher depreciation of R$146.3 million and higher financial expenses of R$183.2 million. Lower income tax expense was driven mainly by tax offsets against Avon’s losses in the UK in the quarter and a non-recurring tax effect in Q4-19 of R$206.6 million related to the constitution of the holding company. In FY-20, underlying net income was R$399.5 million and reported net income was R$(650.2) million, due to impact on activity from the pandemic, Avon acquisition-related PPA and tax effects. Management will recommend to offset losses against capital reserves, subject to approval by the extraordinary shareholders’ meeting, to be held on April 16.

a) Income tax and taxes on holding company constitution

b) Other includes non-controlling interest and discontinued operations

c) Net income attributable to controlling shareholders

Free cash flow and cash position

We ended the quarter with a strong cash position of R$8.3 billion (R$5.8 billion in cash, and R$2.5 billion in short-term deposits), post the US$900 million 2022 Avon bond prepayment in November, in line with projections and well above our minimum thresholds.

The strong cash flow generation of R$1.0 billion in Q4 helped reverse negative cash flow in the first half of the year, despite Avon acquisition costs and Covid-19 impacts. Cash generation in Q4-20 was driven by strong operational results and improvement in working capital, mainly lower inventory at Natura &Co Latam and extended payables at The Body Shop, notably rent deferrals. 

Capital structure and liquidity

In the quarter, the Group successfully concluded an SEC-registered global follow-on offering of US$1 billion (R$5.6 billion), through the issuance of 121.4 million common shares, subscribed by existing shareholders and new investors, with partial placement in the form of American Depositary Shares (ADSs), adding liquidity to the program.

On November 2^nd, 2020 we prepaid the US$900 million Avon 2022 bonds in the amount equivalent to 101.969% plus accrued interest until that date, as well as repaid the promissory note of R$560 million at holding Company level, related to the Avon acquisition.

Strong deleveraging at both Natura Cosméticos and Natura &Co Holding

Natura &Co Holding’s consolidated net debt-to-EBITDA stood at 0.97x in Q4-20, significantly down from 2.17x in Q4-19, including the effects of IFRS 16 (excluding IFRS 16: 1.16x in Q4-20 vs. 2.62x in Q4-19).

Natura Cosméticos’ net debt-to-EBITDA stood at 0.68x in Q4-20, down from 1.92x in Q4-19, including the effects of IFRS 16 (excluding IFRS 16: 0.90x in Q4-20, down from 2.49x in Q4-19, significantly below pre The Body Shop acquisition levels).

Natura &Co Latam¹: The Natura brand posts strong double-digit growth; The Avon brand grows for the second consecutive quarter in Brazil and resumes growth in Hispanic Latam

Net revenue at Natura &Co Latam increased by 20.5% in Q4-20 in BRL (+13.0% at CC), driven by the Natura brand‘s strong 24.7% growth (+16.2% Brazil, +44.5% Hispanic Latam), while the Avon brand was up 16.2% (+4.9% in Brazil, +23.9% in Hispanic Latam). The combined brands in Latin America gained significant market share in the year, consolidating the Group’s clear leadership in the region with over 12% market share, vs. 11.8% in 2019. In Brazil, the brands combined also strengthened market leadership, with market share gains of 4 pp in the quarter, and 0.6 pp in the year. The Natura brand’s performance, both in Brazil and Hispanic Latam, attests to the strength of our digital social selling model on the back of successful Christmas campaigns and a strong innovation pipeline. The Avon brand’s improving trends continued, with revenue growth in Brazil for the second consecutive quarter and a return to growth in Hispanic Latam, including Mexico, its largest single market, as the digital transformation in the region continued. The satisfaction index for Avon representatives in Brazil and Mexico remained strong, even after having reached its highest levels in the last 10 years, driven by aligning commercial practices and continued improved communication as well as social and commercial support. Natura consultant loyalty index in Brazil reached the best-ever level.

The Avon integration in Latam is on track, with important progress in procurement, customer service, financial services, manufacturing, logistics and digital. We launched a new e-commerce platform in Argentina, and implemented digital representative recruitment and CRM initiatives. We unified the credit engine for the Natura and Avon brands in Latam, initiating pilots in various countries, with rollout planned for early 2021. We began piloting multiple orders at any given time for Avon representatives in Brazil, to complement the traditional one order per cycle system, and combined distribution sites and same vehicle delivery for Natura and Avon boxes, optimizing freight. There were strong savings in procurement, despite Covid-19 impacts, and we implemented actions to minimize raw materials and packaging constraints and foreign currency while optimizing working capital.

