Natura & Co Holding SA
BOVESPA:NTCO3
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Natura & Co Holding SA
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Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Natura &Co Second Quarter 2020 Results.
Today with us, we have Roberto Marques, Group CEO and Executive Chairman of the Board of Natura &Co; Mr. José Filippo, CFO of Natura &Co; Mr. João Paulo Ferreira, CEO of Natura &Co Latam; and Ms. Viviane Behar, Investor Relations Officer of Natura &Co.
This event is being recorded. [Operator Instructions] We have webcast that may be accessed through Natura's IR website, investor/naturaeco.com. The slide presentation may be downloaded from this website. There will be a replay facility for this call on the website after the end of the event.
This presentation may contain forward-looking statements. Such statements are not statements of historical fact and reflect the beliefs and expectations of Natura &Co's management. Forward-looking statements speak only as of the date of they're made -- as of the date they are made, and the company does not undertake any obligation to update them in light of new information or future developments. This presentation also includes adjusted information prepared by the company for information and reference purposes only, which have not been audited.
Now I will turn the conference over to Mrs. Viviane Behar, Investor Relations Officer of Natura &Co. Ms. Behar, you may begin. The floor is yours.
Good morning or good afternoon to everyone. I'm Viviane Behar, Natura &Co's Investor Relations Officer. I hope you're all well. Thank you for joining us today in this still unusual time for this call to present Natura &Co's Second Quarter 2020 Earnings.
I'm joined today by Roberto Marques, Executive Chairman and CEO of Natura &Co; José Filippo , CFO of Natura &Co; as well as João Paulo Ferreira, CEO of Natura &Co Latin America, who will join us for the Q&A session. Our Investor Relations team of Natura &Co is also with us.
This presentation, we will be referring to during the call, is available on the Natura &Co Investor Relations website. Roberto will start with an overview of our performance. Filippo will detail our financials for Natura &Co. And after that, Roberto will make concluding remarks, and we will open the floor to your questions.
Let me now hand over to Roberto. Roberto, please?
Thank you, Viviane, and hello, everyone. Thank you for joining us. I hope all of you are safe and well in these still challenging times.
Let me begin on Slide 3 with the highlights of our performance in an unprecedented yet very active quarter for us. Overall, this second quarter demonstrated the resilience of our business and the strength of our omni-channel and global footprint model. In the face of a continuing global pandemic, the peak of lockdown in many geographies with many lives suddenly lost and livelihoods impacted, we were extremely proud and pleased how our associates globally, partners and our entire network performed, exceeding our expectations in terms of results.
First, from a sales standpoint, our overall results outperformed both the global and Brazil CFT markets. Second, we contained the sales drop to 12.7% in the quarter. And our adjusted EBITDA margin stood at 8.8% on improved gross margin and cost discipline, particularly in Q2, to mitigate COVID-19 impact on revenue.
And third, we strengthened our capital structure and cash position, finishing with a strong over BRL7 billion in cash by the end of the quarter. We also successfully completed a private capital raise of BRL2 billion subscribed by our own controlling investors and existing shareholders. The proceeds allow us to deleverage the company faster, restrengthened our balance sheet and to build on our digital momentum.
The strength of the quarter was due to the remarkable acceleration in our digital transformation. We pivoted rapidly to online channels as lockdown measures hit stores and impacted consumer, consultants and representatives' mobility. In the quarter, our group-wide e-commerce sales rose by a very strong 225%.
In adoption of digital tools, our profit group -- also grew significantly, a particular call out to the Natura brand, which posted remarkable growth in Brazil and to The Body Shop and Aesop, which successfully managed to largely offset the impact of store closures. A quick shift to online and digital results in online growth at Aesop at 430% and also a very strong growth in The Body Shop's e-commerce and At Home channel of almost 300% combined.
We also saw rapid growth in eBrochure sales at Avon brand in Q2. To help fuel this transformation, we plan to continue stepping up our digital and IT investments with an outlay now of BRL400 million over the coming six months, in line with our CapEx budget, while we're still planning for significant ongoing investments over the coming years.
We continue to make progress on the Avon integration and synergies. In the second quarter, we delivered $25 million in cost savings mainly in procurement, which was ahead of the estimate in the quarter. And we are on track to deliver our full year synergy commitment. As also disclosed early in the quarter, Avon was impact by a cyber incident that interrupt some systems and partially affect operations during the last weeks of the quarter. This has really a phasing impact on sales of about BRL450 million on a consolidated base, which were already captured in Q3. Excluding this phasing impact, the quarter would have post a decline of only 7% versus prior year.
