Good morning, ladies and gentlemen. Thank you for waiting. At this time, we'd like to welcome everyone to Natura & Co. conference call on the first quarter results. Today with us, we have Mr. Roberto Marques, Executive Chairman of the Board for Natura & Co., Mr. João Paulo Ferreira, Natura's CEO, José Antonio de Almeida Filippo Director of Finance and Investor Relations Mr. Luiz Palhares, Investor Relations. This event is being recorded, and all participants will be in a listen-only mode during the company's presentation. After Natura's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. We have simultaneous translation into Portuguese, and questions may be asked normally by participants connected from abroad, either in English or Portuguese. Should any participant need assistance during this call, please press star zero to reach the operator.
We have a simultaneous webcast that may be accessed through Natura's IR website, www.natura.net/investor. This 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. Before proceeding, please be informed that forward-looking statements are being made under the safe harbor of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the beliefs and assumptions of Natura management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Natura and could cause results to differ materially from those expressed in such forward-looking statements.
I'll turn the conference over to Mr. Roberto Marques, Natura & Co.'s Executive Chairman of the Board. Mr. Marques, the floor is yours.
Thank you, Natalie. Good morning to all of you, thanks again for joining us on this conference call to present Natura & Co.'s first quarter results. As this call comes short after our Natura & Co. Day, during which the CEOs of the three brands made extensive presentations, we are in a slightly smaller configuration than our previous call. I'm joined today by João Paulo, the CEO of Natura, who will present his company's Q1 performance, José Antonio de Almeida Filippo , Finance and Investor Relation Director, who will present the key consolidated figures for the quarter. I'll comment on the performance of The Body Shop and Aesop, then we'll be happy after our remarks to take your questions. As usual, I'll be referring during this call to the presentation that you can also download on our website.
Let me start on slide three, which is the key highlights of Q1. Overall, I would say that Natura &Co is off to a strong start of the year, with solid top-line and bottom-line growth in the quarter. Pro forma consolidated net revenue was up 11%, and comparable consolidated EBITDA rose by a very solid 58.4% on a pro forma basis. I think we are firing on all cylinders, with each of our three businesses contributing to this very satisfactory performance. Natura regained its leadership position in the Cosmetics, Fragrances, and Toiletries market in Brazil, confirming that the company is back on track on its home market, and it continued to post strong growth elsewhere in Latin America. The Body Shop turnaround is already underway, and it posted its best first quarter in eight years, with very encouraging sales, EBITDA, and EBITDA margin growth in the quarter.
Aesop continues to show rapid growth and improved profitability. Our net debt to EBITDA ratio at 3.3 times is ahead of our estimates for the period. The group also made its successful debut on international capital markets through a BRL 750 million bond issue, which is fully hedged to protect us against any exchange rate fluctuation. This bond matures in 2023 with a coupon of 5.375%. In this quarter, also, we saw further advances in sustainability. With this, let me now hand over to José Filippo to provide greater detail on our consolidated financial performance.
Thank you, Roberto. On slide five, we begin with our consolidated net sales, which stood at almost BRL 2.69 billion in the quarter. On a reported basis, this represents record sales growth of 55.5%, while on a pro forma basis, including The Body Shop in both periods, this represents a healthy year-on-year increase of 11% in BRL. All three brands posted growth in the quarter, with Natura up 6.7%, The Body Shop up 8.5% on a pro forma basis, and Aesop growing by a very strong 30.8% in a constant currency. We will go into this in great detail shortly. On slide six, we look at our EBITDA, which grows by a strong 58.4% on a comparable and pro forma basis in BRL. Just to remind you, in Q1 2017, our reported EBITDA was BRL 365 million.
However, excluding this PIS/COFINS tax reversal of BRL 155 million and including The Body Shop's EBITDA, which was a negative BRL 8.5 million, our comparable and pro forma EBITDA stands at BRL 201 million. On a comparable basis, Natura, The Body Shop, and Aesop all contributed positively to EBITDA in the quarter. Before talking about net income, let me provide some details on slide seven about our financial results. In Q1 2017, we had a positive impact of BRL 106 million from the interest accrual PIS/COFINS reversal. In Q1 2018, our costs related to financing the acquisition of The Body Shop was BRL 95 million, which is fully hedged. So in the comparable financial results, again, excluding The Body Shop related effects, we have a cost of BRL 60.7 million versus BRL 118.6 million in 2017.
