Brazil’s Natura Cosmetics posts a loss for Q1

By Deanna Utroske

- Last updated on GMT

Brazil’s Natura Cosmetics posts a loss for Q1

Related tags Latin america

Multinationals are edging in to the South American region while the economy is down; but for the time being, this quarter’s results don’t look good for the local direct-sales beauty company.

Late last week Natura Cosméticos S.A. formally announced its first quarter results for the year. And the big takeaway that investor news sites have run with is the company’s 69.1m real loss (which equates to $19.61m).

Behind and beyond the numbers

The company’s short explanation of the loss includes the Brazilian recession, “noncash effects from the mark-to-market adjustment of instruments to hedge foreign-denominated debt and,…the revaluation of the provision for acquiring the remaining interest in Aesop, which combined amounted to R$77 million,” ​explains Natura in an earnings release document.

Recent reporting from Euromonitor, which Natura highlighted in the earnings call last week, shows the company doing well over the past year in terms of country and regional market share. In Brazil for 2015, Natura had just over 11% of the market share and “remained the second-largest player in the market.” ​Across the Latin American region, Natura saw market share gains in Peru, Mexico, Columbia, Chile, and Argentina, amounting to a consolidated 4.1%.

A global view of beauty in the region   

Despite the current economic situation in Brazil, the beauty industry is betting in favor of the region. In March, Oriflame, the direct-sales beauty brand out of Sweden, announced plans​ to launch operations in South America. Though, executives were swift to note that this likely won’t happen for a couple of years.

Beauty retailer Sephora has made recent investments to establish a strong footing in Brazil. Late last year the company teamed up with a local logistics provider​ to ensure efficient warehousing and to-store shipments. CEVA hadn’t worked with a beauty brand before, but made significant investments itself to properly streamline the Sephora business.

Additionally, the Brazilian American Chamber of Commerce and other regional experts have pointed out that the country’s recession is an e-commerce opportunity for personal care brands​. A growing population of middle class consumers in the country are shopping online and looking for the quality and selection that global brands offer.

A top-ten company

When ranked by revenue alongside other direct-sales companies, Natura came in at 8. Direct Selling News produced their annual list last month and even when compared to companies from all industries, Natura’s $2.48bn in revenue for 2015 put the company in the top ten.

The publication puts out its list annually to illustrate the global reach and economic influence​ of these businesses. Natura’s strategic plan to do better financially going forward relies in part on the potential of direct selling: “Our focus will be on revitalizing direct selling, proposing innovative products and concepts with special technology and performance, streamlining our portfolio, reviewing our brand positioning and strategy, developing new alternative distribution channels, designing a more agile and efficient organization and maintaining accelerated growth outside of Brazil,”​ according to the earnings release document.

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