The Natura brand in Brazil had a strong quarter, with significant market share gains, supported by continued brand preference and a successful Christmas campaign. Our innovation index increased significantly vs. prior year, reaching 67.1% (+870 bps), the highest in the last five years. This increase was driven by the successful relaunch of hero brands such as Tododia, Mamãe e Bebê, Essencial and Biografia, and also important launches in fragrances such as Natura Homem Emocion.e, Luna Absoluta and Kayak Oceano, which performed particularly well on festive dates. Volumes increased, mainly driven by growth in core categories such as fragrances, body care, soaps and deodorants. Growth was also supported by higher consultant activity level and a bigger consultant base. Productivity per consultant grew for the 17th consecutive quarter, by +1.4% in Q4-20. The average available consultant base was up 12.9% vs. Q4-19 (and +2.5% vs Q3-20), reaching 1.2 million consultants. We saw continued progression toward the top tier segments (Silver, Gold and Diamond). Product launches in Brazil include new fragrances such as Essencial Mirra and Essencial Stilo for men and women and a new men’s fragrance Natura Homem Verse; in makeup, a new Una Luz metallic collection; and in body care, Tododia seasonal summer products such as Tododia Lima and Flor de Laranjeira and Ekos Buriti.

Avon’s net revenue in Brazil grew 4.9% in Q4-20 vs. Q4-19, mainly driven by higher representative productivity, higher activity level and a stable average number of representatives. Fashion & Home category sales grew double-digit and Avon focused on “above the mask” make-up products. Brazil had strong innovation driven by fragrances, notably Segno, Aquavibe and Black Suede, and the Color Trend nail polish line grew for the first time since Q1-18 in Brazil. Avon launches in Brazil in the quarter included new shades across all face makeup products, covering the full diversity of Brazilian skin tones. In Hispanic Latam, Natura launched Tododia Mango and Coconut Water with prebiotic nutrition, replicating the successful launch in Brazil in Q3-20. Avon intensified media investments, with the launch of an antiracist manifest and a campaign for a make-up line for black skin.

1 Natura &Co Latam is comprised of the Latin American operations of all the Group’s brands: Natura, Avon, The Body Shop and Aesop. For comparison purposes, 2019 results include aggregated and adjusted (unaudited) information in IFRS to reflect this new segment. 

During the year, the Avon brand in Brazil developed actions to increase the brand’s perception as giftable. Considerable advances were made and gifting will continue to be a focus going forward, with a greater presence of best sellers and innovation in gifts. The pilot of the new commercial model, to be rolled out in Q1/Q2-21, was completed.

The Natura brand in Hispanic Latam posted a strong revenue increase of 44.5% in Q4-20 in BRL (+35.8% at CC), supported by growth in all markets, notably Argentina, Chile and Mexico, with productivity increases and an expansion of the consultant base (+16.1%), which reached 814,000. The quarter ended with a significantly higher consultant loyalty index in the region.

The Avon brand in the Hispanic Latam returned to growth, of +23.9% in Q4-20 in BRL (+3.0% at CC). The region saw improving trends towards the end of Q3, which continued throughout Q4, notably Argentina, Chile and Mexico, with a sequential increase in the number of representatives. Certain markets in Hispanic Latam successfully launched gift sets for the first time.

The use of digital assets was fundamental for our business and consultants. The number of Natura consultants trained on digital tools continued to increase vs. last year, and, as a result, there has been a continuous increase in adoption. The interactive e-brochure continued to gain penetration and has allowed us to significantly grow sales through our digital platforms, notably in Argentina. We launched a gift dedicated section in the Natura app for consultants, with the objective of offering consultants and consumers gifts all year long. At the end of Q4 we neared 1.1 million Natura consultant online stores, 49% more than in Q4-19, with a significant year-on-year increase in the number of orders (over 40%) and visits (over 50%). At Avon, e-brochure sales gained relevance and continued to post significant growth, of 59% in Brazil in Q4, and the number of consumer visits to the e-brochure reached an average of 3.1 million per month.

