Group's performance was impacted by the
continued Avon
transformation, challenging global environment and
tough comparable base
SÃO PAULO, May 5, 2022
/PRNewswire/ -- Natura &Co's (NYSE – NTCO; B3 – NTCO3)
first-quarter performance reflects the challenging environment in
which it is operating, but the Group recorded positive signs
including a resumption of growth at Natura in Brazil and further improvement in Avon's fundamentals, while Aesop continued its
strong growth.
Natura &Co posted consolidated net revenue of R$8.3 billion, down 4.6% at constant currency and
12.7% in BRL in the first quarter, and adjusted EBITDA margin was
7.2% (-300 bps) on the back of a very strong comparable base, as Q1
of last year saw sales growth of 8.1% at constant currency and
25.8% in BRL. Net income was R$ (643.1)
million and the Group ended the quarter with a solid net
cash position of R$ 4.5 billion.
The Q1-22 performance was notably impacted by rising inflation
affecting discretionary spend in key markets, cost pressures in the
supply chain, unfavorable currency movements and first effects of
the war in Ukraine. But it also
reflects strategic decisions by Natura &Co related to
Avon's transformation, including a
reduction in the product portfolio and the implementation of the
new commercial model, with first indicators already showing
improvements.
The ramp-up of digitally-enabled sales continued, reaching 50.8%
of total revenue, compared to 47.7% in Q1-21 and to 35.0%
pre-pandemic (Q1-20), driven by 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, adoption of the
Avon On app has posted consistent and sustained growth over the
last 9 quarters, reaching 16%, or 5 times pre-pandemic levels. At
Natura in Latam, the average number of consultants sharing content
also increased by nearly 5 times compared to pre-pandemic levels
and orders through the 1.5 million+ consultant online stores
increased by 81% in the region and were three times their Q1-20
levels.
The global macroeconomic and geopolitical environment has been
volatile, marked by rising inflationary pressures, supply chain
disruption, currency volatility and the outbreak of the war in
Ukraine, all impacting consumer
spending and demand. Despite this volatility, the company is
reaffirming its 2024 EBITDA margin guidance of 14% to 16%. The
company now expects to achieve its consolidated net revenue target
of R$47 billion to R$49 billion and net debt-to-EBITDA target of
less than 1.0x in 2024, from 2023 currently, thus aligning all its
guidance on the fiscal year ending December
31, 2024.
Roberto Marques, Executive
Chairman and Group CEO, declared: "While our Q1 performance was
impacted by rising inflation, cost pressures in the supply chain,
unfavourable currency movements, and the first effects of the war
in Ukraine, they also reflect The
Body Shop channel rebalancing and weak consumer demand in
Europe, as well as key strategic
decisions related to Avon's
transformation, including a reduction in the product portfolio and
the implementation of the new commercial model.
This combination resulted in lower sales and profitability in
the quarter compared to Q1-21, partly reflecting our greater
exposure to Latin America and
Europe, while most of our global
peers are more exposed to Asia and
North America. But we also saw
some positive signs, including the resumption of growth by Natura
in Brazil, an improvement in
Avon's underlying performance with
productivity gains, and another quarter of strong growth by
Aesop.
We expect the environment to remain challenging in Q2 and will
continue to take measures including further cost containment and
strict financial discipline on investments in order to protect our
profitability and cash generation. We also expect in the second
half of the year to see further gains from Avon's transformation, with continued
improvement in its fundamentals and leading indicators, in addition
to a more favorable comparable base for the group. The company is
reaffirming its EBITDA margin target in 2024 despite the outbreak
of the war in Ukraine and the
recent deterioration in the macroeconomic and geopolitical
environment, which are impacting consumer spending and
demand. However, in light of these effects, the Company now
expects to achieve its consolidated net revenue and leverage
targets in 2024, from 2023 previously."
Performance by business unit:
Natura &Co Latam's net revenue decreased by 2.1% in constant
currency (-8.4% in BRL) in Q1. The Natura brand posted 5.3%
growth in Latin America at
constant currency (-1.9% in BRL) in the quarter. Growth resumed in
Brazil (+3.2% at constant currency
and +3.1% in BRL) and the Natura brand made significant market
share in the quarter. Natura's sales were also up 8.0% in constant
currency in Hispanic Latam markets (-8.7% in BRL), with growth
across all markets, notably Argentina and Colombia. The Avon brand's revenue was down 11.1% at
constant currency (-16.3% in BRL). In Brazil, net revenue improved sequentially
since Q3-21 but was still down -17.0% in Q1-22, with beauty sales
declining by a more limited 9.7%. In Hispanic markets, net
revenue was down 7.9% in constant currency (-16.0% in BRL). The new
commercial model is showing significant progress in Ecuador, with activity and productivity growth
in nearly all campaigns in Q1 vs. last year, as well in
Central America, with a sequential
increase in activity and higher recruitment. Adjusted EBITDA margin
for Natura &Co Latam was 9.0% (-320 basis points) in Q1.
Avon International's net revenue decreased 10.1% at constant
currency (-22.1% in BRL) in Q1. Performance was mainly impacted by
the war in Ukraine, lower
disposable income in Europe from
rising inflation and fewer representatives, reflecting a higher
comparable base last year when the channel benefited from lockdown,
as well as intentional optimization linked to the implementation of
the new commercial model. Avon's
business fundamentals continued to improve, with an increase of
+9.1% in productivity and stable activity (excluding Russia and Ukraine). Q1 adjusted EBITDA margin stood at
4.4%, +30 bps vs Q1-21, a major achievement, supported by strict
financial discipline and structural savings from the simplification
of the operating model.
The Body Shop's net revenue was down 16.0% at constant currency
(-22.9% in BRL) in Q1, mainly reflecting lower disposable income in
Europe and an expected channel
rebalancing, with retail's recovery offset by a drop in TBS At Home
and e-commerce after outperforming during lockdowns. Q1 adjusted
EBITDA margin was 6.4%, -830 bps vs Q1-21, mainly due to the
absence of one-off pandemic-related government support that boosted
last year, channel mix rebalancing and sales deleverage from
deceleration in key markets. EBITDA margin is expected to recover
in H2.
Aesop posted another excellent quarter, with net revenue
increasing by 21.3% at constant currency (+9.6% in BRL). All
markets delivered double-digit growth, led by North America and Asia-Pacific. Aesop consistently posted
superior sales growth relative to global luxury brands. Q1 adjusted
EBITDA margin was 21.7%, -500 bps compared to Q1-21, mainly due to
planned higher investments in digital, categories and geographies
to drive 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.