We also took a number of strategic actions in the quarter to strengthen our business for the future. Let me start with the partnership between Natura brand and Singu, a leading Brazilian digital platform for at-home beauty services. We believe that the combined strength of the two companies can provide thousands of beauty professional consultants with the opportunity to drive higher income by offering their service through the Singu platform.
In addition, we signed a partnership with VaynerMedia, a global powerhouse in social media, which will include support for the relaunch of the Avon brand that is planned for a rollout starting in Q3 of this year with focus on digital and content creation using also our own network of representatives.
In line with our strategic priorities to expand our geographic footprint, The Body Shop has signed an agreement to acquire its Japan business from its head franchisee, a transaction that is expected to close in October of this year. During this quarter, The Body Shop also launched its successful At Home direct-selling channel in the U.S. having signed to date over 3,000 consultants.
Finally, in June, we launched our ambitious 2030 Sustainability Vision, our Commitment to Life, that amplifies our belief and goals to be an all-encompasses business model that aims to create a positive impact in society and to help build a more sustainable economy. Natura &Co's Commitment to Life sets out a 10-year plan to tackle some of the world's most pressing issues, including addressing the climate crisis and protecting the Amazon, defending human rights, ensuring the quality and inclusion and embracing circularities in generation in our products and packaging. Today, more than ever, Natura &Co is committed to prioritizing a combined economic, social and environmental performance.
Let me now hand over to Filippo to go into our financials in greater detail.
Thank you, Roberto, and hello to everyone.
Before going into our financials, let me remind you of the adjustments that impact our numbers, as shown on Slide 5. Throughout this presentation, we will refer to adjusted EBITDA. And this slide describes the principal adjustments that we applied to our reported figures to allow better understanding of our underlying performance. These include transformation and acquisition costs and certain tax credits and reversals of both Natura and Avon Brazil.
That said, let's now look at our Q2 performance. As mentioned, we managed to largely offset the impact on the COVID-19 pandemic on stores and traffic with a rapid move to online and the gradual reopening of retail stores. Natura &Co posted a record acceleration in digital social selling in the quarter with group online sales growing nearly 225%.
On Slide 6, we show you a few highlights by brand. Online sales rose almost 150% at Natura and Avon brands. At Natura, content sharing grew by more than 70%. The number of orders through consultant stores tripled versus last year. At Avon International, eBrochure sales tripled. At The Body Shop, e-commerce sales grew by more than 230%, and At Home increased by more than 280%. And finally, online sales grew by more than 430% at Aesop.
On Slide 10, our consolidated net sales in the quarter were down 12.7% in reais and 23.5% in constant currency to over BRL6.9 million. This constitutes a very resilient performance, reflecting the strength of our omni-channel and social selling model. This performance was driven by remarkable growth of the Natura brand in Brazil, a very strong performance by The Body Shop and Aesop and was also helped by our geographical diversification.
These effects allowed us to significantly offset impacts from COVID-19 and the previously announced cyber incident at Avon, which shift approximately BRL450 million in sales to Q3. Excluding the phasing effect of the cyber incident on sales, net revenue in Q2 would have been down by 7% versus Q2 2019 and 18.6% at constant currency. In the first half, sales were BRL14.5 million, a drop of only 5.7% year-on-year with strong growth in the reais of both The Body Shop and Aesop of 9% and 30.8%, respectively.
Turning to Slide 9. We look at Natura &Co's underlying net income. In Q2, it stood at a negative BRL213.8 million. This excludes a BRL174.7 million in transformation costs and Avon acquisition effect. This reflects mainly COVID-19 impact on EBITDA and higher depreciation of BRL156 million, which were partially offset by improvement in financial expenses for BRL15.8 million and the income tax for BRL57 million. On a reported basis, we reported a net loss of BRL388.5 million in the quarter.
On Slide 10, we look at our balance sheet items and capital structure. We have a very strong cash position with BRL7.4 billion in cash at the end of the quarter. Our debt maturities this year stand at only BRL1.4 billion. And our overall average maturity is 3.8 years. Cash flow in the quarter was an outflow of BRL96.1 million versus an inflow of BRL63.6 million in Q2 2019. This is consistent with seasonality and also reflects other factors, including COVID-19 impact on revenue, foreign exchange effects in working capital and extended payment terms for consultants and reps. This was partially offset by an extended payables.