Let's turn on slide eight to our consolidated net income, which rose substantially to a net profit of BRL 88 million in Q1 2018 from a loss of BRL 1.3 million in the same quarter last year on a comparable pro forma basis. Again, we are looking at comparable Q1 2017 figures, which exclude the benefit of the tax reversal and include a net loss at The Body Shop, as you can see in the graphic. Similarly, in Q1 2018, our net income of BRL 88.2 million excludes interest of BRL 64 million on costs related to The Body Shop acquisition. Reported net income was BRL 24.4 million. Let me conclude on slide nine with some balance sheet considerations. The free cash outflow in the period was BRL 351 million, in line with our expectations.
This is due to the inclusion of The Body Shop number in a period of cash consumption, which accounts for BRL 124 million. In addition, we had BRL 64 million coming from financing costs related to the acquisition of The Body Shop. Finally, Natura had a temporary increase of BRL 200 million in inventory to roll out its operation plan. As Roberto said in his introductory remarks, we are ahead of our estimates regarding our net debt to EBITDA ratio, which stood at 3.3 times at the end of Q1. Let me reiterate our target to return to a pre-acquisition indebtedness ratio of 1.4 times EBITDA by 2021. One year ahead of our initial plan. At the end of 2018, we expect to improve our net debt to EBITDA ratio. I will now hand over to JP, who will comment on Natura's performance in the quarter.
Thank you, José. Hello, everyone. We begin on slide 11 with our net revenues, which grew by 6% in the quarter to nearly BRL 1.7 billion. This growth was driven both by Brazil and especially by our remaining operations across Latin America. Building on the success of our new relationship selling model, which is driving continued productivity gains. In Brazil, according to Euromonitor, we regained market leadership in the CF&T market in 2017, and our key categories continued to perform well in Q1. Net sales in Brazil grew by 0.8% in the first quarter, or 3% adjusted for the commercial calendar effect. As this year, our Mother's Day campaign shifted to Q2. Consultants' productivity continued to show very strong growth of 21.8%, more than compensating the already expected 18.8% drop in the average number of consultants.
We continue to make further inroads in our multi-channel approach and our online business almost doubled, now accounting for almost 4% of sales in Brazil. As mentioned in previous occasions, our business is becoming increasingly digital, and more than 550,000 consultants are now using our exclusive app that supports their beauty consulting activity. Latin America continues to be a growth engine, with sales up 20.2% on a reported basis and 23.1% at constant exchange rates. We saw very solid growth in Argentina, Mexico, and in Chile. By the way, Chile is the first country to introduce the new relationship selling model and is already seeing encouraging results. The region is also posting significant consultant productivity gains with a 9.5% improvement in the quarter. Let's now turn to slide 12 to Natura's EBITDA in the quarter. On a comparable basis, EBITDA grew by 30.3% in the quarter to BRL 250 million.
Considering that our EBITDA in Q1 of last year benefited from a tax reversal of the PIS and COFINS taxes of BRL 155 million. Our Q1 2018 margin rose 200 basis points to 14.9%. In Brazil, on a comparable basis, EBITDA grew by 9.4% to BRL 187 million, with margin growing by 120 basis points, driven by improved SG&A costs. These figures also exclude last year's PIS/COFINS tax reversal. In Latin America, EBITDA grew by 83.3% and an even stronger 88.7% at constant exchange rates. EBITDA margin improved by 470 basis points to 13.6% from better operating leverage and strict cost control. You know that Natura & Co pursues triple bottom line results. On slide 13, we highlight some advances in sustainability. In Q1, Natura's carbon emissions were ahead of target, benefiting from more favorable category mix and a more efficient order cycle.
Also worth mentioning that The Body Shop has already collected 5.8 million signatures for its campaign to end animal testing on a global scale and is well on its way to achieving our objective of gathering 8 million signatures. As of the end of Q1, Natura has added its voice to that campaign. I will now hand back to Roberto to comment on the key highlights of Aesop's and The Body Shop's performance.
Thank you, J.P. Again, congratulations to you and to all of our Natura associates to a great start of the year in running our Natura business. Let me now talk a little bit about Aesop. On slide 15, Aesop continued its growth story in Q1, as shown on slide 15, which details its net sales. As you see on this graphic, sales rose by a very strong almost 31% at constant currency and an even stronger 39.2% on a reported base in Q1 to over BRL 200 million. Most interesting, on a like-for-like basis, sales were up 18%. Aesop continued its expansion and at the end of Q1, it counted 305 owned retail doors, of which 208 signature stores and 97 counters in department stores. This represents a total of 40 additional points of sales over the past 12 months.
