Natura &Co reports strong revenue growth in all brands in Q1

By

Novello Dariella

Published
Jul 18, 2018

The Brazilian cosmetics group, owner of Natura, Aesop and The Body Shop, has announced in a release that its consolidated net revenue increased by 55.5% in Q1, totalling R$2.7 billion, compared to the R$1.7 billion reported in the first quarter of 2017. On a pro-forma basis, growth was 11%. "Natura &Co turned in its third consecutive quarter of solid growth in sales and profitability, demonstrating the strength of the multi-brand, multi-channel group that we are building. We are particularly pleased to see all three brands and businesses making a strong contribution to this quarter's performance," stated the company's management. 

The group's consolidated EBITDA came to R$318.9 million, compared to R$364.6 million in the first quarter of 2017, while consolidated net income slumped to R$24.4 million from R$189 million in the same period in the previous year. According to Natura, the principal causes of this negative impact on its income were non-recurring fiscal expenses and costs incurred in relation to its acquisition of The Body Shop, which the company bought from L'Oréal last year. On a comparable, pro-forma basis, excluding The Body Shop's results, Natura's net income totalled R$88.2 million, compared to a loss of R$1.3 million in Q1 2017. Free cash flow was also affected by the purchase of The Body Shop, with outflow coming to R$351 million, compared to R$16.5 million in the same period in the previous year.

By brand, revenue at Natura grew 6.7% compared to the same period in 2017, including a 0.8% increase in Brazil (a 3% rise on a comparable basis). Productivity improved 21.8% per consultant, 550,000 of whom are now working via the brand's exclusive mobile platform. Online sales in the country almost doubled and now account for 3.6% of net sales in Brazil. In Latin America, where Natura has just reached 600,000 consultants, the brand's revenue increased 23.1%, with particularly strong growth seen in Argentina, Mexico and Chile. EBITDA came to R$250.6 million, a rise of 23.8%, while the EBITDA margin on a comparable basis saw a particular improvement. "The recent news that Natura has regained leadership in the Cosmetics, Fragrances and Toiletries markets in Brazil in 2017 (source: Euromonitor) confirms that the company is back on track, thanks to its revamped brand strategy, revitalized and digitized Direct Sales and multi-channel approach," stated the group.  

Aesop reported an increase of 30.8% in revenue, with 18% growth in same-store sales. The brand's EBITDA totalled R$27 million, an increase of 118.4% with margin registering a 500 bps gain. According to the group, the brand opened 28 new signature stores in the last 12 months, along with 12 department store locations, a fact which contributed to its significant increase in revenue. Aesop now operates through a total of 305 stores, 208 of which are signature boutiques, while the other 97 are department store locations. 

The group's most recent acquisition, The Body Shop, reported its strongest quarter since 2010, with revenue totalling R$807.3 million, an increase of 8.5% on a pro-forma basis. The brand's sales performance was particularly strong in the EMEA and APAC regions, as well as in franchises, company-owned stores and on its e-commerce platform. EBITDA was R$57.1 million, compared to negative R$11.1 million in the same period in the previous year. As part of a strategy to optimize the brand's network, 43 of The Body Shop's company-owned locations were closed over the course of the quarter, meaning that the brand now operates a total of 1,068. 12 franchises were also closed, leaving the brand with 1,938. 

The group also pointed out a number of improvements related to its commitments to sustainable and ethical operations, stating, "Beyond the numbers, we continued to make advances in sustainability, consistent with our commitment to sustainable and ethical business practices. Natura's carbon emissions were ahead of objectives in the quarter. With close to six million signatures to date, The Body Shop is well on its way to achieving its target of collecting 8 million signatures in its global petition campaign, in partnership with Cruelty Free International, to achieve a global ban on animal testing."