Good morning, ladies and gentlemen. Thank you for waiting. We would like to welcome everyone to Natura & Co. conference call on the first quarter results 2019. Today, we will hear from Mr. Roberto Marques, Executive Chairman of the Board of Natura &Co., Mr. José Filippo, Chief Financial Officer of Natura &Co., Mr. João Paulo Ferreira, CEO of Natura, Mrs. Viviane Behar, Investor Relations Director of Natura &Co. This event is being recorded and all participants will be in a listen-only mode during the company presentation. As Natura's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. We have a simultaneous translation into Portuguese, and questions may be asked normally by participants connected from abroad, either in Portuguese or English. Should any participant need assistance during this call, please press star zero to reach the operator.
We have a simultaneous webcast that can be accessed through Natura IR website, www.natura.net/investor. The slide presentation can 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. management. This presentation also includes adjusted information prepared by the company for information and reference purposes only, which have not been audited. The company does not undertake any obligation to update them in light of new information or future development. Now, I'll turn the conference over to Mr. Roberto Marques, Executive Chairman of the Board of Natura &Co. Mr. Marques, the floor is yours.
Thank you. Hello, everyone, thank you for joining us for this call to present our first quarter 2019 earnings. As was said, I'm joined today by José Filippo, CFO of Natura &Co., João Paulo, CEO of Natura, and our investor relations teams of Natura &Co., headed by Viviane Behar. I will start with a few introductory remarks on our performance. Filippo will then detail our financials on a consolidated basis also by business. After my concluding remarks, we'll open the floor to your questions. Just before we get started on this presentation, I wanted to highlight that as you all know, of January 1st, 2019, a new accounting standard for lease agreement was adopted in IFRS 16.
For the purpose of the comparison, the results and analysis in this presentation excludes its effect, especially as we did not restate 2018, so in order to really have a fair comparison. The term adjusted revenue and adjusted EBITDA also excludes other effects that are not considered recurring, nor comparable between the periods under the analysis. Hopefully, that will be helpful for all of you. Let me begin with slide three with an overview of our performance. Q1 was another quarter of solid, consolidated underlying performance for Natura &Co., with growth in sales, EBITDA, and net income, confirming the continued momentum of our multi-brand, multi-channel, purpose-driven beauty group that we are building. Our adjusted net revenue was up by a robust 7.1%.
It's worth it, all three of our brands and businesses posted sales growth in Brazilian reais in the quarter, in spite of some challenging market conditions in some markets, notably Brazil, demonstrating the group's resilience and benefit of its broad geographic footprint. Natura overall revenue grew 2.2%. Growth was up in double digits in Latin America. While the business operated in a weak CFT environment in Brazil, it's important to highlight that we outperformed the market and gained market share, confirming its leadership in the sector in direct sales and underscoring the business' solid fundamentals. The Body Shop also continued to show progress in its transformational plan. Sales were up by more than 10% in Brazilian reais, broadly stable in local currency. A very satisfactory performance, given the continued optimization of its own store network, with 44 net closures of stores in the past 12 months.
Our store like-for-like sales were slightly down due to a weak Asian market, but up by 2.4% in U.K., which, as you all know, is our Body Shop's biggest market, confirming the brand's growing attractiveness. Aesop delivered another yet impressive quarter, with solid double-digit growth in sales, including at our own signature store, supported by a strong performance in all channels and geographies. Adjusted EBITDA was up by 3.7% versus Q1 2018, driven by a very strong 54% EBITDA growth at The Body Shop. This is reflecting significant efficiency gains coming from the transformational plan. Finally, net income was up nearly 73%, demonstrating a very strong underlying performance. From a financial standpoint, the business also consumed less cash in Q1, and we improved our leverage ratio to 2.95 times at the end of the quarter, which compared to 3.32 times in the year-ago quarter.