We strengthened our capital structure in the quarter with the successful completion of a BRL2 billion capital increase, which contributed to deleveraging, as shown in the next slide. We are committing up to BRL400 million investment over the coming six months, in line with our CapEx budget, and continuing significant investments over the coming years. This will help upgrade Avon platforms, accelerate the Latam integration and make advanced and rich transformation across all of our business.
On Slide 11, starting with Natura Cosméticos. Deleveraging improved in Q2 to 2.04x, excluding IFRS 16, compared to 2.83x in Q2 2019 and was well under the June 30 covenant ratio of 3.25x. At Natura &Co Holding level, including the effects of IFRS 16, consolidated net debt-to-EBITDA stood at 3.63x with total net debt of BRL10.6 million.
On Slide 13, we have the key highlights of Natura &Co Latam, which encompasses our four brands in the region, Avon, Natura, The Body Shop and Aesop. For comparison purpose, we adjusted 2019 results to include Avon. Total net sales were down 16.5% to BRL3.97 million in Q2. In the very challenging context, Natura brand posted total growth of 4.4% in reais and 2.6% in constant currency driven by a remarkable performance in Brazil where it gained market share. Avon was impacted by COVID-19 and the cyber incident, and sales were down 35.2% in reais and 40.2% in constant currency. In the first half, total net sales were down 7.8% in reais and 11.3% in constant currency.
On Slide 14, we look at Natura brand. Sales at Natura brand in Brazil rose 7.9% in Q2, which represents an exceptional performance in the circumstances. We saw a steady progression in sales throughout the quarter, ending with strong growth in June of 29.4%. This demonstrates the success of our relationship selling model, which led to the 15th consecutive quarter of high productivity in Brazil, up by a strong 6.9%. The number of consultants at the end of the quarter was up 5.6% versus Q2 2019.
Digital played a critical role in the current context. The number of Natura consultants trained on digital tools has tripled in relation to the pre-COVID-19. And there has been a continuous increase in usage and penetration. Over 90% of consultants use digital platform. At the end of Q2, there were almost 900,000 Natura consultants online stores, 65% more than Q2 2019. The implementation of new features, such as directive eBrochure, has allowed us to significantly grow sales through the digital platform. In the retail channels, all brands across the region were impacted by lockdown restrictions. By mid-July, approximately 70% of our retail stores were reopened, mostly with restriction.
At the Natura brand in Hispanic Latin America, Q2 net sales were down 3.6% in reais and 10.2% at constant currency. This is mainly due to strict COVID-19 lockdowns in markets such Argentina, Peru and Colombia in April and May. However, in June, the region resumed growth. The average number of consultants increased by 9.8% versus Q2 2019 to 714,000. In the first half, sales were up 8.7% in Brazil and 9.6% in Hispanic Latam or 3.6% at constant currency.
Turning to Avon on Slide 15. The Avon brand revenue in Brazil declined by 31.1% in Q2, impacted by lower representative activity due to COVID-19 and the cyber incident, which had a favorable phasing effect on Q3 sales in Brazil of approximately BRL180 billion. The average number of representatives decreased 5.1%. In Hispanic Latam, the Avon brand posted a revenue decline of 37.8% in Q2 2020 in reais and 46.2% at constant currency. This is due to the effect of hard lockdown in the region and a 21.5% reduction in the average number of representatives. The cyber incident shift approximately BRL210 million to Q3. So the overall effect of Natura &Co is about BRL390 million in sales phasing.
The period saw good advances in digitalization despite the challenging environment, and we saw an increase in the satisfaction index of representatives for the first time in six years. In the first half, sales at Avon Brazil were down 18.2%; and in Hispanic Latam, they were down 23.9% or 31.9% at constant currency.
Adjusted EBITDA for Natura &Co Latam on Slide 16 were FCC BRL373.2 million in Q2. Adjusted EBITDA margin was down 320 basis point to 9.4%. And Natura brand posted a 660 basis points increase in adjusted EBITDA margin, supported by higher margin on both Natura Brazil and Hispanic Latam, driven by growth in revenues and measures implemented to reduce discretionary spend, notably in the second quarter to mitigate COVID-19's impact. This was offset by an decrease at the Avon brand mainly from lower revenues causing significant leverage of fixed expenses, particularly in Hispanic Latam. In the first half, adjusted EBITDA were BRL660.9 million, down 23% with margin down 12.6 points to 8.1%.
