Natura & Co sales rise but warns of another challenging year ahead

Natura & Co has reported a 3.4% increase in net revenue for the first quarter of 2023, despite another drop in sales from The Body Shop and Avon International.

The Body Shop's net revenue decreased 9.4% in constant currency. This was attributed to a "tough macro environment", particularly in the UK and the rest of Western Europe, as well as the continued "steep decline" of The Body Shop at Home.

Avon International, which includes all markets except Latin America, saw net revenue drop 7.5% in constant currency, reflecting the situation in Ukraine.

Aēsop saw net revenue rise 16.8% in constant currency, with all regions delivering double-digit growth. Additionally, fragrance sales grew at "more than twice the overall pace", aligned with the brand's category diversification strategy.

Last month, L'Oréal reached an agreement to acquire Aēsop, opening a new chapter of the luxury brand's growth story after 10 years under Natura & Co's stewardship.

Under the transaction, L'Oréal is set to acquire Aēsop for £1.81 billion ($2.525 billion). The deal is still subject to customary regulatory approvals and is expected to close in Q3 2023.

Excluding Aēsop, Natura & Co showed "strong profitability improvement" in the first quarter. This was mainly driven by gross margin expansion across all business units and continuous cost control, partially offset by sales deleverage at The Body Shop and Avon.

The sale of Aēsop will allow Natura & Co to strengthen and deleverage its balance sheet, freeing up resources to focus on its strategic priorities, notably the integration in Latin America, as well as the further optimisation of Avon International's footprint and the improvement of The Body Shop's business.

Fabio Barbosa, CEO of Natura & Co, said: "Our performance in the first quarter is in line with our plan and with our previous communication, as Q1 numbers show a solid improvement both in gross and adjusted EBITDA margin, while the company continues to put in action important structural changes in its portfolio, focusing on simplifying its structure and improving its capital structure.

"While 2023 continues to shape up as another challenging year, our strategic priorities are clear and, the first results give us confidence that we are on the right track.

"We believe that massively reducing the company's net debt, combined with stronger EBITDA margins resulting from the businesses' operational improvement, allowing us to make disciplined investments in our business priorities and unlocking value for our shareholders."

Read TheIndustry.beauty's feature on Will The Body Shop shine now Aēsop is out of the picture?