A significant improvement there as well, which put us on track to achieve our guidance of returning by 2021 to a leverage ratio of 1.4 times, which we talk about it, which is equivalent to the level prior to the acquisition of The Body Shop. Finally, Natura &Co. posted further sustainability achievements. Natura was included in the Corporate Knights Global 100 list of the most sustainable corporations in the world for the 10th consecutive year. The Body Shop won Marie Claire's Beauty Award for its Christmas campaign, which helped protect a further 11 million sq m of natural habitat in Armenia and in the U.K. Aesop also reduced plastic consumption by 17% per unit by redesigning some of its bottles, which should contribute to saving 124 tons of virgin plastic over a year.
These achievements confirm Natura &Co.'s commitment to a better way of doing business, combining positive economic, social, and environmental impact. With that, let me hand over to Filippo to go through our financials in greater detail. Over to you, Filippo.
Thank you, Roberto, and hello to everyone. Before going to our financials on slide five, I thought it would be helpful to step back for a second and remind you again of the various adjustments that continue to impact our numbers and give you some visibility on their impact. Indeed, as in past quarters, this quarter was marked by several non-operational adjustments. IFRS 16, which impacted net revenues both in Brazil and Latin and EBITDA in Brazil, hyperinflation in Argentina, non-recurring tax effects in Brazil from a reversal of an ICMS tax revision, and continued transformation costs related to The Body Shop impacting EBITDA. This quarter also was marked by the adoption as of January 1, 2019, of the IFRS 16 accounting standard, which Roberto has already mentioned. As you see on Slide six, IFRS impacts the entire design of our P&L and balance sheet.
You'll find full details in explanatory notes 2.3 and 16 of our consolidated financial statements. Let me mention the main impact. The standard introduces one single lease accounting model, replacing the previous accounting standards of operating and financing lease arrangements. In our balance sheet, the adoption of IFRS 16 has brought accounting changes to the fixed portion of rental agreements now classified as leases, requiring recognition of future commitments and liabilities offset against rights of use in assets. Our assets and liabilities are both impacted by approximately BRL 1.9 billion. Up until 2018, rental costs were recorded as expenses, but henceforth are recorded in both depreciation and financial expenses accounts. Overall, these changes result in a favorable impact of BRL 112.2 million on EBITDA. Let's now look at our Q1 performance. I'll start this overview of our P&L with our consolidated net revenue on Slide seven.
As shown in the graph, the group's net revenue rose 7.1% in the quarter in BRL and 4.1% at constant currency to near BRL 2.9 billion. The stock increase in sales results from growth in BRL in all three business units. Natura's net revenue was up 2.3%, driven by Latin America, up 10%. In Brazil, net sales, excluding the effect of IFRS 16, were down 1% due to a weaker CFT market and the new pricing alignment policy to support a sustainable omni-channel strategy, which impacted the online channel. Sales at The Body Shop were up 10.2% in BRL and broadly stable at -0.2% versus Q1 2018 at constant currency. This comes despite 44 net own store closures as The Body Shop continued to optimize its network.
It also reflects a high comparable base as Q1 2018 had been boosted by saving of half and child orders. Finally, Aesop posted double-digit growth of 34.2% in BRL and 16.3% at constant currency, with strong growth across channels and geographies. On slide eight, we turn to consolidated EBITDA excluding IFRS 16, which grew by 5.6% to nearly BRL 337 million. Adjusted EBITDA excluding IFRS 16 rose by 57% in Q1 to BRL 330.8 million, notably driven by a very strong growth at The Body Shop and a solid contribution from Aesop. On the same basis, margin was 11.5%, a slight contraction of 37 basis points. Turning to slide nine, we look at Natura &Co's net income. Excluding IFRS 16 effect, net income was up by 72.8% to BRL 41.9 million, largely supported by the increase in consolidated EBITDA.
Underlying operating income posted a drop of 12.1% in Q1 as a result of increased expenses, mainly corporate expenses, which offset the increase of BRL 154.4 million in gross profit. Let me conclude this quick summary of our key financial highlights with a look at the main aggregates of our balance sheet on the next slide. Cash flow in the quarter was an outflow of BRL 339 million. This represents a reduced cash consumption of nearly BRL 12 million versus the same quarter last year. This reflects lower working capital requirements at Natura, driven by reduced inventory and higher accounts payable to suppliers, which partially offset the higher seasonal working capital requirements at The Body Shop and Aesop. We continue to deleveraging the company in line with our expectations.
