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Natura &Co Holding S.A. (NYSE:NTCO)
Q2 2020 Earnings Call
Aug 14, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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. Jose Filippo, CFO of Natura &Co Mr. Joao Paulo Ferreira, CEO of Natura &Co Latam; and Ms. Viviane Behar, Investor Relations Officer of Natura &Co.

[Operator Instructions] We have a simultaneous webcast that may be accessed through Natura' 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 -- which are not statements of historical fact and reflect the beliefs and expectation of Natura and Company management. Forward-looking statements speak only as of the date of the made -- as of the date they are made and the Company does not undertake any obligation to update them in light of new information of future -- 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 Ms. Viviane Behar, Investor Relations Officer of Natura &Co. Ms. Behar, you may begin. The floor is yours.

Viviane Behar -- Investor Relations Director

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 times for this call to present -- Natura &Co second quarter 2020 earnings. I'm joined today by Roberto Marques, Executive Chairman and CEO of Natura &Co Jose Filippo, CFO of Natura &Co as well as Joao 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.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Thank you, Viviane and hello everyone. Thank you for joining us. I hope all of you are safe and well in this still challenging times. Let me begin on slide 3, with the highlights of our performance in the precedented and yet very active quarter for us. Overall, this second quarter demonstrated the resilience of our business and the strength of our omnichannel and global footprint model. In the face of a continuing global pandemic, the peak of lock down in many geographies with many lives sadly lost and livelihood impacted, we were extremely proud and pleased how our associates globally partners in 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 market. Second, we contained, the sales dropped 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 groupwide e-commerce sales rose by a very strong 225%. And adoption of digital tools across the Group also grew significantly, and particularly call out to the Natura brand, we posted remarkable growth in Brazil and to The Body Shop and Aesop which successfully manage to largely offset the impact of store closures, a quick swift to online and digital results in online growth at Aesop of 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 e-brochure sales at Avon brand in Q2. To help fuel this transformation, we plan to continue stepping up our digital in IT investment, 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 this second quarter, we delivered $25 million in cost savings mainly in procurement which was ahead of the estimates in the quarter. And we are on track to deliver our full year synergy commitments.

As also disclosed earlier in the quarter, Avon was impacted 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 basis, which were already captured in Q3. Excluding this phasing impact, the quarter would have posted 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 a 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 single platform. In addition, we signed a partnership with Vayner Media, 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, would focus on digital and content creation using also our own network of representatives. And 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 US, 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 set 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 circularity and generation [Phonetic] 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.

Jose Antonio de Almeida Filippo -- Chief Financial Officer

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 in 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 in traffic with a rapid move to online and the gradual reopening of the 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 a 150% at Natura enabled brand. At Natura, content sharing grew by more than 70%. The number of orders through consultant stores tripled versus last year. At Avon International, e-brochure 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 7, our consolidated net sales in the quarter were down 12.7% in reais and 23.5% in constant currency to over BRL6.9 billion. This constitutes a very resilient performance reflecting the strength of our omnichannel 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 in the previously announced cyber incident at Avon, which shifted 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 billion, a drop of only 5.7% year-on-year with strong growth in 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 BRL230.8 million. This excludes BRL174.7 million in transformation costs and Avon acquisition effects. 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 recorded 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 maturity 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. This was an inflow of BRL63.6 [Phonetic] million in Q2 2019. This is consistent with seasonality and also reflect 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 extended payables. We strengthened our capital structure in the quarter with the successful completion of a BRL2 billion capital increase which contributed to deleverage.

As shown in the next slide, we are committing to BRL400 million in investment over the coming six months in line with our capex budget and continued significant investments over the coming years This will help upgrade Avon platforms, accelerate the Latam integration and make advanced [Phonetic] and rich transformation across all of our business.

