Body Shop owner Natura sees strong Q3 sales, but profits are hit by investments

By

Sandra Halliday

Published
Nov 14, 2019

Brazilian cosmetics giant Natura & Co has reported revenue growth for its third quarter with all three brands performing. The company, which owns The Body Shop and is buying Avon, is becoming one of the biggest global names in natural/sustainable beauty as its acquisition strategy drives its sales to new record levels.

Late on Wednesday it said that consolidated net revenue reached R$3.5bn (£0.65bn/€0.76bn), up 7.2% on a reported basis and 10.1% at constant currency. Adjusted EBITDA was R$459.3m and net income was R$68.6m in Q3. But this latter figure was down from R$132.8m a year ago. “reflecting a planned increase in investments at Natura in digitalisation and the brand and non-recurring costs related to the Avon acquisition”. However, in the nine months, net income rose by a “healthy” 6% to R$176.6m.

The Natura brand's adjusted net revenue in Brazil was up 8.1% on the back of “innovative product launches”. Productivity per consultant rose for the 12th consecutive quarter. Its digital platform now has 860,000 users in Brazil and online sales grew in double-digits. 

The company said The Body Shop “continues to make headway in its transformation plan”. Net revenue was up 1.1%, or 3.8% in constant currency. Excluding events in Hong Kong, constant-currency growth would have reached 6.4%. Like-for-like own-store sales grew 3.1% in the UK, “underscoring the brand's attractiveness in its biggest market”. But its adjusted EBITDA of R$69m, with margin of 7.4% “reflected the impact of events in Hong Kong”. 

Aesop delivered “another quarter of solid growth”. Revenue increased 10.8%, or 10.2% at constant currency. Like-for-like retail sales growth was 9%.

Executive chairman Roberto Marques said the group “posted a remarkable sales performance, exceeding market expectations. All our businesses and brands again contributed to growth despite a market that remains challenging in Brazil, where Natura continued to grow market share, and Hong Kong, which impacted The Body Shop and Aesop”.

During the period, Natura celebrated its 50th anniversary and entered a new country, Malaysia, leveraging The Body Shop's market knowledge. The Body Shop also joined Natura in being certified as a B-Corp and opened its new store concept in London, “reconnecting with its activist heritage”. And Aesop, while continuing its expansion, also stepped up its sustainability focus.

And he said the group has also taken major steps towards closing the “transformational acquisition” of Avon Products. Brazil’s anti-trust authority has approved the acquisition without restrictions and Natura and Avon's shareholders have both voted in favour of the transaction. It remains on track to close the acquisition as planned in Q1 2020, creating the world's fourth-largest pureplay beauty group.