Earnings Call: Q1 2019

May 3, 2019

Good morning, ladies and gentlemen. Thank you for waiting. We would like to welcome everyone to Natura and Co Conference Call on the First Quarter Results 2019. Today, we will hear from Mr. Roberto Marquez, Executive Chairman of the Board of Natura and Co Mr. Giordecio, Chief Financial Officer of Natura and Co Mr. Joao Paulo Ferreira, CEO of Natura Mr. Vivian Behar, Investor Relations Director of Natura and Co. This event is being recorded and all participants will be in a listen only mode during the company's presentation. As the current 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 who connect from abroad either in Portuguese or English. We have a simultaneous webcast that can be accessed through Natura IR website at www.natura.net/aincester. 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 as statements that are not statements of historical fact and reflect the beliefs and uncertainties of Nutrien's management. This presentation also includes adjusted information prepared by the company for information and reference purposes only, which have not been audited. Forward looking statements speak only 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 development. Now I'll turn the conference over to Mr. Roberto Marquez, Executive Chairman of the Board of Matura and Co. Mr. Marques, the floor is yours. Thank you. Hello, everyone, and thank you for joining us for this call to present our first quarter 2019 earnings. As we said, I'm joined today by Sebastien Lito, CFO of Natura and Co Jean Paul, CEO of Natura and our Investor Relations team of Natura and Co, headed by Vivienne Ibea. I will start with a few introductory remarks on our performance. Filippo will then detail our financials on a consolidated basis and also by business. And after my concluding remarks, we will open the floor to your questions. So before we get started on this presentation, I wanted to highlight that, as you all know, of January 1, 2019, a new accounting standard for this agreement was adopted, the IFRS 16. For the purpose of the comparison, the results and analysis in this presentation exclude this effect, especially as we did not restate 2018, so in order really have a fair comparison. The term adjusted revenue and adjusted EBITDA also exclude other effects that are not considered recurring or comparable between the periods under analysis. So hopefully, that will be helpful for all of you. So let me begin with Slide 3 with an overview of our performance. Q1 was another quarter of solid consolidated underlying performance for Natura and Co, with growth in sales, EBITDA and net income, confirming the continued momentum of our multi brand, multi channel, purchase driven beauty group that we are building. Our adjusted net revenue was up by a robust 7.1%. Recorded all 3 of our brands and businesses posted sales growth in Brazilian reals in the quarter in spite of some challenging market conditions in some markets notably in Brazil, demonstrating the group's resilience and benefits of its broad geographic footprint. Kaltura overall revenue grew 2.3%. 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 a 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 more than 10% in Brazilian reais, broadly stable in local currency, with 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 as our own signature store, supported by strong performance in both channels and geographies. Adjusted EBITDA was up by 3.7% versus Q1 'eighteen, driven by a very strong 54% EBITDA growth at The Body Shop, reflecting the domestic and 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 proved our leverage ratio to 3.95x at the end of the quarter, which compared to 3.32x in the year ago quarter, so a significant improvement there as well. We put us on track to achieve our guidance of returning by 2021 to a leverage ratio of 1.4x. Which we talked about it, which is equivalent to the level prior to the acquisition of Body Shop. Finally, Natura and Co posted further sustainability achievements. Natura was included in the quarter 9 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 11,000,000 square meters of natural habitat in Armenia and in the UK. And 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 the true and full 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. Turn to you, Filippo. Thank you, Roberto, and hello to everyone. Before going to our financials on Slide 5, I thought it would be helpful to step back for a second to 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 LatAm and Chile in Brazil hyperinflation in Argentina nonrecurring tax effects in Brazil from a reversal of an ICMS tax revision and continued installation costs related to The Body Shop impacting EBITDA. And 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 6, IFRS impacted on various lines of our P and L and balance sheet. You'll find full details and explanatory note 2.3 and 16 of our consolidated financial statements, But let me mention the meaning of that. As standard introduces 1 single EC accounting model replacing the previous accounting standards of operating and financing lease arrangement. In our balance sheet, the adoption of IFRS 16 has brought accounting changes to the fixed portion of rental agreement now satisfied as leases, requiring recognition of future commitment in liabilities, offset against right of use in assets. Our assets and liabilities are both impacted by approximately BRL1.9 billion. And up until 2018, rental costs were recorded as expenses, but hence, costs are recorded in both depreciation and financial expenses accounts. Overall, these changes result in a favorable impact of BRL112.2 million on EBITDA. Let's now look at our Q1 performance. I'll start with overview of our P and L with our consolidated net revenue on Slide 7. As shown in the graph, the group's net revenue rose 7.1% in the quarter in