11.12.21
Global multi-brand cosmetics group Natura & Co, which includes Avon, Natura, The Body Shop and Aesop, reported a slight sales decline in the third quarter, but posted strong growth in the first nine months of year 2021 and compared to the third quarter in 2019 prior to the onset of the Covid-19 pandemic.
On a year-to-date basis, net income improved by over $1 billion reais or $182 million US dollars, despite short-term cost pressure.
In the current challenging operating environment, Natura & Co continued to make major advances on key strategic initiatives that will fuel future growth. A key highlight is the progress made on Avon's turnaround, with the implementation of a new commercial model and an acceleration in digital tools. For the first time in five years, total sales of the Avon brand, encompassing both operations in Latin America and in international markets, showed growth of 10.7% (more than 3.4% in constant currency) in the first nine months of the year versus the same period last year. Company officials say planned synergies are fully on track with 40% of the overall target already achieved by the end of this year, helping the company offset raw material inflation and foreign currency headwinds.
"Despite a very tough comparable versus last year, when we grew over 20%, and some persistent external headwinds related to the global pandemic, Natura &Co continues to progress on its key initiatives, attesting to the underlying strength of our business,” said Roberto Marques, executive chairman and group CEO. “We again outperformed the global cosmetics, toiletries and fragrances market on a year-to-date basis and versus pre-pandemic levels, all our brands and businesses posted growth over nine months and the group's digitalization continued to advance. We also made major headway on the integration of Avon. With a further roll-out of Avon's new commercial model, continued deployment of social selling tools at Natura, new conversions to The Body Shop's new store concept and preparations for an entry onto the Chinese market at Aesop well underway, we have a number of initiatives to fuel growth in 2022 and beyond."
The group is also launching a share repurchase plan of up to $1.5 billion reais and is evaluating switching its primary listing to the New York Stock Exchange to highlight its increasingly global nature, while maintaining a dual listing with Brazilian Depositary Receipts in Brazil. Underscoring its commitment to sustainability, Natura & Co led a call to action to world leaders at the COP26 summit to address not just climate change, but also nature. Natura &Co is strongly pushing for the creation of a carbon market with effective mechanisms put in place, and for an Agreement on Nature similar in scope and significance to the Paris Agreement on climate change. It also launched the PlenaMata platform, aiming to mobilize people, businesses, institutions and communities to work together for forest conservation and ending deforestation in the Amazon. The region, which counts 390 billion trees, lost over 400 million trees in 2021 alone. The instrument is public and tracks the deforestation or the regeneration of the forest on a daily basis.
Natura & Co
Natura &Co Latam's net revenue decreased by 2.4% in Brazilian real in quarter three, but was up 14.4% over nine months. In the quarter, Natura's brand power reached its highest level, while the Avon brand continued to gain strength and was above its quarter three-20 level. Consultant/representative loyalty and satisfaction at both brands also reached its highest-ever levels. Avon's new commercial model, a key pillar of its turnaround, has been fully implemented in Brazil. Natura online sales also grew over 13% versus quarter three 20 and its own payment solution, Natura & Co Pay, is already working with 300,000 accounts and total payment volume ahead of the annualized estimate of $4 billion reais. Adjusted earnings before interest, taxes, depreciation, and amortization margin for Natura &Co Latam was 9.6% (down 690 basis points) in quarter three and 10.8% (less than 90 basis points) in the nine months.
Avon International
Avon International's net revenue decreased 14.3% in quarter three, but was up 6.3% in the first nine months. Key markets such as the UK, South Africa and the Philippines gained market share this quarter and in the nine months. The new commercial model, mirroring Natura's segmentation approach, is being implemented across Avon International's top 9 markets. Investments in digital made since the acquisition are supporting the increase in social selling adoption at Avon International, already reaching 15% versus 3% pre-pandemic. Online sales were up by +19% vs. quarter three-20. Adjusted interest, taxes, depreciation, and amortization margin was 3.9% (down 350 basis points) in quarter three and 4.1% (down 160 basis points) in the nine months.
The Body Shop
The Body Shop posted another solid performance, with net revenue up 0.4% in Brazilian real in the quarter and 20.6% in the nine months. Deployment of the new store concept resumed, with 100 stores expected to be renovated by year-end. Stores converted into the new concept see a like-for-like sales uplift of about 10%. Online and At-Home channels are still twice above pre-pandemic levels. Interest, taxes, depreciation, and amortization margin was 18.0% (down 430 basis points) in quarter three and 15.3% (down 270 basis points) in the nine months.
Aesop
Net revenue increased 12% in Brazilian real in quarter three for Aesop, and 39.8% over nine months. Aesop continues to show strong momentum, posting revenue growth, notably in Asia and the Americas, against a tough comp in quarter three-20 and despite supply-chain challenges in certain markets. Aesop's omnichannel model was further consolidated with the continued growth of online sales, which are twice above their pre-pandemic level. Interest, taxes, depreciation, and amortization margin was 19.6% (down 1,170 basis points) in quarter three, notably reflecting planned higher investments in digital, categories and geographic expansion to accelerate growth, and 22.5% (down 500 basis points) in the nine months.