Let's now move to Avon International on Slide 18. Net revenue declined 21.6% in Q2 2020 and 38.9% at constant currency mainly impacted by a 36% reduction in active representatives due to COVID-19 and the cyber incident later in the quarter. The cyber incident shift approximately BRL60 million of sales to Q3. Units sold declined 34%. Digitalization of representatives continued throughout the quarter. They were equipped with the new in digital capability, including easier digital brochure ordering and the ability to ship directly to consumer, allowing representatives to fulfill orders despite lockdown.
Q2 2020 Avon International sales via digital brochure more than tripled versus Q2 2019, and e-commerce sales more than doubled. The first half revenues was down 11.9% or 26.6% in constant currency. Avon International adjusted EBITDA in Q2 was set BRL72.6 million with margin of 4.4%, down 950 basis points, impacted by lower revenues due to the COVID-19 and the cyber incident, resulting in operational deleverage. In the first half, adjusted EBITDA was BRL175.4 million and adjusted EBITDA margin was 4.7%, down 840 basis points.
We now move on to The Body Shop on Page 20. Net revenue in reais increased by 15.5% in Q2 to BRL979 million and was down by 13.2% at constant currency. The decline in constant currency was primarily due to lockdown restrictions, combined with the permanent closure of 35 old stores on a net basis in the last 15 months as part of the store footprint optimization plan. At the end of April, 87% of retail stores were closed due to lockdown measures. Revenue progressively grew as store reopened, reverting to the strong growth of 14% in June with only 16% of the stores closed.
The Body Shop offset about 90% of the COVID-19 impact, thanks to the gradual reopening of stores and e-commerce growth of more than 230%, while At Home sales increased by more than 280%. Growth in these channels were supported by new distribution centers opened in record time in April to meet the demand surge.
The first franchisee new concept store was launched in South Korea in the quarter in addition to the three previously launched owned concept stores in London, Hong Kong and the U.K.. The quarter ended with 973 owned stores and 1,746 franchised stores. Adjusted EBITDA in Q2 reached BRL145.2 million, up 9.4% with margin of 14.8%, down 90 basis points on an adjusted basis but up 140 basis points on a reported basis. The adjusted margin decline was due to revenue reduction from store closing and lockdown measures, partially offset by lower discount, split cost measures and COVID-19-related government subsidies, particularly in Q2.
On Slide 22, Aesop's success story continued with strong double-digit growth in both revenue and profitability in Q2 in reais. Net revenue grew by 34.8% and was broadly stable at constant currency. Store closures early in the quarter reaching about 90% were offset by remarkable growth of 430% in digital sales and the gradual reopening of stores. June growth reached 20%.
Aesop took quick action to convert several stores into fulfillment centers to meet the increased e-commerce demand. As of mid-July, 75% of the store network has reopened, most with restrictions in place. In the first half, net revenue was up by 30.8% in reais and up 4.9% at constant currency. Profitability also grew in strong double digits in reais with EBITDA reaching BRL102.6 million with margin of 26.8%, up 650 basis points.
This growth was driven by target cost reduction, favorable channel mix and utilization of government subsidy programs in the quarter, which helped to mitigate COVID-19 impact on revenue. In the first half, EBITDA was up 52.8% with margin of 25% up 360 basis points. Signature stores totaled 247 in the quarter, up 11 over the past 12 months and stable in the year as no new stores were launched.
Let me now hand back to Roberto.
Thank you, Filippo.
Let me now conclude on Slide 24 with the key takeaways. And let me mention four of them. First of all, Natura &Co omni-channel model has shown its resilience amid the COVID-19 crisis with strong growth in digital social selling and e-commerce and a gradual return to revenue growth as the store reopened and mobility increased. The Natura brand posted remarkable growth in the quarter. And The Body Shop and Aesop also managed to largely offset store closures.
Second, with a record increase in online sales in Q2, we demonstrated that our digital transformation is a reality, and we are planning further investments to build on that momentum over BRL400 million in the coming six months, guaranteeing the best experience for our clients and make the online channel available to all of our consultants and representatives network.
Third, we have optimized our capital structure. With the successful capital raise of BRL2 billion, we also continued to deleverage our balance sheet faster than actually we even anticipated.
And fourth, we have made advance in our sustainable growth strategy with: on one hand, the unveiling of our ambitious new target as part of our 2030 Vision Commitment to Life; and on the other hand, a number of moves to bolster growth and expand our footprint, including strategic partnerships, such as Singu and VaynerMedia; The Body Shop acquisition of its franchisee business in Japan and move in At Home direct selling in the U.S., which will contribute to long-term top line growth and geographic footprint expansion in strategic markets, such as Asia and North America; and continued advances on the Avon integration, which is so critical for us, with synergies on track.