On slide 11, starting with Natura Cosmeticos, with the leverage improvement in Q2 to 2.04 times excluding IFRS 16, compared to 2.83 times in Q2 2019 and was well under the June 30 covenant ratio of 0.25 times. As Natura &Co holding level, including the effects of IFRS 16, consolidated net debt to EBITDA stood at 3.63 times with total net debt of BRL10.6 billion.

On slide 13, we have the key highlights of Natura &Co Latam, which encompasses our core brands in the region, Avon, Natura, The Body Shop and Aesop. For comparison purpose, we adjusted 2019 results to include, a, total net sales were down 16.5% to BRL3.97 billion 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 in 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 that 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 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 consultant strength 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 interactive e-brochure has allowed us to significantly grow sales through the digital platform. In the retail channels all brands across the regions were impacted by lockdown restrictions. By mid-July approximately 7% 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 was mainly due to strict COVID-19 lockdowns in markets such as 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 BRL100 million. The average number of representatives decreased 5.1%. In Hispanic Latam, the Avon brand posted 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 shifted approximately BRL210 million to Q3. So the overall effect of Natura &Co, it is about BRL390 million in sales phasing, with some 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 was down 18.3%, and in Hispanic Latam, they were down 23.9% or 31.9% at constant currency. Adjusted EBITDA for Natura &Co Latam on slide 16 where BRL373.2 million in Q2. Adjusted EBITDA margin was down 120 basis points to 9.4%. The Natura brand posted of 660 [Phonetic] 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 impact. This was offset by a 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 was BRL660.9 millon down 23% with margin down 160 basis 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 shipped approximately BRL60 million of sales to Q3, units sold declined 34%. Digitalization of representatives continued throughout the quarter. They were equipped with the new digital capabilities including easier digital brochure, order and the ability to ship directly to consumers allows 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 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 140 basis points.

We'll now move on to The Body Shop on page 20. Net revenue in reais increased by 50.5% in Q2 to BRL979 million and was down by 30.2% in constant currency. The decline in constant currency was primarily due to lockdown restrictions combined with the permanent closure of 25 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 the retail stores were closed due to lockdown measures. Revenue progressively improved as stores 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 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 was supported by new distribution center in the UK and open in record times 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 previously launched owned concept stores in London, Hong Kong, in the UK, the quarter ended with 973 owned stores and 1,746 franchise stores. Adjusted EBITDA in Q2 reached BRL145.2 billion, up 9.4% with margin of 14.8% down 90 basis points on an adjusted basis, with up 140 basis points on a reported basis. The adjusted margin decline was due to revenue reduction from store closures and lockdown measures, partially offset by lower discount. Strict cost measures and COVID-19 related government subsidies particularly Q2.

On slide 22, Aesop 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 9% 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 move 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-digit 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, utilization of government subsidy programs in the quarter, which helped to mitigate COVID-19 impact on revenue. In the first half, that was up 62.8%, margin of 25%, up 360 basis points. Signature stores totalled 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.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

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 omnichannel 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 increase. The Natura brand posted remarkable growth in the quarter, and The Body Shop in Aesop also managed to largely offset store closures.

Second, with a record increase in online sales in Q2, we demonstrated our digital transformation, is a reality and we are planning further investments to build on the 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 continue 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 the strategic partnerships such as Singu and Vayner Media. The Body Shop acquisition of its franchisee business in Japan and move in at-home direct selling in the US which will contribute to long-term top line growth and geographic footprint expansion in strategic markets such as Asia and North America, and continue 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 who's 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 question. So, the floor is now yours.

Questions and Answers:

Operator

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We have a question from Thiago Macruz from Itau.

Thiago Macruz -- Itau BBA -- Analyst

Hi, guys, good morning. My first question is to Roberto. Roberto, the times like the one that we're leaving 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, in 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. Just -- 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 interest growth? These are my two question, guys. Thank you.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Thank you, Thiago. I'll start and then I'll ask JP to talk about the pre-market. The 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 thing 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, discretionary spending and we also benefit for some of the government subsidies, right, which I'm 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 part of that are probably more one-off, because of some of the actions to again help us navigate to 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?

