Natura &Co Posts Resilient Performance in Q3 2022

Reports consolidated net revenue of $1.7 billion, up 2.2% at constant currency.

Natura &Co posted a resilient performance in the third quarter of 2022, with sales growth in constant currency and stable adjusted EBITDA margin, while making significant progress on moves to make the Group leaner and simpler and give brands more autonomy and accountability.

Natura &Co posted consolidated net revenue of $1.7 billion, up 2.2% at constant currency (-5.7% in BRL) in the third quarter.

Digitally-enabled sales, which include online sales and relationship selling using digital apps, reached 50.1% of total net revenue, up from 49.8% in Q3 of last year. At Avon International, penetration of the Avon On app (active representatives who logged in at least once in the last three campaigns) rose to 19.7% in Q3-22, compared to 13.7% in Q3-21. At Natura in Latam, the average number of consultants sharing content increased to 28.6% this quarter, compared to 23.9% in Q3-21, while orders through the 1.5 million+ consultant online stores increased by 15% in the region.

Fabio Barbosa, Group CEO of Natura &Co, declared: “Natura &Co posted results in line with our expectations, with top line trending better, while margins continued to be pressured by the challenging macroeconomic environment marked by high inflation, lower discretionary spending and foreign exchange impacts.”

Natura &Co Latam posted solid performance, notably the Natura brand and the Avon CFT segment in the region. Aesop posted another consistent quarter of growth while Avon International showed another sequential improvement in results and in key channel indicators. On the other hand, The Body Shop continued to post challenging results amid channel decline in the At-home segment and slower franchise recovery.

Business Segments

Natura &Co Latam’s net revenue was up 10.2% at constant currency (CC) and up 4.1% in BRL in Q3. The Natura brand posted strong 18.5% growth in Latin America at CC (+11% in BRL) in the quarter. In Brazil, net revenue grew by +19.3% in Q3-22, supported by an acceleration in consultant productivity, up by +21.4%. In Hispanic Latam, net revenue was up +17.3% at CC (+0.3% in BRL.) Growth was mainly driven by Argentina and Colombia, offsetting a softer performance in Mexico and a decrease in Chile. The Avon brand’s revenue was up 0.7% at CC (-4.1% in BRL). In Brazil, net revenue continued to improve sequentially since Q3-21 but still decreased by -1.4% in Q3-22. This was mainly due to a 26% drop in Fashion and Home sales, while Beauty sales increased by +11% in the quarter. In Hispanic markets, net revenue was up +2.3% at CC (-5.4% in BRL), also due to lower Fashion and Home sales while beauty sales grew +9% at CC. The new commercial model continued to show progress, with the number of available representatives growing sequentially (+6% vs Q2-22) but still down 9.6% year-on-year.

Avon International’s net revenue decreased 8.1% at CC (-19.8% in BRL) in Q3. Performance was mainly impacted by the war in Ukraine (excluding Russia and Ukraine, sales were down a more limited 3.1% at CC), low consumer confidence and eroding household purchasing power in Europe. Avon’s business fundamentals continued to improve as the new commercial model, now implemented in 20 markets, resulted in higher productivity and digitalization and better performance by top products. Aiming at better profitability, Avon announced the closing of its U.S. R&D facility in Suffern and the relocation of its R&D operations to Brazil and Poland, as well as the outsourcing of IT infrastructure and services to top global technology partners.

The Body Shop’s net revenue was down 19.5% at CC (-29.8% in BRL) in Q3, mainly impacted by post-lockdown channel rebalancing, as the decrease in sales at TBS At Home outpaced the progressive retail recovery, with traffic to stores increasing and retail sales through franchise partners improving.

Aesop posted another strong quarter, with net revenue increasing by 21.5% at CC (+8.9% in BRL). All regions except Europe delivered double-digit growth, led by North America and Asia-Pacific. Aesop continues to consistently post like-for like sales growth while continuing to roll out new stores. As announced in the material fact published on October 17th, a comparative study is underway for either an initial public offering (IPO) of Aesop or a spin-off to separate Aesop from Natura &Co, potentially followed by a public offering.

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