Yesterday (November 13), Natura Co, a leading beauty conglomerate, released its Q3-23 financial report. Its consolidated net revenue for the quarter reached BRL 7.5 billion ($1.53 billion), reflecting a slight decline of -0.7% in constant currency (CC) compared to Q3-22 and a more significant decrease of 10.5% year-on-year (YoY) in Brazilian real (BRL).
The company experienced solid growth in Natura Latam (+18.6% in CC) and relatively stable trends at Avon International (-2.3% in CC). However, The Body Shop faced another challenging quarter (-13.2% in CC), and Avon in Latam witnessed an expected drop, primarily in the Home & Style category (-38.7% in CC) due to ongoing portfolio optimization.
Natura Co’s net income for Q3-23 was BRL 7 billion ($1.43 billion), a remarkable improvement compared to a loss of BRL 560 million ($114.1 million) during the same period last year. This positive outcome was driven by a capital gain resulting from the disposal of Aesop, which concluded during the quarter.
In the Natura &Co Latam segment, net revenue demonstrated an increase of 2.5% in CC but declined by 9.4% in BRL. This performance was primarily driven by strong double-digit growth in the Natura brand, offset partially by an anticipated decline in the Home & Style category due to portfolio optimization and a decrease in the beauty category at the Avon brand.
Net revenue for Avon International was BRL 1.456 billion ($296.7 million), showing a decline of 2.3% in constant currency (-11.6% in BRL). This decrease was primarily driven by the expected reduction in the number of active Representatives (-11.6%). The reduction in the distribution channel was a result of ongoing commercial model adjustments, particularly focusing on leaders’ incentives and structure, as mentioned in the previous quarter.
Despite the reduction in the distribution channel, the Beauty category managed to achieve a growth of 1.8% YoY, while the Home & Style category continued its decline due to the planned portfolio reduction. The growth in the Beauty category was mainly driven by the outperformance of fragrances and the strategic direction of fewer, but more significant and innovative products.
The Body Shop faced challenges in Q3-23, with net revenue of BRL 830 million ($169.1 million), reflecting a decline of 13.2% in CC and 15.0% in BRL. The market continues to present difficulties, with reduced footfall and traffic across The Body Shop’s global footprint.
Combined sales across core business distribution channels, including stores, e-commerce, and franchises, experienced a high-single-digit decline in constant currency during Q3-23, slightly worse than in Q2-23. Store closures, amounting to 111 over the last 12 months (4.5% of total Q3-22 stores), significantly impacted these results. The company is focused on improving conversion rates and offering the right products to the right customers, particularly as it enters the peak Christmas season.
Core business distribution channels, including stores, e-commerce, and franchises, witnessed a high-single digit decline in CC sales, slightly worse than in Q2-23. Store closures, totaling 111 over the past 12 months (equivalent to 4.5% of total Q3-22 stores), significantly impacted sales. Retail sales through these channels showed a sell-out Same Store Sales decline of -5.0%. Franchise sell-in was weak in the quarter, although sell-out showed some improvement, leading to a slight year-on-year improvement in inventory levels, although still above 2019 levels in certain regions, particularly APAC.