On slide 16, you see also similar strong growth in Aesop EBITDA and margin. At BRL 27 million, EBITDA in Q1 was up by 118.4% at constant exchange rates, while margins grew by 500 basis points to 13.4%. This is very exciting performance. Aesop is steadily contributing to the group growth. Again, I want to congratulate Michael O'Keeffe, CEO of Aesop, and its entire associate group at Aesop for posting such a strong result to start the year in 2018. Let's now turn to The Body Shop on slide 18. In Q1, we already started seeing the initial positive effects of the five-pillar turnaround plan that is being implemented at The Body Shop. On a pro forma basis, net sales were up 8.5% at constant exchange rates and 16.5% on a reported basis to over BRL 800 million.
Let me give you a heads-up that half of this growth is coming from a favorable commercial calendar effect in Q1. This will have an impact in Q2. The remainder was driven by franchise, own stores, and double-digit growth in online in terms of channels. In terms of geographies, growth was driven by India and Asia Pacific, as well the retail channel in North America. The Body Shop ended the quarter with a total of 3,006 stores, with a net reduction of 43 stores, of which 31 owned stores, as we continue to selectively adjust our network. On a positive note, our like-for-like of our own stores grew 5% and our e-commerce grew 20% in the period. On slide 19, let's look at The Body Shop EBITDA. The Body Shop EBITDA stood at BRL 57.1 million in Q1, with a margin of 7.1%.
This compares with a negative margin in Q1 2017. This improvement is largely due to lower discounts and occupancy costs in owned stores and better franchise sales. I also want to take this opportunity and congratulate David Boynton and all of our The Body Shop associates throughout the globe for a very strong start of the year. To conclude, on slide 20, what are the key takeaways of this quarter? First, Natura & Co. is clearly making headway with solid top and bottom line growth in this first quarter. Second, all the three brands and businesses contributed to this solid performance. Natura, as J.P. talked about it, saw a confirmation of its recovery in Brazil as evidenced by its growing market share and regained market leadership in CF&T and continues to expand in Latin America.
The Body Shop's turnaround is already underway, and the teams are fully mobilized around the company's five pillars transformational plan. Aesop continues its growth story. Third, with this solid first quarter performance, Natura & Co. is on track to deliver the medium-term targets we presented recently. Namely, high single-digit growth in net sales and low double-digit growth in EBITDA on a compound annual growth rate basis through 2022. Thank you for your attention, and now we are happy to take your questions.
Ladies and gentlemen, we'll now begin the question and answer session. If you have a question, please press the star key followed by the one key on your telephone now. If at any time you'd like to remove yourself from the questioning queue, press star two. Our first question comes from Guilherme Assis with Brasil Plural.
Hi, good morning, everyone. Good afternoon for those in London. I just wanted to touch a few points here. The first question actually goes to Roberto Marques. Roberto, in your remarks, you mentioned that The Body Shop results were benefited by a positive calendar impact, if I'm not mistaken, right? Can you talk a little bit more about these impacts on the quarter and what should be the impact on the second quarter? If we should expect a lower growth rate for The Body Shop because of that? Also, I think one of the surprises of the quarter was the good margin for The Body Shop. I had the impression that actually, since it was a low seasonality quarter, you're going to deliver a lower EBITDA margin, right, for The Body Shop.
Can you talk about the impact of this potential calendar effect on The Body Shop as well? That's one question. Also, can you also give us a breakdown of how much Argentina represents of your LatAm operations? If you see any risks with the current situation there and the devaluation of the peso for your business. Those are my questions. Thank you.
Hi, Guilherme. Roberto here. I'll start with The Body Shop, and then I'll ask JP to comment on Argentina, specifically for Natura. On The Body Shop, you saw the growth on Q1, which is roughly 8%. We believe half of that was benefit on this commercial calendar year. If you think about it, we're still very confident for the remaining of the year in delivering plans and some of our commitments that we already shared with all of you. Of course, the benefit on this commercial calendar was some of the changes in holidays that benefit The Body Shop globally. Some activities that will pull from end of the year to the beginning of this year that also had a positive impact.
Again, overall, we feel very good about how the business is performing and very confident about this year in terms of the results for The Body Shop. I'll turn to JP to comment specifically on Argentina. Thank you, Guilherme.
Okay. All right.
Good morning, Guilherme.