Joao Paulo Brotto Goncalves Ferreira -- Chief Executive Officer of Natura &Co Latin America

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 reasons for the good performance which was carried over to Q2 have to do with the structural improvement and developments that we have been doing over many years, strengthening the brand. The brand, it's in extremely good shape. You may have seen that, during the pandemic, the Natura brands in Brazil was one of the top 5 most relevant brands, according to consumers. All right.

Then is of course all the omnichannel approach that we have been developing, turning actually consultants into omnichannel 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've seen now that we have grown in the region, almost 1 million online stores, consultants are sharing content in multiple formats and actually is a sort of 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 remove entry barriers into this network. So overall that created 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 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 arrive into your house, right and trustful. In addition to convenient, so all of that together allows us to operate differently, adapt offerings on a daily basis. Right. Regardless of what had been -- had already been printed in the brochures. We could use digital to customize individualize, change, according to the circumstances. And I think that all of those muscles built in the past were put to work during the pandemic, Thiago.

Thiago Macruz -- Itau BBA -- Analyst

Thanks. Thank you very much, JP and Roberto, and congratulations on a very good quarter.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Thank you, Thiago.

Operator

Our next question comes from Bob Ford from Bank of America.

Bob Ford -- Bank of America -- Analyst

Hey, good morning, Roberto, JP, Filippo. I too would like to congratulate you on your sterling [Phonetic] performances in utilization improvements in your integrated brands and especially the growth at Natura Brazil. That said, if we were to be a little bit more skeptical, I think that the skeptics would continue to point to the decline today. And JP how can you be sure that the growth of Natura Brazil isn't in part due to a market share shift for May month. 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?

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Hey 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 a little bit on the cyber incident, right, that has a impact especially on Q2. But if we look at two aspects, one is also the significantly exponential growth of the digitalization and adoption of 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. E-brochure 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 are really now becoming much more bullish is like UK. We actually doubled in this quarter, the number of appointments on 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 2, 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 team not only in UK, but in many markets across the globe, an increase in terms of appointment and the recruitment. So we see that as part of the journey, and in fact, I think we're even more bullish than before.

Now, a lot of the things that we are planning to do at Avon, we haven't implemented yet. Right. Either because again, let's not forget, we acquired the business in general. 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, to fill 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, but it's already been captured and it'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 in front of that communicated 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 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 a 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 the Latam. JP, do you want to comment specific about Avon Brazil and some of the learnings?

Joao Paulo Brotto Goncalves Ferreira -- Chief Executive Officer of Natura &Co Latin America

Sure. Hi, Bob. So the group, the combined -- the combination of all brands. We did gain share in Q2, in Brazil, but as regards Avon, we came from 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 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 underlying declining trend, but I'm very confident that will be reverted very soon.

Bob Ford -- Bank of America -- Analyst

The last part of the question is how the cyber event impacts the pace of systems changes and integration, if at all.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

It didn't. Bob, I mean it was for a short period of time, call it 2.5 weeks to three weeks. So the plan is still on 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 in accelerate the digitalization across the board including Avon to accelerate even further, the development of new applications and apps for Natura and Avon. And also to help us with the integration, right, especially in Latin America. So we 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 in 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 accelerating investment and continue to build on the momentum.

Bob Ford -- Bank of America -- Analyst

That's very helpful, thank you both very much.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Thank you, Bob.

Operator

Thank you. Our next question comes from Tobias Stingelin from Citi.

Tobias Stingelin -- Citigroup -- Analyst

Yes, thank you so much. Congratulations. A very quick question, I think in Q2 [Phonetic] again, just on this Avon issue, when you included in your press release and your presentation you have kind of our curves showing how Natura's brand in Brazil kind of accelerated during the quarter. Can you be give us a sense about how Avon was doing or how Avon kind of started the quarter, ended the quarter? I know that we have kind of this cyber attack, but if you maybe you can just give us a sense about how the underlying trends of the business are? And I think you kind of guided already, because that improvement going forward would be expected by the end of the year like December or something like that, the brand be growing already. Thank you.

