Betterware de Mexico released its first quarter financial results for 2022. Included in the report was the company’s expectations for a long-term growth and commercial strategy that will combat the softer economic environment in Mexico and the effects of inflationary pressures.
In the first quarter, the company managed cost increases and recovered profit margins, which they described as an illustration of the model’s adaptability amid challenging market conditions. The company continues to have confidence in its long-term strategies, which include 40% household penetration in Mexico by 2025.
To support distributors, the company announced it will launch the Betterware+ app next month, along with the first version of its “Natural Language Processing” technology. Betterware also plans to revise its three-year innovation development focus to make sure it capitalizes on its existing core categories, while addressing new categories and concepts. They will now strengthen the “to go,” home renovation and home organization categories, with an exploration of the smart home, home restoration and other categories.
“The strength and resiliency of our asset-light business model combined with the successful execution and agility with which we operate our strategy served us well in the first quarter, driving significant recovery in gross profit margin and EBITDA margin compared to the fourth quarter of 2021,” said Luis G. Campos, Betterware de Mexico Executive Chairman of the Board. “Furthermore, we were able to navigate the environment well, offsetting cost pressure, commodity price inflation and supply chain disruptions while implementing and developing innovative product, pricing, and growth initiatives. To this end, we focused on innovation planning to introduce new categories and concepts; we will launch Betterware+ App in May providing our associates and distributors with enhanced tools to grow orders while elevating their rewards program. We were also delighted to announce the closing of the acquisition of Jafra on April 7th, which expands our category and geographic reach. While we expect the overall economic and operating environment to remain tenuous, we remain confident that our strategy and the discipline with which we execute has us positioned to adapt to market conditions as they develop and deliver improving trends in the second quarter and as the year progresses for the organic business. Overall, we are still excited by the growth potential we see for our business long term and expect our strategy to result in increased value for all Betterware stakeholders.”
Net revenues decreased 36% within the first quarter, but the company expected this dip, given that the same quarter of 2021 was the company’s strongest in history. On average, the company had 48.1 thousand distributors, a 24% decrease from the same quarter last year, and 997.8 thousand associates, a 20% decrease from the same quarter in 2021. This lower number, combined with a mild decline in their activity levels when compared to last year’s quarter, was offset in part by a higher average price per SKU sold.
Gross margin in the first quarter increased to 63.6% from 57.5% in Q1 2021, majority of which was derived from a 12% product price increase, efficient cost management and preplanning for freight expenses. Full year gross margins are now expected to be within the range of 58%-60%.
EBITDA decreased 41% year-over-year, but the previous year’s quarter, which saw the highest EBITDA level in company history, provided a tough comparison base. Net income suffered a similar fate, decreasing 58% after last year’s 339% net income growth rate.