Brazilian reais and 4.1% at constant currency to near BRL2.9 billion. The strong increase in sales results in growth in Brazilian reais in all 3 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 15, were up 1% due to a weaker TFT market and the new pricing alignment policy to support a sustainable omni channel strategy, which impacted the online channel. Sales at the bookshop were up 10.2% in Brazilian reais and broadly stable at negative 0.2% versus Q1 2018 at constant currency. This comes despite 44 net owned store closures as The Body Shop continued to optimize its network. It also reflects the high comparable base as Q1 2018 has been boosted by exceeding of headcounts orders. Finally, Aesop posted double digit growth of 34.2 percent in Brazilian reais and 16.3% at constant currency, with strong growth across channels and geographies. On Slide 8, 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 27% in Q1 to BRL330.8 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 percent, a slight contraction of 37 basis points. Turning to Slide 9, we look at Natura and Co. Net income. Excluding IFRS 16 effect, net income was up by 72.8 percent to BRL41.9 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 increase of BRL154,400,000 in gross profit. Let me conclude this quick summary of our key financial highlights with a look at the main aggregate of our balance sheet on the next slide. Cash flow in the quarter was an outflow of BRL339 1,000,000. This represents a reduced cash consumption of nearly BRL12 1,000,000 versus the same quarter last year. This reflects low working capital requirements at Naturo, driven by reduced inventory and higher accounts payable to suppliers, which partially offset the higher seasonal working capital requirements set by the shop and lease. Finally, we continue to deleveraging the company in line with our expectation. Our net debt to EBITDA ratio stood at 2.95 at the end of Q1, down from 3.32x 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 Baeshat of 1.4x. After looking at our consolidated numbers, let me now comment on individual performance of our 3 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 gifts. Euromonitor recently confirmed that Natura was the leader in the Brazilian CFT market for the 2nd consecutive year in 2018, with market share of 11.7%. The solid performance reflects the success of our relationship selling margin, which is leading to higher productivity in Brazil. Consultant productivity increased by 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 create Natura products. Adoption of our digital platform IR consultants, continued to increase as did 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 Acura has increased its leadership in CFT direct sales in the region with market share of 5.1%. He performed well in both countries. In Argentina, despite the challenging economic environment, we were posting strong growth. On Slide 13, we look at the sales performance on Natura both on a consolidated basis and in each geographic zones. Total sales were up 2.3 percent to BRL1.7 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 product, which impacted the online channel to support a sustainable omnichannel strategy. Consortium loyalty remains high. However, as I just mentioned before, we gained market share, demonstrating Natura's strong fundamentals in Brazil. In Latin America, we saw a very solid growth of 10% and an even stronger 19.4% at constant currency, a group 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 the EBITDA on Page 14. Overall, EBITDA reached BRL247 1,000,000. 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 and A declined by 100 basis points to 57.1 percent of net revenue as a result of continued 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 significantly negative exchange rate effect in Argentina. Let's now move to the right chart on Slide 16. Net revenue in reais 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 some orders by high intensity. On a like for like basis, sales at home stores were down 1.7% in Q1, mainly due to a weakness in the Asian market and stable sales in the U. S. However, like for like in The Body Shop's home market in the UK its regulated market were up by 2.4%, which is a very encouraging performance that demonstrates the successful first effort on the brand's rejuvenation. We also saw a very strong growth at the Body Shop's direct selling channel. At home, which were up nearly 5% 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 10 24 home stores and 1864 franchise 1. In Slide 17, we see that The Body Shop's adjusted EBITDA in the quarter, which excludes transformation costs, grew by BRL 53.7 percent in reais to BRL 81 1,000,000. This resulted in a margin of 9.9%, up by 280 basis points. The partnership transformation plan is advancing well with cost and benefits in line with the plan. Transformation costs of BRL6.1 million or BRL1.5 million incurred in the quarter are related to initiatives such as organizational design, stock with print optimization and reduction of discounts among others. As a reminder, we expect to incur circa £10,000 in transformation costs in 2019. On 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 reals by 34.2% in Q1 with a very strong performance across all channels and geographies. At constant currency, growth remained very strong at 16.3%. Buy for like growth in signature stores increased 10.6% in Q1 and with 22 openings in the past year, Aesop now has 230 signature stores. EBITDA also grew double digit in reals, up by 29.5% in Q1, resulted 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 Slide 63, 3 of them. First of all, Natura and Co posted a solid performance in Q1. Revenue grew across the 3 brands, which we think is very important. Net income was up by a very strong 73%, and the use of cash was reduced as we continue to deleverage the company. The