Joao Paulo Brotto Goncalves Ferreira -- Chief Executive Officer of Natura &Co Latin America

So can I take that?

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Yeah, Joao. Yes, please.

Joao Paulo Brotto Goncalves Ferreira -- Chief Executive Officer of Natura &Co Latin America

Hey, Tobias, 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 -- in the last month of the quarter. So it is showing just to tell you that, it is showing an improving trend already.

Tobias Stingelin -- Citigroup -- Analyst

Perfect. So let's say by July ex cyber attack, sales of the Avon brand in a year-over-year basis kind of flat.

Joao Paulo Brotto Goncalves Ferreira -- Chief Executive Officer of Natura &Co Latin America

Flattish. Right. Because we really don't -- don't know precisely because of the cyber incident, but it was -- it was already showing a significant improvement.

Tobias Stingelin -- Citigroup -- Analyst

In Latin America, if you exclude Brazil, has been the trend had a similarity, something that you can share with us as well about how the brand, the performance has been there.

Joao Paulo Brotto Goncalves Ferreira -- Chief Executive Officer of Natura &Co Latin America

So in Latin America, the Natura brand showed a very similar performance improving toward the end of the quarter. And the Avon as well, but, it's many more countries there, so there is still a significant dispersion in terms of the performance, but we are -- we are now pushing all of those countries to align in the practices. So it's a little bit behind the Brazilian improvement plan, but it's catching up.

Tobias Stingelin -- Citigroup -- Analyst

Okay, perfect. And as you said [Speech Overlap] sorry.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Just one thing to be is also to say that I think 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 is always being an iconic brand that is stood for relevant causes. In any 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 the reason for being. That's second reason. Third reason, Avon also is a very democratic brand, is probably the most democratic brand offering high quality and 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, Joao already explained in terms of the turn around, the commercial model, the digitalization that I think also are, I would say tailwinds for Avon as a brand. Sorry, I interrupted you, Tobias.

Tobias Stingelin -- Citigroup -- Analyst

No, no. Thank you so much for that. Can we make the last question only, with regards to the cyber affect, so we have kind of this postponement in sales, you are kind of increasing investments in technology as you're kind of addressing different initiative. Huge success 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 be a backlog and then in the fourth quarter, you might be sending back again. Just want to kind of understand, if this is just one-off, there won't be any type of impact in terms of sales trend going forward.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Yeah. No. This is right. This is a one-off and the number that we are communicating are factual numbers. So we are not even in speculating in potential sales loss that we would recuperate. The number that we are announced in the BRL450 million are number that truly we had -- we invoiced and is just end up being captured in Q3 versus Q2.

Tobias Stingelin -- Citigroup -- Analyst

Okay, thank you so much again, and congratulations.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Thank you, Tobias.

Operator

Thank you. The next question comes from Andrew Ruben from Morgan Stanley.

Andrew Ruben -- Morgan Stanley -- Analyst

Hi, thanks very much for the question here. I have two on the international business. So for Avon International, we 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? And 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 further brand expansion, and say over the next year? Thank you.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Hi, Andrew. Roberto here. I will start with the first part of the question, 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 on 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 end up creating this reduction.

So I think it is temporary in the fact that as we see some easiness, and the lockdowns, you enroll again more representative. And the reason why we're bullish is we are seeing some of the markets that are seeing, call it easiness of the lock down like in UK. And we double the amount of appointment and recruitment in the last -- in the last couple of weeks in UK. You put that, and then you added all the digitalization, e-brochures 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 concept of long-term relationship value simplifying the model, segmenting the representatives and the sales leaders. Those are all the things that are being implemented in the back half of the year together with the relaunch of the Avon brand. JP, do you -- you want to talk about the Natura international, some of the learnings in Malaysia? JP?

