Natura will return to door-to-door operations after selling The Body Shop

On the morning of Tuesday, November 14, Natura&Co took another step in its process of restructuring and simplifying its operations by announcing the sale of The Body Shop to German manager Aurelius Investment, in a transaction valued at 207 million pounds , or R$1.25 billion.

Expected to be completed by December 31, the agreement also includes a potential earn out of 90 million pounds (R$543 million), which would bring the total amount to around R$1.8 billion, still below analysts’ most recent projections, in the range of R$2 billion.

The sale was also below the amount disbursed by Natura, of 1 billion pounds, when purchasing the asset in 2017. But, apart from the differences between all these figures, the Brazilian group preferred to emphasize another balance resulting from the negotiation.

“We understand that we do not have the expertise in retail itself,” said Fabio Barbosa, CEO of Natura&Co, in a conversation with journalists. “So our focus now is back to basics. Let’s do what we do well: direct sales and moving from that to omnichannel.”

Before giving guidance on this return to basics, the executive noted that Natura has not yet defined the destination of the resources obtained from the transaction. And he took the opportunity to highlight another “lesson”.

“I learned that the biggest mistakes happen when you have excess capital”, highlighted Barbosa. “That’s why I’m the biggest advocate that we need to maintain financial discipline.”

The group, however, has clearly defined direct sales as its priority in Latin America. In the region, another point highlighted was the advances in the multichannel strategy, faced with the long-standing challenge of integrating the battalion of 4 million consultants that made the group famous in this process.

“Today, of our almost a thousand Natura stores, around 700 are already operated by consultants who have become franchisees”, said João Paulo Ferreira, CEO of Natura&Co in Latin America. “On another note, around 5% of our revenue in the region is online and half of that volume comes from these consultants.”

Ferreira also highlighted that, due to the wave of integration between Natura and Avon’s operations in Brazil, which began in September, the company has been dealing with problems in product availability and delays in delivery. He noted, however, that these issues will be normalized by the end of the year.

In the case of Avon International, an operation that encompasses 43 countries and all markets outside Latin America, Natura’s plan is to reinforce investments in the brand and in maximizing the capillarity of the operation, whether via direct presence or through distribution agreements. .

“Now, with fewer initiatives and more capital, we will have more time to make the necessary investments,” said Barbosa. “The idea is to focus on direct sales in middle-income countries and, at Avon International, in markets such as Turkey, South Africa, the Philippines and Eastern Europe.”

When talking about this map, Barbosa made a point of highlighting that the group will not direct all its efforts to the Latin American market, given that, with the exception of Avon, the company has been getting rid of the assets that made up the strategy of building a global platform for cosmetics brands.

Over time, this thesis did not generate the expected results. And, contrary to the initial ambition, a move prior to the divestment of The Body Shop came in April this year, with the sale of Aesop to L’Oréal, in a US$2.5 billion deal.

“Aesop was so successful, so much so that we sold the operation for a substantial multiple in relation to the initial value”, stated the CEO. “It was not sold because it was a problem, but precisely because it was a solution for reframing the company’s balance sheet.”

From loss to profit

The sale of Aesop was precisely one of the factors that boosted Natura&Co’s net profit of R$7.02 billion in the third quarter. With the last line of the balance sheet boosted, the group reversed the loss of R$559.8 million, announced a year earlier.

Between July and September, net revenue fell 10.5%, to R$7.5 billion. In the division by unit, Natura&Co Latam fell 9.4%, to R$5.2 billion, while Avon International and The Body Shop had drops, respectively, of 11.6% and 15%, to R$1. 4 billion and R$829.4 million.

Adjusted EBITDA for the quarter was R$751.4 million, which represented a 10% jump on an annual basis. The adjusted Ebitda margin increased from 8.1% to 10% in this period.

The group also highlighted that it ended the period with net cash (excluding leasing) of R$700 million, compared to a net debt of R$10 billion in the second quarter of this year.

In a report, BTG Pactual highlighted the fact that Natura’s restructuring is still ongoing, now, however, under a much better capital structure. In addition to highlighting that, despite sales remaining weak and impacted by this process, the company is already showing good improvement in margins. But he noted:

“Although we welcome the efforts to simplify its structure and improve margins, the pace of recovery remains uncertain, which leads us to maintain our neutral rating,” wrote the team led by Luiz Guanais, with a target price for the stock from R$18.

In the same vein, but with a target price of R$21 for the stock, Itaú BBA highlighted that the result brought encouraging signs of the company’s turnaround. These advances also helped boost the performance of the company’s shares, which rose more than 5% this morning.

At around 1:30 pm, the shares were trading slightly below this level, up 4.10%, quoted at R$14.47. No, the shares accumulated an appreciation of 24.6%. Natura&Co is valued at R$19.9 billion.