I would like to conclude by expressing once again my gratitude to the teams across our group whose incredible energy, passion, dedication and focus really enable this performance. Thank you very much for your attention.
We are now going to open the Q&A session. And Filippo, JP and I are happy to take your questions. So the floor is now yours.
[Operator Instructions] We have a question from Thiago Macruz from Itaú.
My first question is to Roberto. Roberto, these times, like the one that we're living today, they bring several challenges and some companies are basically forced to adapt very quickly. And we've seen very good news in this quarter in terms of gross margin and OpEx for more than one brand of your group. Do you think that some of these novelties could be sticky? Can you, because of the learnings over the last five months, emerge from this crisis a more streamlined, a more efficient company?
And then my second question is to JP. I just want to try to understand Natura's brand growth in Brazil, which was impressive. What do you think differentiated yourself from the competition during this period to help you sustain such an impressive growth? These are my two questions guys.
Thank you, Thiago. I'll start and then I'll ask JP to talk about the remarkable result of Natura Brazil, which is really amazing. In terms of some of those things, I would say, partially it is; partially it might not be, right? So the things that might stick are some of the more disciplined approach. As you know, we are also doing a transformation, and we'll continue to do that in terms of our overall structure, and those things will have a more long-lasting benefit.
But I also think that we needed to realize that this quarter also, we reduced a lot of the spend in discretionary spending. And we also benefit for some of the government subsidies, right, which are not going to be sustainable. So I think I would probably say there is a part of that, that will be more sustainable; and there are a part of that that are probably more one-off because of some of the actions to again help us navigate through the crisis and also realizing some of the benefits that came from some of the government subsidies.
JP, do you want to talk about Brazil and Natura?
Yes, Roberto. Thank you for the question, Thiago. Before I talk about this one, I just want to remind you all that Natura Brazil was already tracking very good results in Q1. It grew almost 10% in spite of half the month of March when the pandemic started. And the reason for that good performance, which was carried over to Q2, have to do with the structural improvements and developments that we have been doing over many years strengthening the brand. The brand is in extremely good shape. You may have seen that during the pandemic, the Natura brand in Brazil was one of the top five most relevant brands according to consumers, right?
Then, of course, all the omni-channel approach that we have been developing turning actually consultants into an omni-channel point of sale, if you want, right? There is the digitalization, of course. And it was only end Q3 last year that we fully merged on and off commercial models in Brazil. So that started to accelerate after Q4 and then Q1. And when the pandemic arrived, the adoption of the digital tools to complement the beauty consulting activity was already pretty high, although the maturity was not that high.
Then pushed by the circumstances, our consultant network adopted more sophisticated features. You see now that we have, across the region, almost 1 million online stores. Consultants are sharing content in multiple formats and actually is a sort of a content commerce because as they shared the content, that allows their customers or their products through the social networks as well in addition to the online stores and so on.
So the recruitment of new consultants, which is now almost fully online, removed entry barriers into this network. So overall, that created a huge flexibility for consultants to operate. Also, many of them found more opportunities to provide for their families through this activity in this period and of -- and service their customers in a differentiated way. Right now, people talk about fair commerce. So you cannot think of anything fairer than that; safe, and we have the products arriving to your house, right; and trustful; in addition to convenience.
So all of that together allowed us to operate differently, adopt offerings on a daily basis, right. Regardless of what had already been printed in the brochures, we could use digital to customize, individualize, change according to the circumstances. And I think that all those muscles built in the past were put to work during the pandemic, Thiago.
Congratulations on a very good quarter.
Thank you, Thiago.
Our next question comes from Bob Ford from Bank of America.
Roberto, JP and Filippo, I, too, would like to congratulate you on your sterling performances in utilization improvements in your integrated brands, and especially the growth at Natura Brazil. So that said, if we were to be a little bit more skeptical, I think that the skeptics would continue to point to the decline at Avon. And JP, how can you be sure that the growth of Natura Brazil isn't in part due to a market share shift from Avon? And Roberto, can you comment on Avon's brand health indicators more globally, anything in addition to the cyber event that might explain the decline in Avon reps, whether it's internal or otherwise? And how this cyber event will impact the pace of systems changes and integration at Avon?
Yes. Bob, let me start, and then I'll turn to JP to talk specifically about Brazil. So I actually think that we are very bullish on Avon. And I'll get it a little bit on the cyber incident, right, that has a impact, especially on Q2. But if we look at two aspects, Bob, one is also the significantly exponential growth of the digitalization and adoption of a social selling platform.