Operator

We are experiencing some technical difficulties. Please standby.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

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 established Natura brand as a kind of omnichannel brand as we think about the internationalization of Natura. So we already -- are ready to start with a combination of some physical presence. Our 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, if that has a lot of interaction 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 positioning of the brand that brings a lot of the Amazon, a lot of the biodiversity, the ingredient and at the same time in terms of go-to-market thinking about a more omnichannel approach.

Andrew Ruben -- Morgan Stanley -- Analyst

Yeah. That will make sense. Thanks very much.

Joao Paulo Brotto Goncalves Ferreira -- Chief Executive Officer of Natura &Co Latin America

Roberto, just to tell you that I'm back.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Sorry, anything else to add JP? Sorry, I tried to [Speech Overlap] anything else.

Andrew Ruben -- Morgan Stanley -- Analyst

I did not hear the question. Sorry, I was disconnected.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

I think -- I think we can move on. It was related to Natura, Malaysia. But I think I covered, JP.

Joao Paulo Brotto Goncalves Ferreira -- Chief Executive Officer of Natura &Co Latin America

Okay, thank you.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Over to you, operator [Phonetic] if there is any other question.

Operator

Thank you. Our next question comes from Richard Cathcart from Bradesco BBI.

Richard Cathcart -- Bradesco BBI -- Analyst

Yeah, hi guys, good morning. And Jose [Phonetic], congrats on the performance for 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 how the performance has been selling. Sorry, both in The Body Shop and Aesop selling into China via TMall. I think that's something that we've been commented in previous quarters, so being just interesting to hear how that has performed, just given the situation around the pandemic.

And then the second issue is just about the new -- 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. Thanks very much.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Yeah. So thank you for the question, Richard. So one, 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 -- the ability to offset and most of them offset close to 85% of the coal path when we had over 90% of stores closed at the beginning of the quarter the, really the pivot the shift to e-commerce, Aesop grew over 400% in e-commerce and The Body Shop between Body Shop at home in e-commerce almost 300%.

It's just remarkable and the e-commerce piece also has TMall as we talk about it and we are seeing continued growing both Aesop and as well as The Body Shop, but we think that China is a huge opportunity for us. And our teams are working a very diligent in seeing how can we even strengthen our position, beyond you know the T-Mobile platform in China and we think that study 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 -- 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 pause, because of everything that's going on. So to your point, we are -- we are looking at the right now footprint of the stores and where to open, it's interesting that we are -- we are seeing again, the stores in the markets that have been open.

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 had actually stabilizing a much higher level than before, which is very exciting about the possibility for us to continue to optimize our footprint or physical stores and make sure that we have in the right locations, the right places with the right look and yield while both the e-commerce and 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 US, which is a -- also a super interesting in opportunities 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.

Richard Cathcart -- Bradesco BBI -- Analyst

Great, thanks very much for the reply. Roberto, thanks very thanks so much.

Operator

Thank you, 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.

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Thank you and thank you all for joining the call. Again, I think as you all sold from today's results, we are very proud and actually very pleased with the results that really demonstrates the resilience and adaptability of our omnichannel model, while at the same time really strengthening our balance sheet and also making these 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, the core to our future and outline very ambitious goals that we needed to achieve and we are very excited about that in working with a lot of our 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 and wish you all a good day and good weekend. And on behalf of all of us please stay well, state safe. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Viviane Behar -- Investor Relations Director

Roberto de Oliveira Marques -- Group Chief Executive Officer and Executive Chairman

Jose Antonio de Almeida Filippo -- Chief Financial Officer

Joao Paulo Brotto Goncalves Ferreira -- Chief Executive Officer of Natura &Co Latin America

Thiago Macruz -- Itau BBA -- Analyst

Bob Ford -- Bank of America -- Analyst

Tobias Stingelin -- Citigroup -- Analyst

Andrew Ruben -- Morgan Stanley -- Analyst

Richard Cathcart -- Bradesco BBI -- Analyst

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