Natura & Co sees Q3 sales drop at Avon and The Body Shop

Natura & Co, owner of Aesop, Avon and The Body Shop, has released its financial results for the third quarter, revealing a 2.2% rise in revenue at constant currency to £1.44 billion (R$9 billion).

Aesop posted another strong quarter, with net revenue increasing by 21.5%. All regions except Europe delivered double-digit growth, led by North America and Asia-Pacific.

Avon net revenue was up 0.7%. However, Avon International's net revenue decreased 8.1%. Performance was mainly impacted by the war in Ukraine (excluding Russia and Ukraine, sales were down a more limited 3.1%), low consumer confidence and eroding household purchasing power in Europe.

Avon's business fundamentals "continued to improve" as the new commercial model, now implemented in 20 markets, resulted in higher productivity and digitalisation and better performance by top products.

The Body Shop's net revenue was down 19.5% in Q3, mainly impacted by post-lockdown channel rebalancing. To address these challenges, management is implementing a series of measures including strict cost containment and a deployment of the new Workshop store, which is showing a 15 percentage point uplift on sales compared to the traditional model.

Digitally-enabled sales, which include online sales (e-commerce and social selling) and relationship selling using digital apps, reached 50.1% of total net revenue, up from 49.8% in Q3 of last year.

Adjusted EBITDA margin was 8.6%, "stable" compared to Q3 of last year, according to the business. Efforts to focus on cash generation also showed "good results", with a significant improvement in cash conversion in Q3.

Fabio Barbosa, Natura &Co CEO, commented: "Natura &Co posted results in line with our expectations, with top line trending better, while margins continued to be pressured by the challenging macroeconomic environment marked by high inflation, lower discretionary spending and foreign exchange impacts.

"Natura &Co Latam posted solid performance, notably the Natura brand and the Avon CFT segment in the region. Aesop posted another consistent quarter of growth while Avon International showed another sequential improvement in results and in key channel indicators. On the other hand, The Body Shop continued to post challenging results amid channel decline in the at-home segment and slower franchise recovery.

"The group reorganisation that we announced last quarter has made good progress. We have significantly reduced operating costs at the Holding and continue to implement important steps to give each brand more autonomy and accountability.

"Other structural steps are also in motion: We are accelerating the integration of the Avon and Natura businesses in Latin America. We are continuing to optimise Avon International's geographic footprint, with significant changes in markets such as India and Saudi Arabia. We also announced the closing of Avon's Suffern R&D facility in the US and the outsourcing of Avon's IT infrastructure. The Body Shop has taken steps to rightsize its organisation and, as announced in the Material fact published on October 17th, we continue to analyse strategic alternatives for Aesop.

"Taking into consideration the strategic moves mentioned above, the potential alternatives for Aesop currently under study and our expectations of a continued uncertain macro environment in some markets, we are withdrawing our mid-term guidance."