Our net debt to EBITDA ratio stood at 2.95 times at the end of Q1, down from 3.32 times in Q1 2018. This put us well on track to achieve our target of returning by 2021 to our leverage ratio prior to the acquisition of The Body Shop of 1.4 times. After looking at our consolidated numbers, let me now comment on individual performance of our three businesses. Starting on slide 12 with the key highlights of Natura. Natura faced a tough environment in Brazil as well, as we will see shortly, but the company outperformed the market, gaining market share in the sector and in key categories of fragrance, body, and gift. Euromonitor recently confirmed that Natura was the leader in the Brazilian CFT market for the second consecutive year in 2018, with market share of 11.7%.
The solid performance reflects the success of our relationship selling model, which is leading to higher productivity in Brazil. Consultant productivity increased for the 10th consecutive quarter, up by 1.5%. Another highlight in Brazil was the launch in March of the Natura digital account in partnership with Banco Santander. This is an additional exclusive feature embedded in our consultants' mobile platform, which will promote banking and financial inclusion of our network of consultants. In addition, the partnership will offer microcredit to consultants also on the mobile platform to purchase Natura products. Adoption of our digital platform by our consultants continue to increase and give the range of available digital solutions and services. Over 60% of our consultants in Brazil and 30% in Latin America use our mobile platform.
Latin America is also performing strongly, and Euromonitor confirmed that Natura has increased its leadership in CFT direct sales in the region with a market share of 5.1%. We performed well in both countries. In Argentina, despite the challenging economic environment, we're posting strong growth. On slide 13, we look at the sales performance at Natura both on a consolidated basis and in geographic zones. Total sales were up 2.3% to BRL 1.7 billion in Q1, mainly driven by LatAm. In Brazil, sales dropped 1%, reflecting the weaker CFT market and also as a result of a new pricing alignment policy, which impacted the online channel to support a sustainable omni-channel strategy. Consultant loyalty remains high. As I just mentioned before, we gained market share demonstrating Natura's strong fundamentals in Brazil. In Latin America, we saw very solid growth of 10% and an even stronger 19.4% at constant currency.
We grew in all geographies with Argentina and Colombia as highlights. The number of consultants grew 7.4% versus Q1 2018 to more than 634,000, and volumes were up in the region by 12.7%. I will conclude on Natura with its EBITDA on page 14. Overall, EBITDA reached BRL 247 million. In Brazil, EBITDA was down 5.2%, with an EBITDA margin of 15.4%. This reflects lower sales in a soft market and higher cost of goods sold as a result of a negative effect from foreign exchange, category mix, and promotional investment. This was partially offset by efficiency gains. SG&A declined by 100 basis points to 57.1% of net revenue as a result of continued business rationalization efforts, despite investments in innovation and technology. In Latin America, EBITDA grew double digits, up to 10.1%, driven by a strong performance in Argentina and Colombia.
EBITDA margin was stable due to a higher cost of goods sold from significant negative exchange rate effect in Argentina. Let's now move to The Body Shop on slide 16. Net revenue in BRL increased by 10.2% in Q1. At constant foreign exchange, sales were broadly flat at negative 0.2%. As mentioned earlier, this reflects a smaller owned store footprint as The Body Shop continues to optimize its network and has closed 44 underperforming owned stores in the past 12 months. It also reflects a higher comp, as Q1 of last year benefited from strong orders by health and safety. On a like-for-like basis, sales at owned stores were down 1.7% in Q1, mainly due to a weakness in the Asian market and stable sales in the U.S.
