Natura & Co has reported a 1.9% increase in net revenue for second quarter 2023 despite its ongoing performance challenges with The Body Shop.
The Brazilian beauty brand owner delivered a consolidated net revenue of R$7.8bn for the quarter ended 30 June 2023.
This was driven by improved margins across its Avon International and The Body Shop businesses, as well as Natura &Co Latam, where net sales were up by 5.8%.
Not to mention a 5.7% drop in corporate expenses, said the company.
Gross margin increased 430 basis points to 65% compared to 2022’s figures.
The group's adjusted EBITDA grew 230 basis points; this was said to be partly driven by gross margin improvements and continued cost control at The Body Shop.
Earnings were offset by planned investments at Natura & Co Latam and Avon International.
However, this overall positive result was in spite of another weak performance by The Body Shop.
The British beauty company’s net revenue for the quarter decreased 12% at constant currency.
This steep drop follows the business’ less than stellar Q1 2023 figures, where it reported a net revenue dip of 9.4%.
The Body Shop’s combined sales of core business distribution channels for Q2 2023 – stores, e-commerce and franchises – also showed a mid-single-digit decline.
A sharp decline in sales for The Body Shop at Home for the quarter was also reported amid channel decline in the ‘at-home’ segment and slower franchise recovery.
Retail sales for the category through core business distribution channels came in at -3.5%.
However, The Body Shop’s adjusted EBITDA margin showed an improvement by 210 basis points to 5.4%.
This was thanks to a quarter of gross margin growth – up 30 basis points to 77.8% – combined with strict cost control.
“The Body Shop continues to focus on structural cost reduction as it works to improve margin and cash generation,” read a statement from Natura & Co.
Natura & Co has reported “compelling” results for its Natura-Avon integration in Latin America
Natura & Co’s global beauty brand Avon International also reported a 1.3% decrease in revenue at constant currency.
However, the brand’s TMEA and Central and Eastern Europe regions posted year-on-year growth.
Sales for its beauty category also soared 3% compared to 2022 figures, driven by consumer demand for fragrance and colour cosmetics, said the company.
Avon International’s adjusted EBITDA margin was 4.4% – up 110 basis points – driven by gross margin expansion, price increases and product mix.
“Beauty productivity per representative evolved positively again, with significant growth compared to the previous year,” read a statement from Natura & Co.
Natura & Co also kicked off “Wave 2” of its Natura-Avon integration, reporting “compelling” results.
The company has been accelerating the integration of its Avon and Natura businesses in Latin America, starting with Peru and Colombia.
In both markets, Avon International saw “a meaningful acceleration” of cross-selling between brands and significant CFT productivity growth.
This resulted in “greater prosperity for its beauty consultants”, read a statement for the company.
As Natura & Co enters the second half of 2023, its focus will be on the roll out of Wave 2 of Natura-Avon integration in Brazil.
Natura & Co is due to close the sale of Aesop to L’Oréal later this year
Natura & Co’s Q2 2023 numbers also exclude the operating performance for Aesop pending the closing of its sale to L'Oréal.
The French cosmetics goliath is set to acquire the Australian luxury cosmetics brand for $2.5bn.
"Natura & Co's second-quarter performance continued to show the improvement already observed in Q1,” said Fabio Barbosa, Group CEO of Natura & Co.
“With low-single digit top line growth at constant currency and a significant improvement in adjusted EBITDA margin.
“This was mainly driven by gross margin, benefiting from mix effects, partially offset by investments and inflation.
“Net income was still impacted by high financial expenses, which will be addressed upon closing of the sale of Aesop, expected to occur in Q3 2023.”
Cash conversion remains a main focus for the company going forward.
“And this quarter we saw further improvement in operating working capital dynamics, partially offsetting seasonal cash consumption in the quarter,” added Barbosa.
“We continue to drive our cash conversion improvement, mainly through working capital and net Capex optimisation, among others.
“And we still see more opportunities to be captured on these fronts, although we might face volatility from quarter-to-quarter.”