03.14.23
Natura &Co has shared financial results for the fourth quarter and fiscal year 2023.
The Brazilian cosmetics giant posted a resilient performance in the fourth quarter, with sales growth in constant currency and continued progress in cash conversion, in line with its strategic priority.
A key highlight of the quarter was Aesop's successful entry in the China market, with initial performance above expectations. Digital also continues to progress: At Natura Latam, the penetration of digital (consultants who logged in at least once to the digital catalog or the app during the quarter) reached 82.1% in Q4 compared to 80.5% in Q421. At Avon International, penetration of the Avon On app (active representatives who logged in at least once in the last three campaigns) reached 30.6%, compared to 25.5% in Q421.
Fabio Barbosa, Group CEO of Natura &Co, declared: "In the challenging environment we faced in 2022, we decided in mid-year to reassess the group's growth model to enter a new stabilization cycle. Important changes were carried out, such as a stronger focus on profitability and cash conversion, a revision of the cost structure and the role of the Holding company, alongside important revisions in our footprint worldwide to position the business for success going forward.”
“We are confident that the actions we are taking will position Natura &Co to return to growth. While we expect 2023 to be another challenging year, our priorities of focusing on cash generation and improving the Company's capital structure will allow us to invest in our priorities, building the path to unlock significant value. We expect a continuous improvement in revenues, as well as better adjusted profitability and cash generation, while continuing to invest in transformational actions,” added Barbosa.
Avon International's revenue was down 9.9% at CC (-23.8% in Reais.) This drop continues to reflect the situation in Ukraine (excluding that, CC sales were down 6.2%). The TMEA and APAC regions showed year-on-year growth, while Western Europe posted softer performance. However, even in a tough macro environment, Avon International was able to pass through inflation and FX pressure to prices, which also benefits rep productivity. Digitalization is progressing and the use of digital tools reached 30.6%.
The Body Shop's Q4 net revenue declined by 8.4% at constant currency (-20.6% in BRL), marking a sequential improvement over the previous quarter. Combined sell out sales of core business distribution channels (stores, e-commerce and franchise) were down by a more moderate 4.8% in constant currency, while The Body Shop at Home is returning to pre-pandemic levels. Management is focused on stabilizing core distribution channels top line and the implementation of cost savings initiatives to deliver margin expansion and support cash generation. In early 2023, management announced the closure of the At-Home business in the US and of the dedicated distribution center in the UK, and in February, the company announced a restructuring of its global management structure and staffing cuts.
Aesop again recorded another quarter of double-digit growth in constant currency, up 18.2% (-2.1% in BRL). All regions delivered double-digit growth despite the challenging environment. Fragrance sales grew at more than twice the overall pace, aligned with Aesop's category diversification strategy. The highlight of the quarter was Aesop's successful China market entry, with the launch of two physical stores, along with the Aesop.com platform and a domestic T-Mall operation. Performance has exceeded expectations and the stores are already the top two sellers of Aesop's 287 signature stores worldwide. As mentioned in the November 30, 2022 notice to the market, Natura & Co continues to evaluate strategic alternatives for Aesop, including a possible sale of a stake in the company.
The Brazilian cosmetics giant posted a resilient performance in the fourth quarter, with sales growth in constant currency and continued progress in cash conversion, in line with its strategic priority.
Q4 Performance
Natura &Co posted Q4 consolidated net revenue of R$10.39 billion, up 3% at constant currency and down 10.8% in BRL, driven by double-digit constant currency (CC) growth at Natura &Co Latam and Aesop.A key highlight of the quarter was Aesop's successful entry in the China market, with initial performance above expectations. Digital also continues to progress: At Natura Latam, the penetration of digital (consultants who logged in at least once to the digital catalog or the app during the quarter) reached 82.1% in Q4 compared to 80.5% in Q421. At Avon International, penetration of the Avon On app (active representatives who logged in at least once in the last three campaigns) reached 30.6%, compared to 25.5% in Q421.
Fabio Barbosa, Group CEO of Natura &Co, declared: "In the challenging environment we faced in 2022, we decided in mid-year to reassess the group's growth model to enter a new stabilization cycle. Important changes were carried out, such as a stronger focus on profitability and cash conversion, a revision of the cost structure and the role of the Holding company, alongside important revisions in our footprint worldwide to position the business for success going forward.”
FY2022 Performance
FY2022 net revenue was R$36,349.6 million, down 9.5% year-over-year in BRL compared to the previous year“We are confident that the actions we are taking will position Natura &Co to return to growth. While we expect 2023 to be another challenging year, our priorities of focusing on cash generation and improving the Company's capital structure will allow us to invest in our priorities, building the path to unlock significant value. We expect a continuous improvement in revenues, as well as better adjusted profitability and cash generation, while continuing to invest in transformational actions,” added Barbosa.
Business Segments
Natura &Co Latam's net sales were up by 10.6% in constant currency (CC) and down 3.2% in BRL. CC growth was driven by double-digit growth at the Natura brand, which grew by 17.5%, while the Avon brand was also up slightly, at +2.2%. The Natura brand posted strong momentum, with growth of 17.9% in Brazil, supported by price increases, mix effects, as well as 14.9% growth in consultant productivity in Q4. In Hispanic Latam, net revenue was up 16.9% at constant currency despite a challenging situation in several countries, driven by Argentina, Colombia and Mexico. The Avon brand in Brazil entered positive territory in Q4, growing by +7.5%, albeit on a soft comparable base. The Beauty segment continued to grow, accelerating to +12%, while Fashion and Home (F&H) was down 10%, in line with our portfolio optimization strategy.Avon International's revenue was down 9.9% at CC (-23.8% in Reais.) This drop continues to reflect the situation in Ukraine (excluding that, CC sales were down 6.2%). The TMEA and APAC regions showed year-on-year growth, while Western Europe posted softer performance. However, even in a tough macro environment, Avon International was able to pass through inflation and FX pressure to prices, which also benefits rep productivity. Digitalization is progressing and the use of digital tools reached 30.6%.
The Body Shop's Q4 net revenue declined by 8.4% at constant currency (-20.6% in BRL), marking a sequential improvement over the previous quarter. Combined sell out sales of core business distribution channels (stores, e-commerce and franchise) were down by a more moderate 4.8% in constant currency, while The Body Shop at Home is returning to pre-pandemic levels. Management is focused on stabilizing core distribution channels top line and the implementation of cost savings initiatives to deliver margin expansion and support cash generation. In early 2023, management announced the closure of the At-Home business in the US and of the dedicated distribution center in the UK, and in February, the company announced a restructuring of its global management structure and staffing cuts.
Aesop again recorded another quarter of double-digit growth in constant currency, up 18.2% (-2.1% in BRL). All regions delivered double-digit growth despite the challenging environment. Fragrance sales grew at more than twice the overall pace, aligned with Aesop's category diversification strategy. The highlight of the quarter was Aesop's successful China market entry, with the launch of two physical stores, along with the Aesop.com platform and a domestic T-Mall operation. Performance has exceeded expectations and the stores are already the top two sellers of Aesop's 287 signature stores worldwide. As mentioned in the November 30, 2022 notice to the market, Natura & Co continues to evaluate strategic alternatives for Aesop, including a possible sale of a stake in the company.