Like-for-like in The Body Shop's home market in the U.K., its biggest market, were up by 2.4%, which is a very encouraging performance that demonstrates a successful first effort on the brand rejuvenation. We also saw a very strong growth at The Body Shop's direct selling channel, The Body Shop At Home, which were up nearly 65% and represented about 5% of total sales. This helped offset a drop in online sales, which were impacted by The Body Shop's efforts to reduce discounts. At the end of the quarter, The Body Shop had 2,888 stores in 1,024 owned stores and 1,864 franchise ones. Slide 17, we see that The Body Shop's adjusted EBITDA in the quarter, which excludes transformation costs, grew by 53.7% in BRL to BRL 81 million. This resulted in a margin of 9.9%, up by 280 basis points.
The Body Shop's transformation plan is advancing well, with costs and benefits in line with the plan. Transformation costs of BRL 6.1 million, or GBP 1.5 million, incurred in the quarter are related to initiatives such as organizational design, stop with printed communication, and reduction of discounts, among others. As a reminder, we expect to incur circa GBP 10,000 in transformation costs in 2019. Slide 19, we round off this look at the performance of business with Aesop, which posted another quarter of strong growth. Net revenue grew in BRL by 34.2% in Q1, with a very strong performance across all channels and geography. At constant currency, growth remained very strong at 16.3%. Like-for-like growth in signature stores increased 10.6% in Q1. With 22 openings in the past year, Aesop now has 230 signature stores.
EBITDA also grew double digits in BRL, up by 29.5% in Q1, resulting in an EBITDA margin of 13%. Let me now hand over to Roberto for some concluding remarks.
Thank you very much, Filippo. What are the key takeaways? Let me mention, as you see on the slide 23, three of them. First of all, Natura &Co posted a solid performance in Q1. Revenue grew across the three brands, which we think is very important. Net income was up by a very strong 73%, the use of cash was reduced as we continue to deleverage the company. The good momentum of Natura &Co in each one of our businesses shows the strength of the global multi-brand, multi-channel beauty group that we are building. With this new quarter of solid performance, we want to reiterate that we are on track, Natura &Co is on track to deliver on its medium-term financial targets while making a positive social and environmental impact and creating value for its stakeholders.
Finally, just to mention that Natura &Co decided to participate in a new venture capital vehicle called Dynamo Beauty Ventures. This new vehicle will work to identify and invest in emerging brands in the cosmetics and wellness segments, particularly in Europe and the U.S. The fund will work in partnership with entrepreneurs with extensive experience in the industry to acquire minority stakes in companies with strong growth potential and innovative business models. Before we go to the Q&A, let me just tell you that we are still in talks with Avon, there is nothing new to report today, as you can appreciate, we won't be able to say anything more at this stage. Thank you very much for your attention. Now, Filippo, João Paulo, and I are happy to take your questions.
Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star one. If at any time you would like to remove yourself from the question queue, press star two. Our first question comes from Tobias Lucchini, Citigroup.
Good morning to everyone. Thanks also for taking my questions. I think the first one is to João. I just wanted to understand a little better underlying sales trends given the imbalance between sell-in and sell-out in Brazil. There was strong double-digit growth in the fourth quarter, and now top line was down. There were clearly a lot of inventories in the channel. Is the situation now normalized? Can you also explain what effectively happened and give us some indication about how the situation is evolving now in regards to sales trend in April and Mother's Day, and so on, João? I think that's the first question. Then I have two more. I don't know if you can include it right now. I just wanted also to get an update about the pricing strategy online.
I think it goes with the digital strategy, and it also impacted the first quarter. If you can elaborate on that. Then just a quick question about the corporate expenses, which were above the 1% of sales, which was a soft guidance. I just want to understand what's the trend there as well. Thank you so much again, and also thanks for helping with the IFRS, which gives me a relief. It's clear to see the impact.