In the retail channel, all our Natura and The Body Shop stores operated with continued restrictions. We ended the quarter with over 700 stores, including 70 Natura own stores, over 140 The Body Shop stores and over 500 Natura franchised stores. The expansion of our multichannel model has offered consumers a superior shopping experience, increasing touch points and consequently increasing the number of new consumers. Leveraging on Natura’s digital platform, The Body Shop in Brazil launched a new e-commerce site, significantly improving customer experience.

We launched the &Co Pay platform in Q3, and in Q4 we initiated the rollout for the Natura brand in Brazil, (Natura Pay). We were able to create a seamless experience for consultants and have seen substantial adoption. The next step in the roadmap will be to launch this platform for Avon representatives, under the name of Avon Pay, in Q1-21, which will help drive productivity by allowing them to make or receive payments and transfers through a digital account, while benefiting from many other financial services, including debit and credit cards, loans, microcredit and loyalty programs. &Co Pay is also an enabler to promote digital and financial inclusion to our consultants and reps. This is a scalable model in which we orchestrate the payment platform supported by four licensed partners.

Natura &Co Latam: Financial analysis

Reported EBITDA was R$716.6 million with margin of 11.3% (+50 bps). Adjusted EBITDA, excluding transformation costs, was R$774.1 million vs. R$579.2 million in Q4-19, with adjusted EBITDA margin of 12.2% (+120 bps), thanks to strong revenue growth and operational leverage at both Natura and Avon. In FY20, reported EBITDA was R$2,369.5 million and EBITDA margin was 11.5% (-20 bps). Adjusted EBITDA was R$2,437.8 million and adjusted EBITDA margin was 11.9% (+150 bps).

A reconciliation between EBITDA and adjusted EBITDA is presented below:

Excluding PPA effects on SG&A expenses, Selling, Marketing & Logistics expenses represented 39.9% of net revenue (+50 bps), due to phasing of investments across brands, R&D and technology for continued sustainable growth.

Excluding PPA effects, Administrative, R&D, IT and Project Expenses reached 11.6% of net revenue (-270 bps) in the quarter, largely driven by net revenue growth at both brands and higher productivity across businesses.

Avon International: Growth in the UK for the first time in a decade; improving fundamentals

Avon started Q4 with improving trends, but revenue was impacted by the second wave of the pandemic, resulting in heightened restrictions, especially in Central and Eastern Europe, which have been more severely hit. Average active representatives improved sequentially (+11.4% vs. Q3-20) as a result of recovery actions, despite new lockdowns in several markets, but declined 7.3% vs Q4-19. Avon International gained market share in color in the quarter, driven by key markets where beauty categories declined. In Russia, market share improved sequentially since Q2 and the Philippines posted strong share gain in fragrance in the quarter. The U.K. was again a highlight, posting growth vs. Q4 last year for the first time in a decade, supported by growth in skin and body care, and gaining market share for the third consecutive quarter, driven by the color category. Average sales and units sold per representative increased over prior year in Western Europe and APAC, while continuing to reduce discounts.

Net revenue grew 12.1% in Q4-20 and was down -11.5% at CC, with several key markets impacted by the second wave of Covid-19. Units sold declined 17.6% vs. Q4-19, while showing a sequential improvement since the strong pandemic impacts in Q2. Beauty categories were more impacted, as were Christmas-related purchases.

Avon continued to take action to strengthen fundamentals, simplifying the commercial model by shifting to a new earnings structure and reducing to monthly campaigns across all markets by the end of 2020, ahead of plan, which will harmonize planning and reduce costs. In the quarter, Avon’s new visual identity was fully deployed across brochures and digital content. The Avon brand’s social media reach and positive mentions (ex-Latam) were both 10 pp higher than in Q3-20, driven by the Watch Me Now campaign. The roadmap foresees different phases for this campaign, including representatives’ stories and content to be launched in early 2021. Avon Worldwide channels have reached 14 million people in Q4 and gathered a community of 21 million Facebook followers across all markets. The pilot for the new representative segmentation model started in South Africa, building on learnings from Natura.

In terms of progress on integration, there are now multiple examples of the Group leveraging Avon’s supply chain, beyond the rapid retooling of operations that took place during Covid-19 to produce essential products for the Group. Avon’s Poland manufacturing facility successfully completed the pilot to produce Body Butter, one of The Body Shop’s most iconic products, with production to be initiated in 2021.