Hi, J.P. How are you?
We do not disclose the exact size of each operation in Latin America. However, as you know, Argentina is one of the largest CF&T markets in the region, right? Is one where we are very well established for long. Mexico is a larger market, but we have been there for fewer years, right? From that, you can roughly estimate. Now, as it comes to the risks, first of all, let me highlight that not only we are very committed to, but more importantly, grateful for the Argentinian consumers and consultants. They have awarded us an outstanding business. Outstanding business. We are now the third brand in the CF&T market, and we have been gaining market share consistently over the last few years, becoming the preferred CF&T brand in the country. Just to highlight how important it is for our business and for our hearts.
Having said that, the volatility that we are seeing in the economy does not worry us much because it's within the ranges that we had in our plans, and we are fully protected. We are fully protected for many reasons. One is that part of our manufacturing is local. Second is that we also export products and services. Not only importing some goods from Brazil, but also exporting from Argentina. With that said, we are very confident that the risks are fully manageable in the Argentinian business.
Thanks, J.P. I think that's clear. If I could just go back for Roberto for a follow-up. You mentioned that about half of the 8.5% growth was related to these calendar adjustments or change in commercial policies or practice within the calendar. Is it fair to expect then more flattish results for the second quarter, since we should see a comeback of this calendar effect? Also, if you comment a little bit on the impact on the EBITDA margin of these changes as well, because my impression at least is that The Body Shop also not only had good growth, but also very positive margins. I just wanted to have a grasp of how much of these good margins is sustainable as well. That's my follow-up question.
Guilherme, thank you again for the follow-up. We're not going to provide specific guidance for Q2, as you know. Again, what I can tell you is that this is a factor of many other factors on the performance of the sales. Again, fair to say that we shouldn't be expecting an 8% growth on The Body Shop since half of that was the commercial calendar. I can't comment specifically what to expect on Q2 other than, again, as I indicated, we continue to be very confident in The Body Shop performance of this year and probably improving versus prior year, both on top line and bottom line. From a margin perspective, as you know, we are putting a lot of effort on the turnaround plan in terms of really looking at stores that are not profitable, looking our footprint overall.
I think it is expected that we're going to improve margin as we indicated in our guidance for 2022. Our goal is to double the EBITDA margin for The Body Shop, and we are on track to deliver that.
Okay, that's helpful. Thank you, Roberto.
Next question, Robert Ford, Bank of America.
Hey, thank you for taking my questions, and congratulations on the international growth and the underlying improvements. JP, I was very impressed by the expense reductions in Brazil. The sales, marketing, and logistics were down 5.2%. I was curious, is that a timing issue, or is there something structural in the cost structure? Given the competitive dynamics, are you comfortable with your existing brand investments in Brazil, or do you see a need to take some of these savings and redirect them into the brand?
Hi, Bob. Thanks for the question. It's not a temporary effect at all. It already includes also some negative news in it, as mentioned before. I mean, amortization and depreciation costs of intangible assets, which increase, is already embedded in these numbers. You see there, a portion of that has to do with the higher productivity of the new direct selling model that we've introduced, primarily to that, plus some tight management of costs. This is sort of structural levels we should be running at. Now, as it comes to reinvesting, we have already been investing significantly to grow our market position in recent years. The market started the year quite flattish, so to say, and we've increased competitive activity. Having said that, we do think that the current level of investment is enough for us to achieve our planned performance.
We are looking back very closely because I haven't seen so much competitive activity in many years as we saw in Q1 this year.
Yeah, it seems intense, and I think that Avon was indicating that they were down mid to high single digits in Brazil across every CF&T category. I guess in that context, I was anticipating that maybe you'd have an opportunity to take a little bit of market share or a little bit more.
Sorry, Bob. Can you repeat the ending of the question, please?
Oh, I guess from your perspective, do you see an opportunity because of maybe a position of weakness with your biggest direct selling competitor?
Oh, right. Because of their relatively poor results. Yeah, everyone else is very active. As I mentioned, I have not seen so much activity in many years.
That's helpful. Thank you very much. Again, congratulations.
Thanks.
Next question, Marco Calvi, Itaú BBA.
Hi, good morning, everyone. A question regarding the market share in Brazil. You guys showed some figures during the Natura Day showing an increase in market share in Brazil for most of the important lines of products to Natura. My question is regarding what you guys have been seeing during 2018. Is that still happening? Have you guys been seeing an increase in market share gains in the most important line of products? Thank you.