Good morning, Tobias. JP speaking. Thanks for the question. On your first question, indeed, as you know, our consultants carry some sort of inventory, which helps them buffering the market effect. We did see through SensorPanel that the market slowed down significantly in Q1. Nevertheless, the activity from our consultants and the preference from consumers continued to drive their sales. This is the reason why, again, through SensorPanel, we continue to gain share. Going forward, we expect those two sell-in/sell-out lines to normalize, and you should see our sell-in numbers picking up. This is already the short-term trend. Okay? We are pretty happy with Mother's Day numbers so far. That is on your first question. On the second question-
Sorry. Can you just repeat a bit? There is a little bit of echo on the line. I couldn't hear you very well. Just that you said that, you expect sell-in and sell-out to normalize and the trend in April is already better, is something like that, is that?
Yes, exactly that. The sell-in/sell-out trends should normalize going forward, and we are seeing already a positive selling trend, and we are pretty happy with our Mother's Day campaign so far.
Thank you.
Moving to your second question, our digital channel. As you're aware, we are in preparation for the full merger of our on and off beauty consulting models, which is due middle of the year. In order for that to work properly, few enablers had to be implemented. One of them was the Digital Account, which we just launched in partnership with Santander. Another key enabler was to sort of equalize our pricing and promotional strategies so that we would remove arbitrage opportunities amongst channels. We planned for a hit in Q1 in our own online channel, which just happened, and we should see the online channel performing in its historical trends as of middle of the year when the two channels will be merged. Now, I'll hand over to Filippo.
Yes. Tobias, regarding corporate expenses you asked, those expenses are related to our corporate governance structure. It's a lean structure, as you know, the target to be less than 1% of net sales. However, this particular quarter was impacted by the non-recurring cost of strategic projects expenses. This shouldn't be a trend. This is non-recurring, and that tends to be in our target, as I mentioned.
Thank you. Could you just repeat, sorry, the size of the non-recurring? Again, I'm having some issues with the line. I don't know if it's my line only or everybody's having kind of this echo, but can you just, sorry, size the non-recurring nature?
Those are related to strategic projects.
Correct. Yes, just to be clear, sorry if you're not hearing well, but that's Roberto. That's correct. Those are non-recurring that elevate a little bit the quarter corporate expenses, a little bit above 1.2%-1.3%, again, close to our 1% target, but those are non-recurring expenses that we budget and we don't anticipate that will continue. Thank you.
Okay. Thank you.
Our next question comes from Luiz Felipe Guanais, BTG Pactual. You may proceed.
Good morning, guys. I have two questions here. In the case of the sales performance in Brazil, was there a category that was more impacted, as a result of competition and also the gap between sell-in and sellout? The second question, if you could comment on The Body Shop sales trend going forward for 2019, and which are the main markets in which you could expect the turnaround initiatives to move on in these quarters? Thank you.
Okay, thank you. I'll take the first question. JP speaking. Basically, fragrances was the most impacted category in Q1. Again, not because of competition, but mainly to market performance and demand. The mix was affected with the fewer fragrances units.
Yeah. Regarding The Body Shop, of course, that's why we are highlighting the key market that we're putting more energy in terms of the starting the transformation and the rejuvenation of the brand is U.K. It's our home market. It's one that we are highlighting a good performance in terms of like for like, even in Q1. We feel pretty positive about it, as we started to really think about the rejuvenation of the brand.
Thank you very much.
Next question comes from Thiago Macruz, Itaú BBA.
Hi, guys. Good morning. My question is regarding The Body Shop. Since the beginning, we've seen a combination of maybe much better profitability there with, to some extent, soft growth. My question here is, do you guys believe you've reached where you want to be in terms of profitability now at that specific operation? If you could provide us with the main pillars for organic growth going forward. Is it reasonable to assume that you're going to move to positive in constant currency already in 2019? That's my first question. My second question is regarding your strategy in China. At your investor's date, you gave us an indication of potentially eventually thinking about opening up a shop there, thinking about opening up a factory there eventually. Can you provide us with an update on that front? Those are my two questions. Thank you.