good momentum of Natura and Co in each one of our businesses shows the strength of the global multi brand, multi channel beauty group that we are building. We have a new quarter of solid performance. We want to reiterate that we're on track and soon close 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 and Co decided to participate in a new venture capital vehicle called Dynamo Beauty Ventures. This new vehicle will work to identify and impact emerging brands in the cosmetics and wellness segment, particularly in Europe and the United States. The study 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 model. Before we go to the Q and A, let me just tell you that we are still in talks with Avan, but there is nothing new to report today. And as you can appreciate, we won't be able to say anything more at this stage. Thank you very much for your attention. And now Filippo, Jean Claude and I are happy to take your questions. Ladies and gentlemen, we will now begin the question and answer session. Our first question comes from I think The first one is to Joao, I just wanted to understand a little better the underlying sales trends given the balance between selling in sell out in Brazil. There was strong growth in the Q4 and now top line was down. So there were clearly a lot of inventories in the channel. And is the situation now normalized? Can you also explain what exactly happened and give us some indication about how the situation is evolving now in regards to the strength in April and Mother's Day? And so on, Joao. I think that's the first question. And then I have 2 more, you know, if you could just put 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 kind of impacted the Q1. So if you can kind of elaborate on that. And then just a quick question about the corporate expenses, which were above 1% of sales, which was kind of soft guidance. I just want to understand what's the trend there as well. Thank you so much again. And also thanks for helping me with the FERC, but maybe it's kind of clear to see the impact. Good morning, Tobias. JP speaking. Thanks for the question. So on your first question, indeed, as you know, our consultants carry some sort of inventory, which help them offering the market effect. So we do see we did see through quarter panel that the market slowed down significantly in Q1. Nonetheless, the activity from our consultants and preference from consumers continue to drive their sales. And this is the reason why, again, through center panel, we continue to gain share. So going forward, we expect those 2 sell insell out lines to normalize, and you should see our sell in numbers picking up. And this is already the short term trend, okay? And we are pretty happy with Mother's Day numbers so far. So that is on your first question. On the second question Can you just repeat the visibility of ecoin on the line? I can't put a view very well. Just said that so you expect sell in and sell out to normalize and the trend in increase already better, it sounds like that is fair. Yes, exactly that. So the sell in share line sellout trends should normalize going forward, and we are seeing already a positive sell in trend. And we're pretty happy with our Mother's Day campaign so far. So moving to your second question, our digital channel. As you are aware, we are in preparation for the full merger of our on and off beauty consulting models, which is due mid of the year. And in order for that to work properly, fewer neighbors had to be implemented. 1 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 will remove arbitrage opportunities amongst channels. So we plan 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 in the as of mid of the year when the 2 channels will be merged. Now I'll hand over to Felipe. Yes. Yes. Regarding corporate expenses, you asked, those expenses are related to our corporate governance structure. It's a lean structure, as you know, to target to be less than 1% of net sales. However, this particular quarter was impacted by the nonrecurring cost of strategic projects expenses. This shouldn't be a trend. It's non recurring and that tends to be in our target, as I mentioned. And Gerard, just to repeat, sorry, the size of the nonrecurring. Again, I have issues with the line. Just to be clear, sorry for if you're not hearing well, but that's Roberto. That's correct. Those are nonrecurring that elevate a little bit to quarter. Corporate expenses, a little bit about 1.2%, 1.3%. Again, close to our 1% target, but those are nonrecurring expenses that we budget and we don't anticipate that we'll continue. Thank you. Our next question comes from Luis Felipe Guanae with UBS Capital. 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 complication and also the gap between sell in and sell out? And the second question, if you could comment on The Body Shop sales trend going forward for 2019 and which was the main market in which you expect the turnaround initiatives to move on in this quarter? Thank you. Okay. Thank you. I'll take your first question, JP speaking. So basically, fragrances was the most impacted category in Q1, again, not by not because of competition, but mainly to market performance and demand. So there was a the mix was affected with the fewer fragrances unit. Yes. Regarding Body Shop, of course, and that's why we are highlighting the key markets that we're putting more energy in terms of starting the transformation and the rejuvenation of the brand is U. K. So our whole market is one that we are highlighting a good performance in terms of like for like even in Q1. So we are we feel positive about it as we started to really think about the rejuvenation of the brands. Next question comes from Thiago Macruz, Citi. My question is regarding The Body Shop. I mean, 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? And 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 