Engagement across the suite of Avon digital tools increased vs the prior year, as measured by revenues, traffic and adoption. During the quarter, Avon launched the first ever digital Foundation Finder, piloting in e-commerce in South Africa.

Digital performance accelerated in the quarter, with digital sales and AvonOn adoption increasing by approximately 100% vs. prior year and growth in all markets. In the UK, the number of active representatives who used the AvonOn platform at least once a month doubled to reach over 60% in Q4-20, and the number of active representatives sharing content and e-brochures nearly tripled vs. Q4-19. E-brochure sales were up by nearly 300% in Q4 vs. prior year.

Launches in the quarter included breakthrough innovation in hero skin care line Anew, now powered by Protinol™, a scientific discovery made by Avon which accelerates collagen production. In color, the Sparkle lipstick in the Pearlesque collection gained the first ever augmented filter, with double-digit growth in key markets, and the Glowing for Gold eyeshadow palette posted high double-digit growth across all markets.

Net revenue of the Avon brand, including Latin America and Avon International, grew 14.1% in BRL in Q4 (-4.5% at CC). In FY20, revenue grew 0.4% in BRL (-14.5% at CC).

Avon International: Financial analysis

Avon International’s reported EBITDA was R$98.3 million in Q4-20 and adjusted EBITDA was R$118.9 million. Reported EBITDA margin was 3.4% and adjusted EBITDA margin was 4.1% (-560 bps), due to the impact of lower revenue (-11.5% at CC), foreign currency impacts as well as higher strategic investments in brand, digital and commercial areas to accelerate future growth. In FY20, reported EBITDA was R$315.5 million and EBITDA margin was 3.5%. Adjusted EBITDA was R$477.1 million and adjusted EBITDA margin was 5.2% (-610 bps).

A reconciliation between EBITDA and adjusted EBITDA is presented below:

Excluding PPA effects on SG&A expenses, Selling, Marketing & Logistics expenses reached 40.4% of net revenue (+230 bps), largely due to higher strategic investments in brand, digital and commercial areas to accelerate future growth, lower revenue and unfavorable foreign currency impacts, partially offset by lower bad debt and other savings.

Excluding PPA effects, Administrative, R&D, IT and Project expenses reached 14.6% of net revenue (+290 bps) in the quarter, mainly due to lower revenue and foreign currency impacts.

The Body Shop: Strong performance driven by our omnichannel approach

In Q4-20, The Body Shop posted net revenue of R$2,075.9 million, up by 48.4% in BRL (+9.7% at CC), largely driven by direct channels, with At-Home sales growth of 206% and e-commerce growth of 72%, as well as a significant reduction in discounts. Together, e-commerce and At-Home represented 40% of total sales in the period and more than offset lost retail sales. UK and Australia were the key drivers of revenue expansion this quarter, with an exceptional omnichannel performance. Revenue was also supported by the acquisition of The Body Shop head franchise in Japan, which is now included in retail store revenue.

Black Friday delivered satisfactory results with 33% sales growth vs. last year, even with the continued strategy of reducing discounts (by 13 percentage points). With only 78% of own stores open in December (vs. 97% in September), primarily in Europe as the pandemic’s second wave resulted in new lockdowns, store sales were down 23% vs. Q4-19. In line with the Group’s digitalization strategy, we launched a new global company website, which enhanced consumer experience and increased the number of new customers. In the quarter, 50% of total sales were made by new customers. As part of our strategy to expand our omnichannel model in North America, we grew our At-Home channel to nearly 8,000 consultants.

New launches in the quarter included Seasonal Body Care range with new Winter Jasmin Fragrance, and the new Lemon Hygiene range. Successful gifting categories included hero products such as Ginger hair care range and accessibly priced novelty gifts, such as the new Hand Cream and Bath Blends gifts, in addition to Advent calendars which posted spectacular growth versus the prior year, notably in At-Home.

Reported EBITDA in Q4-20 reached R$348.3 million, with EBITDA margin of 16.8% (-730 bps), impacted by a R$144.5 million impairment related to loss-making legacy stores, predominantly in the US, which were previously included in the original store closure plan and were further impacted by the pandemic effects. Adjusted EBITDA margin excluding impairment was 23.7% (-290bps), mainly due to the pandemic’s impact on retail sales, especially in Europe, as well as channel mix effects, including the Japan buyback. FY20 reported EBITDA margin was 17.5% and adjusted EBITDA margin was 20.2% (-80 bps).