Thank you, Thiago. Roberto Marques is here. In terms of The Body Shop, we are pretty much on track with our transformation. As we presented a couple of times, as we actually planned, the initial focus on The Body Shop was really, and has been, to increase the margin and the profitability. That's been the result of a redesign of the footprint of our stores. As you saw, we closed net of 44 stores, our own stores in the last 12 months, especially unproductive and profitable stores. That is actually performing well. Also, the redesign of the organization, reducing layers, being a little more efficient there, that's also on track. This is the first part of the transformational program. It's on track. It's doing very well. In parallel, we are starting to really talk about the rejuvenation of the brand.
You guys heard from David, the new purpose of the brand, which is driving, again, some of the new market campaign that is coming, some of potentially redesign of our stores with potentially a first prototype in the last quarter of the year. This is also on track. We feel pretty good about where it's going. It's exactly what we planned, and we're pretty happy about that. What was China? Regarding China, as you saw at the investor day, we had our first initial call it a stronger presence through Aesop, through Tmall Global, which has been very successful for Aesop. Right now, what we are committing to do is potentially explore the same venue for The Body Shop later this year. That's where the team is working, and that's probably our first step or second step, I would say, as a group.
While at the same time, we are exploring other possibilities, right now, nothing that we can communicate at this point.
All right, Roberto. Thank you very much.
Next question comes from Joseph Giordano, Banco JP Morgan.
Hi, good morning, everyone. Thanks for taking my question. I'd like to understand a little bit more about the innovation trend throughout the year. You mentioned a few launches on fragrances and also on lotions. I'd like to understand how the innovation impacts
Evolved into this quarter. I couldn't find this data at this time. Secondly, you mentioned about the digitalization process here, right? Basically, slightly over 50% of your sales reps are already digital. How should we see that evolving towards the target of 100% of the base throughout the year? Lastly, in terms of the strategy for the small franchises of the sales reps, how much are they accounting of your sales already and what's the plan for them for the next years? Thank you.
Please hold. Please hold. We are reconnecting the speakers. Please hold. We're back now. You may proceed.
Yeah. Sorry, guys. I think it was, yeah, Joseph. Sorry, Joseph. We got disconnected here for a second. Could you kind of repeat the question that wasn't answered properly at this point? Again, apologies for that. Go ahead, Joseph.
Sure. There were actually three questions. The first one was on innovation here. You mentioned a few launches in the quarter on the fragrances and the lotion side. I'd like to understand how the innovation index is evolving on this front. The second question was on the digital strategy. We have slightly over half of your base with a virtual website or a webpage in a student network. I'd like to understand how we should see that evolving towards 100% at the end of the year, particularly now that you have the Natura digital account, all consultants are able to receive digital payments. Lastly, how is the contribution of those small franchises evolving inside Natura Brasil, where it seems to be a major initiative here towards the bricks and mortar channels.
I'd like to understand how representative it is already in terms of sales and how we should be seeing that strategy going forward in terms of openings. Thank you.
Hi, Joe. JP speaking. We are extremely confident and excited with our innovation pipeline. You saw some of the new launches, especially the second half is packed with new products, with relevant technology. We are pretty confident on that. Having said that, because it was planned to be more active as of Q2, the innovation index would be slightly down in Q1 in comparison to the previous number, right? This is a consequence of our phasing strategy. As it comes to the digitization of our network of consultants, well, as of June or so, when we fully merge the two models, the on and the offline consulting services, as of that moment on, every new consultant will also be a digital consultant. All of them will receive their online stores. Now, those which were already part of the network will be converted progressively as it goes.
We should close the year, particularly in Brazil, with an extremely high percentage of our consultants already digitized. Finally, on the franchise stores, consultant stores, we are extremely happy with the results so far. They are extremely happy with the results, they're beating their expectations as well. There's a significant number of new consultants enrolled for the program. You're going to see a high number of openings throughout the year, but I wouldn't like to disclose what percentage that represents of our total sales at this point.
Thank you very much.
Next question comes from Robert Ford, Bank of America Merrill Lynch.
Good morning, everybody, thanks for taking my questions. JP, I just wanted to follow up on Joseph's question, and that is can you talk a little bit about the economics of the franchised channel versus the direct sales channel, please?