current in constant currency already in 2019? That's my first question. My second question is regarding your strategy in China. At your Investor Day, 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 2 questions. Thank you, Thiago. Roberto is here. So 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. And 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 productive across the stores. So that is actually performing well. Also, the redesign of the organization, reducing layers, being a little more efficient there, that's also on track. So this is the first part of the transformational program. It's on track, doing very well. And in parallel, we are starting to really talk about the rejuvenation of the brand. You guys heard from David the new circles of the brand, which is driving again some of the new market campaign that is coming, some will potentially redesign of our stores with potentially a first prototype in the last quarter of the year. So this is also a good track. So we feel pretty good about where it's going. It's exactly what we planned, and we're pretty happy about that. So what was China? Regarding China, as you saw at the Investor Day, we had our first initial, call it, stronger presence through Aesop, through Tmall Global, which has been very successful for Aesop. And right now, what we are committing to do is potentially explore the same venue for The Body Shop later this year. So 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, but right now nothing that we can communicate at this point. Next question comes from Joseph Giordano, Banco JPMorgan. Hi, good morning everyone. Thanks for taking my question. I'd like to understand a little bit more about the innovation trends throughout the year. You mentioned like launches on fragrances and also on lotions. So I'd like to understand like how the innovation impacts evolved into this quarter. I couldn't find this data at this time. And secondly, you mentioned about all the digitalization process here, right? So basically slightly over 50% of your sales reps are already digital. So how should we see that evolving towards the target of 100% of the base throughout the year? And lastly, in terms of the strategy for the small franchises of the sales reps, so like how much are they accounting of your sales already? And what's been for the next years? Yes. Sorry, guys. Can you I think it was yes, Joseph. Could you sorry, Joseph, we've not 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. So like, there were like actually three questions. So the first one was on the innovation here. So you mentioned a few launches in the quarter on the fragrances and the lotion side. So I'd like to understand how the innovation index is evolving on this front? The second question was on the digital strategy. So we have like already over half of your base with a visual website or a web page in a pseudo network. So I'd like to understand how we should see that evolving to 100% at the end of the year, particularly now that you have like the digital council or consultants are able to receive digital payments? And lastly, how is the contribution of those small franchises evolving inside Natura Brazil? It seems to be like a major initiative here towards the bricks and mortar channels. Like, I understand like how we presented this already in terms of sales and how we should be seeing that strategy going forward in terms of openings? Joe, JP speaking. So we are extremely confident and excited with our innovation pipeline. You saw some of the new launches, but 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, So the innovation index would be slightly down in Q1 in comparison to the previous number, right? But this is just a phasing consequence 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 merged the 2 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. So we should close the year, particularly in Brazil, with an extremely high percentage of our consultants already digitized. And finally, on the franchise stores, consultant stores, we are extremely happy with the results so far. They are extremely happy with the results. So they're between their expectations as well. There's a significant number of new consultants enrolled for the program. So 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. Next question comes from Bob Ford, Bank of America Merrill Lynch. Good morning, everybody, and 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. Well, let's see if I got this right. I was trying to, I 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. And excluding any symbiotic benefit, I understand the benefit to trial and the increased share of whatnot as the 2 call, right? But just from a kind of a margin perspective, how do they compare? All right. So because they are so much more productive than any single consultant, right, 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. Good to know. And then, Roberto, there was a huge increase in the body shops 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. And then 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. Yes, we are super excited about what we are seeing in U. K. It is a result of some improvements already in upgrading systems that is helping the consultants in U. K. And direct selling. There has been 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 UK team has right now in Australia for The Body Shop. So we expect also to start seeing some momentum and some growth in Australia. And we are in discussions without disclosing how fast and which market, 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 EDP and the team in Brazil are looking into that from a strategic point of view. And 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 comp between channels? We are evaluating, Bob. We don't we believe direct selling or social selling will be, again, a key potential revenue growth