So just as a reference, Avon International moved from e-commerce percentage of sales being about 1% last year to now over 4% of the entire business in e-commerce, right? eBrochure sales grew about 100% as an Avon brand compared to Q1 of this year and 200% compared to Q2 of 2019. So clearly, we are seeing also a change of course coming from a different place than Natura is. But again, we're really trying to catch up and get all the learnings from Natura to accelerate that.
The other thing that we are seeing, Bob, in markets that we have really now become much more bullish as like the U.K. We actually doubled in this quarter the number of appointments or new reps coming to Avon. And this is a factor of two things. One, I think we are paying much more attention to the relationship with the reps.
Number two, I think it's fair to say that with increase on unemployment, the possibility of social selling becomes also a source of income for a lot of people. And we are seeing not only in U.K., but in many markets across the globe an increase in terms of appointment and recruitment. So we see that as part of the journey. And in fact, I think we are even more bullish than before.
Now a lot of the things that we are planning to do with Avon, we haven't implemented yet, right, either because -- again, let's not forget, we acquired the business in January. And then in February, March, we are dealing with the biggest pandemic, the biggest challenge that we've seen in our generation. And then on the last part of this quarter, we had the cyber incident that shut down a lot of servers, primarily on our ability to ship product, fulfill the orders.
The representatives are still putting orders in the system, but we couldn't actually ship. That's why you see the shift of BRL450 million that it's already been captured and that's already been invoiced, but actually end up happening in Q3. Now of course, this created a little bit of a challenge for us, but I think the team did a phenomenal job being in front of that, communicating with the reps, reengaging the reps. So we think that this is being resolved. And again, we're going to capture this BRL450 million in Q3 already.
So the last thing that I would say regarding Avon, Bob, which is also -- we are super excited is about the relaunch of the brand. You heard about -- JP talking about how important is the strength of the Natura brand. We want to also develop an Avon brand that is very up-to-date, that is relevant, that has a message that brings again what Avon really stands for. We are super excited about starting this rollout of this new brand campaign in Q2 -- Q3 of this year and will continue through first half of next year, especially in Latam.
JP, do you want to comment specific about Avon Brazil and some of the learnings?
Sure. Bob, so the group, the combined -- the combination of all brands, we did gain share in Q2 in Brazil. But as regards to Avon, we came from a declining trend prior to the pandemic and ex cyber incident. So that is the sort of the underlying trend.
Now as Roberto mentioned, we already have put in place the turnaround plan. It is on track, fully resourced, and we are -- I'm very confident on the outcomes of this turnaround plan across the region. And some of the quick wins, which we implemented late in Q1, are -- that we defined late in Q1, are being implemented as we speak. So I do expect positive signs of improvement as of Q3 and mainly in Q4 already. So yes, indeed, it is still in a underlying declining trend. But I'm very confident that will be reverted very soon.
And the last part of the question is how the cyber event impacted the pace of systems changes and integration, if at all?
It didn't, Bob. I mean, it was for a short period of time, call it, 2.5 weeks to 3 weeks. So the plans still are the same. I think it's fair to say that the investment that we are communicating to the market, the BRL400 million, it is something that is going to help us and accelerate the digitalization across the board, including Avon; to accelerate even further the development of new applicatives and apps for Natura and Avon; and also to help us with the integration, right, especially in Latin America.
So it didn't have any impact, significant ones. And we are on track. And actually now, I believe we're going to even accelerate this journey on digitalization and IT because of our strong position from a cash flow perspective, not just because of the capitalization, but because I think the team did a remarkable job in really containing costs and managing cash that we finished the quarter with over BRL7 billion in cash. So we now are in a very strong position to actually accelerate the investment and continue to build on the momentum.
Our next question comes from Tobias Stingelin from Citi.
Congratulations. A very quick question. I think in Q2, again, just on the Avon issue. When you included in your press release and in your presentation, you have kind of a curve showing how Natura's brand in Brazil kind of accelerated during the quarter. Can you maybe give us a sense about how Avon was doing or how Avon kind of started the quarter and ended the quarter. I know that you have kind of this cyber effect, but if you maybe can just give us a sense about how the underlying trends of the business are. And I think you kind of guided already because you expect improvement going forward. Do you expect that by the end of the year, like December or something like that, the brand would be growing already?
So can I take that?
Yes. Yes, João. Yes, please.
