Natura &Co beats market expectations and outperforms global CFT market driven by strong digital results

SÃO PAULO, Aug. 13, 2020 /PRNewswire/ -- Natura &Co's rapid pivot to online and digital platforms led to 225% growth in e-commerce sales, allowing the Group to outperform the global Cosmetics, Fragrance and Toiletries market in the second quarter. Consolidated sales stood at R$7.0 billion, down only 12.7% despite the unprecedented global impacts of the COVID-19 pandemic.

The quarter also saw the launch of the Group's Commitment to Life, a comprehensive sustainability plan through 2030, further increasing Natura &Co's actions to tackle some of the world's most pressing issues, including the climate crisis and protecting the Amazon, the defense of human rights, ensuring equality and inclusion and embracing circularity and regeneration.

And Natura &Co also successfully completed a R$2 billion capital raise in the quarter that will allow the Group to invest R$400 million in the coming six months in digital and IT, with further significant investments planned over the next four years.

Roberto Marques, Executive Chairman and Group CEO of Natura &Co, declared: "Our continued efforts to accelerate the digital transformation of our businesses enabled us to largely offset store closures, ensure business continuity, and deliver market outperformance during a period in which much of the world faced continued lockdown measures. Every brand and business in the Group became truly omnichannel during the second quarter and--given the circumstances--helped deliver a robust and competitive overall performance, both in terms of sales and EBITDA.

"To further develop our omnichannel model, we will continue making significant investments in digital and IT thanks to our successful capital raise, and I'm also delighted to announce two strategic partnerships, one with Vayner Media, a global powerhouse in social media, which will include digital support for the Avon brand relaunch, and another with Singu, a leading Brazilian digital platform for at-home beauty services.

"We also took a major step in advancing our purpose-driven vision to business this quarter by launching our 2030 sustainability plan. Today more than ever, Natura &Co's trailblazing approach combining economic, social and environmental performance is an absolute imperative."

Natura &Co's consolidated net revenue of R$7.0 billion was driven by remarkable growth by the Natura brand in Brazil and strong growth in sales in Reais by The Body Shop and Aesop, with exceptional performances in digital social selling and e-commerce. Excluding the phasing effect on sales of a previously-disclosed cyber incident at Avon, of approximately R$450 million already captured in Q3, net revenue in Q2 would have been -7.0% vs Q2 19 (-18.6% at constant currency). Adjusted EBITDA was R$615.2 million, with margin of 8.8%, reflecting the Group's cost discipline to offset lower sales.

Group e-commerce sales grew by about 225% in the quarter vs. the same period last year, with growth of 150% at Natura and Avon combined, 230% at the Body Shop and 430% at Aesop. Digital social selling also made major advances. At end-Q2-20, there were 889,000 Natura consultant online stores, 65% more than in Q2-19, and orders through these stores nearly tripled. The implementation of new features, such as the interactive e-brochure, has allowed us to significantly grow sales through our digital platforms. The digitalization of Avon International representatives continued, and sales via the digital brochure in the quarter were more than triple those in Q2-19, while e-commerce sales more than doubled.

Natura &Co Latam's net revenue was down 16.5% in BRL. The Natura brand's net revenue increased by 4.4%, supported by a remarkable performance at Natura Brazil (+7.9%), driven by the strength of its digital relationship selling model, as well as successful and innovative Mother's Day and Valentine's Day campaigns. This helped offset a 3.6% drop in Hispanic Latam due to COVID-19 restrictions. The Avon brand's net revenue declined 35.2% in BRL on a reduction in representatives across all markets in Latin America and COVID-19 impacts, as well as the cyber incident. Brazil dropped 31.1% while Hispanic Latam was down 37.8%. Q2-20 Adjusted EBITDA for Natura &Co Latam was R$373.2 million, and adjusted EBITDA margin was 9.4% (-320 bps). In H1, Natura &Co Latam's net revenue was down 7.8% in BRL and adjusted EBITDA was R$660.9 million, with adjusted EBITDA margin of 8.1% (-160 bps).

Avon International, which comprises Avon's activities in 50 markets throughout Europe, Asia, Africa and the Middle East, saw its Q2 net revenue decrease by 21.6% in BRL. The decrease was caused by a combination of lower representative activity related to COVID-19 impact and the cyber incident. Representatives increased adoption of digital assets and sales via the digital brochure more than doubled in the quarter vs Q1. Adjusted EBITDA was R$72.6 million, with 4.4% margin. In H1, net sales were down 11.9% and adjusted EBITDA margin was 4.7% (-840 bps).

The Body Shop's net revenue increased 15.5% in BRL, driven by a very strong performance in online and direct sales. COVID-19 lockdown measures impacted retail performance in the quarter, with 87% of retail stores closed at the end of April, before reopening mostly in June, ending the quarter with 16% still closed. Revenue progressively improved as stores reopened and returned to growth of +14% in June. Consumers continued to shift to e-commerce and At-Home (direct sales), with growth of more than 230% and 280%, respectively, significantly offsetting lost retail sales. Adjusted EBITDA in Q2 was R$132.8 million, with adjusted margin of 14.8% (-90 bps). H1-20 net revenue increased 9.0% in BRL while adjusted EBITDA was R$278.6 million, with adjusted margin of 14.9% (-280 bps).

The Aesop success story continued in Q2, with strong double-digit growth in both sales and profitability in Reais. Net sales grew 34.8% in Q2 as a 430% increase in digital sales helped offset the closure of 90% of the store network through much of Q2. Growth resumed in June and was a strong +20%. EBITDA in Q2 grew by 78.5% to R$102.6 million, with margin up 650 basis points to 26.8%. In H1, net sales were up 30.8% and EBITDA rose 52.8% to R$180.6 million, with margin of 25.0% (+360 bps).

About Natura &Co
Natura &Co is a global, purpose-driven, multi-channel and multi-brand cosmetics group which includes Avon, Natura, The Body Shop and Aesop. Natura &Co posted net revenues of R$ 14.4 billion in 2019 and R$32.9 billion on a proforma basis, including Avon. The four companies that form the group are committed to generating positive economic, social and environmental impact. For 130 years Avon has stood for women: providing innovative, quality beauty products which are primarily sold to women, through women. Founded in 1969, Natura is a Brazilian multinational in the cosmetics and personal care segment, leader in direct sales. Founded in 1976 in Brighton, England, by Anita Roddick, The Body Shop is a global beauty brand that seeks to make a positive difference in the world. The Australian beauty brand Aesop was established in 1987 with a quest to create a range of superlative products for skin, hair and the body.

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