stream for The Body Shop. But of course, we are evaluating how that would play with our own stores and the company stores or even franchise stores. We do believe, and again, there's a lot of already conversations and change of experience between Natura, social selling tools with The Body Shop. So we would probably see an enhancement that will come from that collaboration. Next question comes from Elena Villares, Bradesco. So 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. So, I know that the comments about participation in the beauty Bina Mobility 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. Okay. Elena, it's Sebastien. Thanks for the question. Let me just we're excited about this. It's a small initiative for us initially, but it is something that we are bullish about it. And you're right. We probably anticipate that we want to do more 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. And this is a first vehicle that kind of match our criteria within what we believe should be our focus moving forward. So the answer is yes. We think that we're 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 and D investment? Yes, listen, it's an investment. It's 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 Kogel, Santander. Good morning, everyone. You mentioned that you continue to see market share gains in Brazil. But can you share with us your expectations regarding total CFM market growth in 2019? What do you guys expect for this year? And 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 you can assume that within the direct selling channel in Brazil, you are gaining market share compared to the other brands? Thank you. Hi, Ruben. It's Lee speaking. So the CFT market is our initial numbers in the year suggest that there will be 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. So as you guys are looking at continuous decrease in GDP estimates that also suggests what's going to happen to our market. And 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, many, many years. It's a combination it's a continuous panel and it's a combination about how satisfied consultants are and their willingness not only to recommend activity to others, but also to continue in the activity. So the combination of those elements compose what we call consultant loyalty. Our next question comes from Irma Iguarceza with UBS. Yes. Hi, good morning. Thanks for taking my question. I have 2 questions. As of continued to obviously perform very well in the overall group context. But when you look at the sales that you posted for the Q1, 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 the slightly less than 11% for the Q1. So I was wondering, was this impacted by the Daigou at all? Or are they shopping in different channels that would impact your scooter sales? And if it did impact your scooter 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 Daigo or the Asia effect? And then the second question is, I think you mentioned somewhere in the release that you have about 5,000,000 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 you feel you already have progressed far in terms of your ability to capture data on your final end consumers through your digital tools. And ultimately, it still depends on your sales reps to improve the data on your on their customer base that you have access to. So curious where you feel that you're on this curve in terms of future data on your on your final customers through the CRM system. Jim, Roberto here. I will start with you and then just talk a little bit about CRM. So you're absolutely right. I mean, we're pretty happy with double digit growth like for like at The Body Shop and the growth overall is still pretty remarkable. But you're right, somehow it's been impacted by the Daigou and also, as you know, the yellow jacket in France and also some kind of fuel impact of Brexit in UK. So you have a little bit of headwind in some of the markets. But overall, I think the big nursery stores are performing well. To really address the daigos and some of the impact, again, we are also pretty confident with the strategy of Tmall Global. And we think 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. So we still feel pretty bullish about the year and what we are committing in terms of Aesop performance for 2019. So, Difei, you want to comment on the CRM with this? On the CRM? Yes. Yes. No, we are 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 Santander partnership, content through the scope of selling tools that we are launching. So and as they get more acquainted with our digital platform that they have all those possibilities in their hands, I mean, we basically empower them with our CRM engine and all the analytics for them to do a better job with their own clients. So we will see them collecting many more customers into that day to day. So we are just in the beginning of that journey. We are targeting at least 20,000,000 customers in the database by the end of next year. Thank you. That was helpful. Just to understand, you get an understanding, like, to 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 step of that purchasing journey that you were losing that last piece of data. I'm just curious how disciplined you feel your reps were in already inputting that data? No, that is not going to be the mechanism. As you properly pointed out, I mean, the reps will help in getting the data on the customers, but not by inputting them or typing them in, but rather by offering the customer better services. And we will connect to customer teleconsulting digitally and hence acquire that data. But that would require us much more time for me to describe that all those mechanisms. But it's not going to be typing things into the 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 business and also pretty confident about continued 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.