Tobias, yes. So the Avon brand in Brazil followed a similar trend at different levels, of course. But it ended the quarter, ex cyber incident, much closer to flat against previous year in the last month of the quarter. So it is showing -- just to tell you that it is showing an improving trend already.
Perfect. So let's say, by July, ex cyber attack, sales of the Avon brand on a year-over-year basis is kind of flat.
Flattish, right. Well, because we really don't know precisely because of the cyber incident, but it was already showing a significant improvement.
Great. And in Latin America, if we exclude Brazil, has been the trend kind of similar? Is there something that you can share with us well about how the brands on their performance has been there?
So in Latin America, the Natura brand showed a very similar performance, improving towards the end of the quarter. And the Avon as well, but it's many more countries there. So there's still a significant dispersion in terms of the performance, but we are now pushing in all those countries to align in the practices. So it's a little bit behind the Brazilian improvement plan, but it's catching up.
Okay. Perfect.
And then...
Sorry.
Just one thing, Tobias, also to say that a thing is relevant that we are seeing, primarily in Brazil, but I would say, across all markets also, the Avon brand is strengthening as a brand. And that is also probably attribute to maybe now part of the group, maybe because Avon has always been an iconic brand that has stood for relevant causes. And in a moment of crisis, those brands, iconic brands tend to perform better than brands that actually do not have so much a clear position and a purpose and a reason for being. That's second reason.
Third reason. Avon also is a very democratic brand. It's probably the most democratic brand, offering high quality at a more affordable price. And in terms of crisis, we know that consumers also tend to trade down. So Avon also can benefit from there. So there are a lot of reasons also on top of what João already explained in terms of the turnaround, the commercial model, the digitalization that I think also are, I would say, tailwinds for Avon as a brand.
Sorry, I interrupted you, Tobias.
No. No. If I can make the -- like the last question with regards to the cyber attack. So we had kind of this postponement in sales. You are kind of increasing investments in technology as you're kind of addressing different issues. But is it, in fact, to assume that we should see no additional impact from the cyber attack going forward? So it's not that we are kind of moving sales from one quarter to the other one but because of that, there will a backlog. And then in the fourth quarter, there might be some impact again. Just want to kind of understand if this is just one-offs, there won't be an impact or impacts in terms of sales trend going forward.
Yes. No, this is right. This is a one-off and the number that we are communicating are factual numbers. So we are not even speculating in potential sales loss that we would recuperate. The number that we announced in the BRL450 million are numbers that truly we had, we invoiced, and it's just end up being captured in Q3 versus Q2.
Perfect. Congratulations.
Thank you, Tobias.
The next question comes from Andrew Ruben from Morgan Stanley.
I have two on the international business. So for Avon International, you reported an active rep decline in the mid-30s for the quarter. I was just wondering if you had a sense how much of that reduction might be temporary versus permanent churn, particularly anything you've seen as we've gotten a broader reopening. And then second, on the Natura brands expansion internationally. I just wanted to know if there was any update on learnings from Malaysia and further thoughts on how big of a priority the further brand expansion is, say, over the next year.
Andrew, Roberto here. I'll start with the first part of the question, and then I'll invite JP to talk about some of the learnings in Malaysia and how we are thinking about really strengthening Natura brand potentially moving beyond Latin America.
So what we saw at Avon, the reduction, it is primarily driven by the impact, especially at the beginning, the lockdown, especially in Europe and some markets that are very important for Avon International. If you think about Philippines and South Africa, those were very strict lockdowns that are -- still have an impact, and that ends up creating this reduction.
So I think it is temporary in the fact that as we see some easiness in the lockdowns, we roll again more representatives. And the reason why we are bullish is we are seeing some of the markets that are seeing, call it, easiness of the lockdown like in the U.K. And we doubled the amount of appointments and recruitment in the last couple of weeks in U.K. You put that and then you added all the digitalization, eBrochures that are now we are making available in many more markets at Avon International, that also creates a possibility to recruit much -- in a much easier way and bring also a different profile of the representatives to Avon International.
So we think that this was temporarily, to answer your question. And I think moving forward with the new commercial model, which, by the way, the Avon International team did a lot of learning from the Natura commercial model. And we are kind of importing a lot of the same concepts of long-term relationship value, simplifying the model, segmenting the representatives and the sales leaders. Those are all things that are being implemented in the back half of the year together with the relaunch of the Avon brand.
JP, do you want to talk about the Natura International and some of the learnings in Malaysia? JP?
