Betterware de Mexico released its first quarter financial results for 2022. The report included the company’s expectations for long-term growth and a business strategy that will combat Mexico’s economic slowdown and the effects of inflationary pressures.
In the first quarter, the company managed cost increases and recovered profit margins, which it described as an illustration of the model’s adaptability in difficult market conditions. The company continues to be confident in its long-term strategies, which include 40% household penetration in Mexico by 2025.
To support distributors, the company announced that 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 goal to ensure it capitalizes on its existing core categories, while addressing new categories and concepts. They will now bolster the take-out, home improvement and organization categories, with an exploration of smart home, home restoration and other categories.
“The strength and resilience of our asset-light business model, combined with the successful execution and agility with which we execute our strategy, served us well in the first quarter, driving a significant recovery in gross profit margin and EBITDA margin compared to the fourth quarter of 2021,” said Luis G. Campos, Executive Chairman of the Board of Betterware de Mexico. “Furthermore, we have been able to navigate the environment well, offsetting cost pressures, raw material price inflation and supply chain disruptions while implementing and developing innovative products, awards and growth initiatives. To this end, we have focused on innovation planning to introduce new categories and concepts; we will be launching the Betterware+ app in May, giving our associates and distributors enhanced tools to increase orders while enhancing their rewards program. We were also delighted to announce the closing of the Jafra acquisition on April 7, which expands our category and geographic reach. While we expect the overall economic and operating environment to remain precarious, we remain confident that our strategy and the discipline with which we execute positions us well to adapt to market conditions as they develop. and show improving trends in the second quarter and as the year progresses. for the organic business. Overall, we continue to be excited about the growth potential we see for our business over the long term and expect our strategy to translate into increased value for all of Betterware’s stakeholders.
Net revenue was down 36% in the first quarter, but the company expected the drop given that the same quarter of 2021 was the strongest in the company’s history. On average, the company had 48,100 distributors, down 24% from the same quarter last year, and 997,800 associates, down 20% from the same quarter in 2021. This lower number, combined to a slight decline in their business levels compared to last year’s quarter, was partially offset by a higher average price per SKU sold.
Gross margin in the first quarter increased to 63.6% from 57.5% in the first quarter of 2021, most of which came from a 12% increase in product prices, effective cost management and pre-planning of transportation expenses. Gross margins for the full year are now expected to be between 58% and 60%.
EBITDA was down 41% year over year, but the prior year quarter, which saw the highest level of EBITDA in company history, provided a base solid comparison. Net income suffered the same fate, declining 58% after last year’s net income growth rate of 339%.