JP speaking. Thanks for the question. Luckily, I cannot disclose and open all the market share, most recent market share numbers at this stage. Having said that, we are working to defend and continue gaining market share throughout this year. Right? So far, there's no reason for us not to believe that we are not going to achieve that.
Okay. Thank you.
Next question, Tobias Stingelin, Credit Suisse.
Yes, good morning to everyone. Just a question, JP. Specifically in regards to the first quarter, there was still kind of a positive impact from the lower taxation on a year-over-year basis of about BRL 23 million, right, which was about 12% of the EBITDA. This effect is kind of going to normalize in the second quarter of the year, right?
Which tax, Tobias?
Taxes. Sorry. If I just look, for instance, if you look at your EBITDA breakdown-
Oh. Mm.
You basically mentioned that about BRL 23 million of the EBITDA growth is coming from lower taxes, from Carga Tributária.
This was basically because of the change in the taxation that was implemented last year, right?
Yeah. Part of that. A significant portion, yes. There are other taxes that we are pushing to optimize going forward.
So-
Yeah, there is an effect in Q1 on that. Yeah.
I'm just looking to understand because if I'm not wrong, this effect will kind of normalize in the second quarter, right? My only concern is here is that in the second quarter, you have comparables, which already include also the lower tax benefit, so you will not see this effect. I'm just trying to see if I'm wrong or if I'm right.
Don't expect any significant change in growth margin for that purpose because there are so many other activities going on. Don't expect any significant swing in growth margin for that.
There should continue to be kind of a positive impact going forward.
Yeah. In second quarter, yes. Tobias, this is Marcel. Sorry. If you are talking about the IPI.
Yes
It started in the third quarter.
Okay. You still have another quarter, which is better.
Yeah.
In the second half of the year, your top line will face tougher comps because of that.
That's it.
Okay, perfect. Just another question is that, given that during the Natura Day, JP mentioned that the number of consultants was expected to stabilize as of now, more or less. Given the strong increase in productivity, should we expect to see a major acceleration in top line in the second quarter?
Well, what I can repeat is that we do expect the number of consultants to stabilize somewhere within Q2, towards the end of Q2. If we manage to continue to deliver an increased productivity, that will reflect on top line. Let's see.
Okay. At the end of the second quarter. Perfect. Thank you.
Next question, Alexandre Roberts, Citibank.
Yes. Hi, everybody. Thanks for taking the questions. I wanted to start with, first of all, top line trends in Brazil, second on the negative free cash flow here. When you look at the top line, I guess it was 1% sales growth, just about, adjusting for the Mother's Day effect, it was 3%. Could you give us a sense of how that top line was among your three categories? I know you've in the past, well, I guess at the end of last year, you were talking about the indications of trading up in toiletries, and I was wondering if you had seen some trading up or there were signs of trading up in the other two CF&T categories. If you could perhaps comment generally on your demand environment. Do you feel like a recovery is firming up?
Do you feel like we're still in transition? That's the first question. I'll come back on free cash flow.
Hi, Alex. JP speaking. Well, as it comes to the demand, I cannot open by category at this stage, but on an aggregate level, as it comes to the demand, what we saw in Q1 is that the market has slowed down quite a lot. Based on external figures, the market has slowed down quite a lot. Is that going to recover? Well, most likely in the second half, our modeling of the market suggests that we'll recover a little bit towards the second half of the year, mainly driven by disposable income of families. This is a variable we have to watch. If that doesn't happen, the market may remain a little bit flat. We'll see. It started very slow.
Okay. Interesting. A follow-up on this, I know you guys kind of relaunched the 19th cycle, right, of the catalog. That I understand was part of the motivation is to kind of have and set up sales for January, or at least stimulate some incremental sales in January. How did that 19th cycle work? Are you happy about the effects and impact, and did it have an influence on this first quarter sales?
No. We add cycles as we see higher activities in the channel, activity levels in the channel. That's what drives us to increase the number of cycles. It helped in Q4. Q1, we basically did some short cycles to adjust the calendar of our activities to sort of the Gregorian calendar. No special reason for driving that additional sales there. I hope it helps, you wanted to ask about the cash flow, isn't it?
Yes. That's right. Thanks. We see this BRL 351 million negative free cash flow. Thanks for breaking it out among the segments. I was just wondering if there was some color that you could give us around for The Body Shop, we saw BRL 125 million of cash burn and then BRL 165 in Natura. What do you think were the drivers behind this? I guess I'm specifically interested in the TBS outflow. Are these movements with some of accounts receivables? Is it some other element around investments, and could this level of outflow that we're seeing here for TBS and Natura continue for a quarter or two or not? Thanks very much.
