Natura &Co results show Body Shop challenges remain

By

Sandra Halliday

Published
Nov 10, 2022

Body Shop, Avon and Aesop owner Natura &Co has released its Q3 results with news of a “resilient performance”, although its UK-based chain wasn’t exactly the star of its portfolio in the period.

The group posted consolidated net revenue of BRL9 billion (€1.7bn/£1.5bn/US$1.7bn), up 2.2% at constant currency (CC) but down 5.7% on a reported basis. 

Adjusted EBITDA was also down 5.7% at BRL772.5 million, and it made a net loss of BRL560 million after a profit of BRL273 million  a year ago. But it ended the quarter with a solid cash position of BRL4.6 billion. Efforts to focus on cash generation also showed good results, with a significant improvement in cash conversion in Q3.

The company also said digitally-enabled sales reached 50.1% of total net revenue, up from 49.8% in Q3 last year. 

CEO Fabio Barbosa said: "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”.

Looking at its various brands and operating units, Natura &Co Latam saw a 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. 

But The Body Shop “continued to post challenging results amid channel decline in the At Home segment and slower franchise recovery”.

It said the fall in sales at TBS At Home outpaced the progressive retail recovery, with traffic to stores increasing and retail sales through franchise partners improving. 

Body Shop margins fell and management is now implementing “a series of measures including strict cost containment, stimulating demand from head franchisees by taking advantage of opportunities to manage inventory levels, continued store footprint optimisation and deployment of the new Workshop store, which is showing a 15 percentage point uplift on sales compared to the traditional model”.

Meanwhile, Natura &Co Latam's net revenue was up 10.2% on a CC basis and up 4.1% in BRL. The Natura brand posted strong 18.5% growth in Latin America at CC (+11% in BRL). The Avon brand's Latam revenue was up 0.7% at CC (-4.1% in BRL). 

Avon International's net revenue fell 8.1% at CC (-19.8% in BRL) in Q3. The 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 though as the new commercial model, now implemented in 20 markets, resulted in higher productivity and digitalisation and better performance by top products. 

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.

A review is also under way for either an initial public offering (IPO) of Aesop or a spin-off to separate it from Natura &Co, potentially followed by a public offering.