A reconciliation between EBITDA and adjusted EBITDA is presented below:

The quarter ended with 1,049 own stores and 1,590 franchise stores, with 93 net store closures (own and franchise) since Q4-19. The increase in own stores is mainly explained by the Japan operation buyback. In the year, we rolled out the new concept store to 13 existing stores and opened 3 new markets with head franchise in Eastern Europe. The chart below shows the store count evolution:

Aesop: Outstanding growth driven by consumer shift to online and Asia recovery

Aesop posted outstanding net revenue growth of 62.1% in Q4-20 in BRL and +19.3% in constant currency, driven by a remarkable performance in Asia, notably Japan, now the company’s largest single market, as well as Taiwan and Korea, while sales in Europe, Australia and New Zealand suffered due to the second wave of Covid-19 lockdowns and a drop in travel. Retail like-for-like sales were down 4%, offset by 190% growth in online sales, representing almost 30% of total revenue, driven by the shift of consumer behavior and digital innovation features, such as live assistance, new payment platforms, same day delivery, click & collect and the WeChat e-boutique in Asia. The “adore beauty” live chats in December significantly contributed to increase Aesop’s page sessions and sell-out sales. In addition, successful Singles’ Day, Black Friday and Festive dates campaigns resulted in FY20 net revenue growth of 50.0% in BRL (+13.2% at CC).

Aesop intensified innovation in its home category with a launch of its first ever candle collection, in time for the Christmas season. In lieu of gift-wrapping, Aesop contributed for every gifting transaction to the Australian Literacy and Numeracy Fund, as part of its social responsibility practices.

Q4-20 EBITDA stood at R$271.6 million, up 66.1%, with EBITDA margin of 37.1% (+90 bps), driven by top line sales growth and cost discipline. FY20 EBITDA margin was 31.1% (+410 bps), driven by strong sales growth, strict cost discipline and utilization of government support programs related to the Covid-19 pandemic.

Signature stores totalled 247 in the quarter, same as Q4-19, as the store roll out plan was put on hold due to Covid-19. A store count table is provided below:

(all actions refer to Natura &Co Group, unless stated otherwise)

Natura 2020 Ambition KPIs:

In 2014, the Natura brand launched its 2050 Sustainability Vision, a long-term social and environmental commitment. It guides the entire business to generate positive impact and contribution for the protection and regeneration of our ecosystem. The first milestone of this plan is the 2020 Ambition, a set of targets that the Natura brand delivered in 2020.

The 2020 Natura ambition KPIs presented in the table below, are already in line with the three pillars of Natura &Co’s Commitment to Life Vision for 2030. Starting in Q1-21, we will report Natura &Co’s consolidated performance of the 2030 plan.

Subsequent Event:

On February 4, 2021, the Company announced a share repurchase program, concluded on February 8, 2021, for a total of 631,358 common shares, acquired at market prices in the Brazilian stock exchange. The shares may be used to meet the Company's obligations arising from its restricted share and stock options programs, and may also be held in treasury, disposed of or cancelled under the terms of the law.

NTCO3 shares traded at R$52.5 at the end of Q4-20 on the B3 stock exchange, an appreciation of 2.7% in the quarter. Average Daily Trading Volume (ADTV) for the quarter was R$377.4 million, an increase of 140.0% vs Q4-19. NTCO traded at US$20.17 at the end of Q4-20 on NYSE, +10.8% in the quarter.

In the year, NTCO3 appreciated 35.8% vs. 2019, with ADTV of R$343.3 million, an increase of 165.0% vs. 2019. NTCO traded at US$20.17 at the end of the year, +3.6% vs. 2019.

On December 31, 2020, the Company’s market capitalization was R$72.2 billion, vs. R$33.5 billion in 2019, an increase of 115.6%, and the Company’s capital was comprised of 1,375,018,140 common shares, vs. 865,659,942 on December 31, 2019.

Below is the performance of NTCO3 and NTCO in the quarter:

Below is a table with details of all public debt instruments outstanding per issuer as of December 31, 2020: