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Avon International revenue declines as Natura & Co reveals first quarter results

Sophie Smith
15 May 2024

Brazilian beauty company Natura & Co has reported a decrease in revenue for Avon International as it continues to explore the possible separation of the two companies.

The group saw total revenue reach £942 billion (BRL 6.1 billion), up 1.1% in constant currency but down 5.7% on a reported basis.

Adjusted EBITDA totalled £105 million (BRL 683 million), with an 11.2% margin, up by 110 basis points and representing another quarter of "solid profitability expansion" for Natura & Co.

However, the company reported a net loss of £144 million (BRL 935 million), compared to a net loss of £100 million (BRL 652 million) the previous year, impacted by discontinued operations, higher taxes from country mix and FX losses and hyperinflation accounting impacts.

Net revenue at Avon International decreased 4.7% in constant currency, impacted by the continuation of weaker promotional execution as mentioned by the company in the previous quarter.

From a category perspective, beauty was also impacted by promotional execution and dropped 4.2%, with the exception of fragrance, while home and style was down 22% amid a planned portfolio reduction.

In an effort to drive growth, Avon International said it is actively exploring opportunities from other distribution channels, including retailers. It is already being sold in the UK via Superdrug, in Italy via Naima stores and in Turkey via representative's retail franchise stores.

In addition, efforts to strengthen gross margin and streamline operations led to only a "slight" decrease in adjusted EBITDA margin.

Fabio Barbosa, CEO of Natura & Co, said: "Avon International had a slow start of the year, following solid Q4 2023 profitability performance.

"The new management team took office in January and is working on simplifying the market, focusing on key countries, and enhancing our portfolio with superior promotional execution. We believe these steps are crucial to stabilise revenues and keep us on track to improve profitability.

"We are also continuing to study a possible separation of Avon and Natura, as we announced in February, in line with our goal of simplifying our corporate structure and giving more autonomy to the business units. We will inform the market as soon as we have news on this subject."

News emerged earlier this year that Natura & Co. is assessing the possible separation of Avon International into an independent publicly traded company as it attempts to unlock further shareholder value.

The structure of the potential transaction is still being considered, but it was previously expected that it would result in two separate, standalone entities (Natura and Avon) with "unique business plans, independent governance and management teams better equipped to pursue more tailored strategies to drive long-term shareholder value".

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