Okay, Bob. Let's see if I got this right. I was trying to think, see if I understood. You asked about a comparison between the franchised stores and the direct sales channel in general. Is that correct?
Exactly. Excluding any symbiotic benefits. I understand the benefits of trial and the increased share of wallet and whatnot as the two evolve. Right? Just from a kind of a margin perspective, how do they compare?
All right. Because they are so much more productive than any single consultant, even though they have better discounts, the cost of serving them is much lower. Hence, they get a better margin, and we get a better margin than the average direct sales channel.
Okay. No, good to know. Roberto, there was a huge increase in The Body Shop's direct sales, and I was hoping you could talk a little bit about what's behind that and perhaps any possible plans to roll out social selling tools for The Body Shop. How do you see direct sales evolving at The Body Shop in the U.K., Australia, and the possibility of expanding that to other existing markets or new ones?
Bob, thank you for the call. We are super excited about what we are seeing in the U.K. It is a result of some improvements already in upgrading systems, that it's helping the consultants in the U.K. and direct selling. There being more and more now collaboration between Body Shop and Natura, understanding the tools, and I think we can even take that to the next level. We are in the process, as we speak, upgrading also to the same system that U.K. team has right now in Australia for The Body Shop. We expect also to start seeing some momentum and some growth in Australia. We are in discussions without disclosing how fast in which markets. We are in discussions about expanding Body Shop At Home in other geographies.
We absolutely see that as a venue for growth within The Body Shop and David and the team working with JP and the team in Brazil are looking into that from a strategic point of view.
With respect to social selling, and new markets, is that where TBS or The Body Shop moves? Or do you see at least for now, a little bit too much conflict between channels?
We are evaluating, Bob. We believe direct selling or social selling will be again, a key potential revenue growth stream for The Body Shop. Of course, we are evaluating how that would play with our own stores and company stores or even franchise stores. We do believe, and again, there's a lot of already conversations and exchange of experience between Natura social selling tools, with The Body Shop. We would probably see an enhancement that will come from that collaboration.
That's very helpful. Thank you very much.
Next question comes from Helena Villares, Bradesco.
Hello. Good morning, everyone, and thank you for taking my question. First, I just wanted to highlight the reconciliation between adjusted figures and IFRS 15 and IFRS 16 were pretty clear, so thank you for that. I noted the comment about participation in the Dynamo Beauty Ventures, and I just wanted to understand if this is a form of research and development investment, and if this is a strategy that the company should continue to pursue with other holdings in such kind of assets. If you could just give me more details regarding that investment, it would be great. Thank you.
Okay, Helena. Thanks for the question. Listen, we're excited about this. It's a small initiative for us initially, but it is something that we are bullish about it. You're right, we probably anticipate that we want to do more of those things. We believe this trend of really going after more entrepreneurial, upcoming new technologies, new brands, is something that we want to really foster within the group. This is a first vehicle that kind of match our criteria within what we believe should be our focus moving forward. The answer is yes, we think that we probably going to do more in the future, and it's a first kind of step into that direction.
Okay. If I could just follow up on that. Do you think that you can have some kind of cost benefits in this kind of R&D investment?
Yeah, listen, it's an investment. This is not the reason why we're doing. This is not just to be clear. We are really going after the opportunity to have access, to get to know what's happening in some of that kind of new upcoming trends and technologies and brands. This is our primary focus at this point.
Okay, thank you.
Next question comes from Ruben Couto, Santander.
Good morning, everyone. Can you share with us your expectations regarding the overall CFT market growth in 2019, what do you guys expect for this year? You also mentioned about consultant loyalty in Brazil, which remains high. Can you give more color on how you're actually measuring this, and if we can assume that within the direct selling channel in Brazil, you are gaining market share compared to the other brands? Thank you.