We are experiencing some technical difficulties. Please stand by. [Technical Difficulty]
Okay. So I can talk a little bit about the learning, Andrew, in Malaysia until JP comes back. So again, it is a prototype one that we are doing in conjunction with the head franchisee actually of The Body Shop in Malaysia. And the way we are thinking is really already establish Natura brand as a kind of omni-channel brand as we think about the internationalization of Natura.
So we already start with a combination of some physical presence on retail to drive awareness and help build the brand; at the same time, e-commerce; and at the same time, social selling. And what we are seeing from a positioning, from a portfolio perspective, that has a lot of traction with the consumers. I think I would say, at this point, we are a little more advanced in the retail piece as we continue to do recruitment and training, especially on the social selling piece. But the idea is it's having a position of the brands that brings a lot of the Amazon, a lot of the biodiversity, the ingredients; and at the same time, in terms of go to market, thinking about a more omni-channel approach.
Yes. That all makes sense.
Roberto, just to tell you that I'm back.
Oh, sorry. Anything else to add, JP? Sorry, I tried to cover your...
No. I didn't hear the question. Sorry, I -- all right. I was disconnected I think from the line. So...
I think we can move on. It was related to Natura Malaysia, but I think I cover, JP.
Okay. Thank you.
Our next question comes from Richard Cathcart from Bradesco BBI.
Congrats on the performance through the quarter. Just a couple of questions from me on The Body Shop. So the first one, if you could just give us an update on, yes, how the performance has been selling -- sorry, both on The Body Shop and the Aesop selling into China via Tmall. I think that's something that has been commented in previous quarters. So it'd be interesting here to hear how that has performed just given the situation around the pandemic.
And then the second issue was just about the new store concept at The Body Shop, just where we are on that. I know it's probably -- there's probably several things going on at the moment just given a review of the store network, but just where the company is in terms of the new store concept and rolling that out.
Yes. So thank you for the question, Richard. So once again, I think it is just important to -- as we didn't talk much about Body Shop and Aesop, just highlighting a remarkable performance of those two retailers business that we have in the group. The ability to offset, and most of them offset close to 85% of the COVID impact when we had over 90% of stores closed at the beginning of the quarter, the -- really, the pivot or the shift to e-commerce, Aesop grew over 400% in e-commerce.
And The Body Shop -- between Body Shop At Home and e-commerce, almost 300% is just remarkable. And the e-commerce piece also has Tmall, as you talk about it. And we are seeing a continued growing both at Aesop and as well as The Body Shop. But we think that China is a huge opportunity for us. And our teams are working, are very diligent in seeing how can we even strengthen our position beyond the Tmall platform in China. And we think that starting next year, we'll see even more stronger presence of our two brands in China, right? So that is something very, very, very important for the group and for our brands.
The second part, on the new layout for The Body Shop that we call Workshop. We were planning to potentially open another 10, 12 of those new design stores this year. Of course, we paused because of everything that's going on. So to your point, we are relooking at the right now footprint of the stores and where to open. It's interesting that we are seeing again the stores in the markets that have been opened. It's interesting that we are seeing of course a lower traffic, a higher basket.
But it's interesting that the e-commerce have not come back to prior to the crisis, which means that the e-commerce that actually stabilized in a much higher level than before, which is very exciting about the possibility for us to continue to optimize our footprint of physical stores and make sure that we are in the right locations, the right places with the right look and feel while both the e-commerce and the At Home will play an important role to complement. And that's the reason why we also announced our interest with At Home in the U.S., which is also a super interesting opportunity for the group and for The Body Shop to strengthen their position by leveraging again the physical stores and now the direct-selling go to market.
This concludes today's question-and-answer session. I would like to invite Mr. Roberto Marques to proceed with his closing statements. Please go ahead, Mr. Marques.
Thank you, Ann, and thank you all for joining the call. Again, I think as you all saw from today's results, we are very proud and actually very pleased with the results that really demonstrates this resilience and adaptability of our omni-channel model while, at the same time, really strengthening our balance sheet and also making the strategic moves looking toward the future.
And again, I would also highlight the super important unveiling of our 2030 Commitment to Life, our sustainability goals, which are core to our strategy, core to our future and outline very ambitious goals that we needed to achieve. And we are very excited about that and working with a lot of partners to make sure that we can create this positive impact on our triple bottom line approach.
Thank you again so very much for your attention. I wish you all a good day and good weekend. And on behalf of all of us, please stay well and stay safe. Thank you very much.
That concludes the Natura audio conference for today. Thank you very much for your participation. Have a good day.