CGS-CIMB expects InNature’s strong sales recovery from 4QFY21 onwards

KUALA LUMPUR: CGS-CIMB Securities Sdn Bhd expects a strong sales recovery in InNature Bhd from the fourth quarter financial year 2021 (4FQY21) forecast onwards, driven by the strong recovery in mall traffic in light of upcoming festivities.

In a note yesterday, the research firm said InNature is one of the few major cosmetics and personal care (CPC) retailers that remained profitable in 2020-2021 (during the Covid-19 pandemic).

This can be attributed to its early investments in beefing up its omnichannel distribution system, which helped to shore up sales despite the various lockdowns and store closures, and prudent cost management.

“We expect the group to post stronger results from 4QFY21 onwards due to strong recovery in mall footfall post reopening on Oct 11, 2021, majority of its store base resuming full operation across its three operating countries; and ability to capitalise on major festive sales,” it said.

InNature plans to increase selling prices in the calendar year 2022 forecast (CY22F) in view of rising commodity prices and elevated freight costs in a bid to protect margins and this bodes well for sales.

Given the strong brand equity of The Body Shop (TBS) and its sizeable loyal customer base who are mostly in the middle to high-income segment, the research firm believes InNature can pass on the higher input costs with ease as we estimate that 60 to 70 per cent of sales are made by repeat customers.

“We turn positive on InNature given its plans to raise prices, which will protect margins, and better-than-expected sales contribution from its omnichannels,” it said.

In addition, the research firm said InNature will adopt a more careful approach in store expansion and InNature also aims to expand its remote selling channels, which have been instrumental in ensuring profitability.