Natura &Co posted consolidated net revenue of R$8.3 billion, down 4.6% at constant currency and 12.7% in BRL in the first quarter, and adjusted EBITDA margin was 7.2% (-300 bps) on the back of a very strong comparable base, as Q1 of last year saw sales growth of 8.1% at constant currency and 25.8% in BRL. Net income was R$ (643.1) million and the Group ended the quarter with a solid net cash position of R$ 4.5 billion.
The Q1-22 performance was notably impacted by rising inflation affecting discretionary spend in key markets, cost pressures in the supply chain, unfavorable currency movements and first effects of the war in Ukraine. But it also reflects strategic decisions by Natura &Co related to Avon’s transformation, including a reduction in the product portfolio and the implementation of the new commercial model, with first indicators already showing improvements.
The ramp-up of digitally-enabled sales continued, reaching 50.8% of total revenue, compared to 47.7% in Q1-21 and to 35.0% pre-pandemic (Q1-20), driven by continued growth at Natura and Avon. Digitally-enabled sales include online sales (e-commerce + social selling) and relationship selling using digital apps. At Avon International, adoption of the Avon On app has posted consistent and sustained growth over the last 9 quarters, reaching 16%, or 5 times pre-pandemic levels. At Natura in Latam, the average number of consultants sharing content also increased by nearly 5 times compared to pre-pandemic levels and orders through the 1.5 million+ consultant online stores increased by 81% in the region and were three times their Q1-20 levels.
The global macroeconomic and geopolitical environment has been volatile, marked by rising inflationary pressures, supply chain disruption, currency volatility and the outbreak of the war in Ukraine, all impacting consumer spending and demand. Despite this volatility, the company is reaffirming its 2024 EBITDA margin guidance of 14% to 16%. The company now expects to achieve its consolidated net revenue target of R$47 billion to R$49 billion and net debt-to-EBITDA target of less than 1.0x in 2024, from 2023 currently, thus aligning all its guidance on the fiscal year ending December 31, 2024.
Roberto Marques, Executive Chairman and Group CEO, declared: “While our Q1 performance was impacted by rising inflation, cost pressures in the supply chain, unfavourable currency movements, and the first effects of the war in Ukraine, they also reflect The Body Shop channel rebalancing and weak consumer demand in Europe, as well as key strategic decisions related to Avon’s transformation, including a reduction in the product portfolio and the implementation of the new commercial model.
This combination resulted in lower sales and profitability in the quarter compared to Q1-21, partly reflecting our greater exposure to Latin America and Europe, while most of our global peers are more exposed to Asia and North America. But we also saw some positive signs, including the resumption of growth by Natura in Brazil, an improvement in Avon’s underlying performance with productivity gains, and another quarter of strong growth by Aesop.