Hi, Ruben. JP speaking. The CFT market, initial numbers in the year suggest that it's going to grow less than we expected. You can refer to historical numbers. Normally, the market grows good times, GDP growth, give or take. As you guys are looking at continuous decrease in GDP estimates, that also suggests what's going to happen to our market. Yes, I can assure you that we are gaining market share in direct sales channel. We track that on a monthly basis, a lot of detail, so I can assure you that we're gaining share there as well. Finally, you talked about consultant loyalty. We track that indicator, that KPI. We have been tracking those for many years.
It's a continuous panel, and it's a combination of how satisfied consultants are and their willingness, not only to recommend the activity to others, but also to continue in the activity. The combination of those elements compose what we call consultant loyalty.
Okay, that's clear. Thank you.
Our next question comes from Irma Sgarz, Goldman Sachs.
Yes. Hi, good morning. Thanks for taking my question. I have two main questions. Aesop continues to obviously perform very well in the overall group context. When you look at the sales that you posted for the first quarter, it did mark a slowdown that was a little bit more than I had expected. When you sort of look at the run rate of 2018 and now sort of slightly less than 11% for the first quarter. I was wondering, was this impacted by the Daigou at all, or are they shopping in different channels that didn't impact your sense of sales? If it did impact your sense of sales, would you be able to sort of just provide maybe an underlying number excluding that impact, just so that we can get a sense of how trends were excluding the Daigou or the Asia effect.
The second question is, I think you mentioned somewhere in the release that you have about 5 million customers already on your CRM, and I was curious whether this is data that has been input by your sales reps, and to what extent do you feel you already sort of have progressed far in terms of your ability to capture data on your final end consumer through your digital tools? Because ultimately, it still depends on your sales reps to input the data on their customer base that they have access to. I was curious where you feel that you are on that curve in terms of capturing data on your final customers through the CRM system.
Irma, Roberto here. I will start with this. J.P. talk a little bit about CRM. You're absolutely right. We're still pretty happy with double-digit growth like for like at The Body Shop, and the growth overall is still pretty remarkable. You're right, somehow it's been impacted by the Daigou and also, as you know, Yellow Vests in France and also some kind of few impact of Brexit in U.K. You have a little bit of headwind in some of the markets. Overall, I think the signature stores are performing well.
To really address the Daigou and some of the impact, again, we are also pretty confident with the strategy of Tmall Global, and we think that this is just starting and it's encouraging numbers that we're seeing, and we still think that there is a huge opportunity to further drive growth into that. We still feel pretty bullish about the year and what we are committing in terms of Aesop performance for 2019. J.P., you want to comment on the CRM with the-
On the CRM?
Yeah.
No, we're only in the beginning of that journey, Irma, as you mentioned. Consultants, as they become more digital and they offer better services to the end consumer, payment services as of now with the new Sintonia partnership
Content through the store for selling tools that we are launching. As they get more acquainted with our digital platform, they have all those possibilities in their hands. We basically empower them with our CRM engine and all the analytics for them to do a better job with their own clients. We will see them collecting many more customers into that database. We are just in the beginning of that journey. We are targeting at least 20 million customers in the database by the end of next year.
Thank you. That was helpful. Just to understand, to get an understanding, do your reps really put in all the data for each order that they place on which product is associated to which one of their customers? Because I know that was always sort of the last leg of that purchasing journey that you were losing, that last piece of data. I'm just curious how disciplined you feel your reps are in already inputting that data.
No, that is not going to be the mechanism. As you properly pointed out, the reps will help us getting the data on the customers, not by inputting them or typing them in, but rather by offering the customer better services. We will connect the customer to the consultant digitally and hence acquire that data. That would require us much more time for me to describe all those mechanisms. It's not going to be typing things onto their phones.
All right. Guys, I just want to again thank everybody for joining the call. I appreciate it. Again, we feel pretty good about the results in Q1 across the three business and also pretty confident about continue those positive trends for the remaining of the year. I want to thank everybody, wish you guys a good weekend, and hope to talk soon. Thanks, everybody. Have a good day. Thank you.
That concludes the Natura audio conference for today. Thank you very much for your participation. Have a good day.