Hi, Alex. This is Marcel. How are you? Yeah, regarding TBS, it's very seasonal. Indeed, this cash outflow is better than the previous year, so I think we are in a good trend. Regarding Natura, we have, I think, three main effects. One, as JP mentioned, we have a different phasing in the previous year when you compare with this year. The second quarter last year was, how can I say? Not so strong. I think we have difference from last year of this year. Besides that, we have the Latin growth. I think part of these stocks to support the Latin growth. The last one is that internally, we took some measures intentionally to increase our inventory level of some top-selling products in order to reduce the risk of stock-outs.
All of those effects are temporary and I think during the remaining year, we are going to reduce this level of working capital in the two companies, TBS and Natura.
Okay. Thank you.
Our last question comes from Francisco Abelardo, Morgan Stanley.
Hi. Good morning, everybody. Thanks for taking my question, and congrats on the strong results. My question is for J.P., related to the calendar impact in Brazil, related to the change in the Mother's Day campaigns that you mentioned in the press release. Could you try to quantify the impact that you had in the first quarter related to that? Or maybe now that we are close to Mother's Day, how much has been the normalized growth, including the comparable calendars for Mother's Day? Of course, not in terms of numbers, but at least directionally. Are the trends much better or worse or similar than the growth we saw in the second half last year in Brazil? That's my question. Thank you.
Hi, Franco. I think that one of the questions you asked, we have already provided some sort of answer. We said that nominally, the Brazilian operation grew 0.8%, but adjusted for the calendar effect, it would have grown 3%. You can quantify out of that how much actually shifted to Q2, right? Just to take into account the calendar effect. As it comes to the underlying business this year, we are in a much better shape than we were early last year. You followed up with us how the business has improved its health throughout last year. We started to gain share and recover our consultants' productivity. You may recall that Q2 last year, the moment was actually just before the moment we introduced the new relationship sales model.
We were leaving the preparation phase for that, and that we had to hold back a little bit because of that reason. We are, this year, in a healthy position.
Very clear. The second question related to the stores channel. You mentioned that you are preparing expansion to new states or new places, new locations in Brazil. Do you have any guidance in terms of how many stores and which regions you can open those stores this year? Thank you.
Well, I cannot give you the exact numbers, but if you have friends walking around shopping malls, you're going to see already in some of them Natura's signs as we are refurbishing those stores in not only São Paulo and Rio, but also in Curitiba and going to Central West part of the country as well. You will see a much higher activity from now to middle of the year.
Perfect. Thank you.
Excuse me. As we still have some minutes, our next question comes from Olivia Petronilho, J.P. Morgan.
Hi, guys. Thank you for taking my question. I have two questions, actually. The first one is on the new channels. If you can talk a little about the development on the stores and on the online channel, more specific of what you saw in this quarter and what to expect for the year. The second question is a little bit on Brazil top line, going back to the subject. We continue to see the productivity of the sales representatives going up, but still top line is flattish. Just wanted to understand if from here onwards, you wish to see top line growing coming from further productivity, or if these sales representatives are still taking share of those that are leaving the bases. Thank you.
Hi, Olivia. João Paulo speaking.
As mentioned before, it is our intention to recover or continue to gain market share in Brazil. We should grow above market. It certainly is not the nominal 0.8% of Q1 that will deliver that, but we are on track to gain market share once again. Productivity of consultants help, and of course, as mentioned before, we do see a stabilization and modest growth of the channel going forward, which will help. On top of that, the new channels, new for us at least, play an important role, especially the online channel, which is almost doubling year-on-year and already represents almost 4% of sales in our Brazilian operation. That will play an important role. Add to that the stores, but it's a much smaller base, although a much higher growth rate, but on a very small base.
Perfect. Thanks.
Yeah.
Excuse me. 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, sir.
Thank you, Natalie. Again, I'd like to thank you all for participating in this call and look forward to our future exchanges. Let me also remind you that we recently announced that José Filippo will be joining us later this month as a group and Natura CFO, and will be with us on the next call on August 10th. I also want to take this opportunity and thank José Filippo for helping us throughout this transition. Thank you, everybody, and have a great weekend. Thank you.
That concludes the Natura audio conference for today. Thank you very much for your participation. Have a good day.