Sprouts Farmers Market closes $600 million revolving credit facility
Intercos Spa reported robust financial performance for Q1 2025, with notable growth in sales and adjusted EBITDA. Despite a challenging market environment, the company demonstrated resilience, achieving a 13% increase in sales and a 41% rise in adjusted EBITDA. The stock currently trades at $14.82, showing signs of recovery. According to InvestingPro analysis, Intercos maintains a "GOOD" financial health score, with multiple positive indicators including strong liquidity and moderate debt levels. The company’s current valuation appears to be near its Fair Value, suggesting balanced market pricing.
Key Takeaways
- Q1 FY2025 sales grew by 13%, with a significant boost in the makeup category.
- Adjusted EBITDA increased by 41%, enhancing the company’s profitability.
- Intercos achieved over €150 million in rolling 12-month revenue for the first time.
- The skincare category faced challenges, particularly in the US and China markets.
- The company maintains a cautious outlook due to geopolitical uncertainties.
Company Performance
Intercos demonstrated strong performance across various product categories and geographical regions. The makeup category led the growth with a 23% increase, while the hair and body category also showed high single-digit growth. However, the skincare segment experienced a decline, attributed to market challenges in key regions like the US and China. Geographically, Asia and the Americas were significant contributors to growth, with Asia achieving an 18% increase.
Financial Highlights
- Revenue: Increased by 13% in Q1 FY2025.
- Adjusted EBITDA: Rose by 41%, reflecting improved operational efficiency.
- EBITDA margin: Gained 225 basis points, indicating enhanced profitability.
Outlook & Guidance
Intercos confirmed its guidance of achieving growth above market trends, projecting a 5-7% increase at constant exchange rates. The company remains cautious due to geopolitical uncertainties and potential tariff impacts, yet it remains confident in its full-year performance. Strategic initiatives, including geographical diversification and supply chain optimization, are expected to mitigate risks.
Executive Commentary
Renato Senerari, CEO of Intercos, emphasized the company’s ambition to outpace market growth, stating, "We want to grow twice as fast as the market." He acknowledged the challenges posed by global volatility, noting, "The world has become more and more volatile. Doing projections is becoming tougher and tougher." Senerari also highlighted the company’s readiness to adapt, saying, "We are ready to put in place mitigation plans, leveraging our global footprint."
Risks and Challenges
Intercos faces several risks, including:
- Geopolitical uncertainties that could affect market stability.
- Potential tariff impacts on supply chain dynamics.
- Challenges in the skincare market, particularly in the US and China.
- Volatility in the broader beauty market, which could affect growth projections.
Intercos’ Q1 2025 performance underscores its strong market position and ability to navigate a challenging environment. While the stock’s decline reflects broader market concerns, the company’s strategic initiatives and focus on innovation position it well for future growth.
Full transcript - Intercos Spa (ICOS) Q1 2025:
Chorus Call Conference Operator, Chorus Call: Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the InterCo’s First Quarter twenty twenty five Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.
Should anyone need assistance during the conference call, you may signal an operator at the star and zero on the telephone. At this time, I would like to turn the conference over to mister Renato Senerari, CEO of Interco. Please go ahead.
Renato Senerari, CEO, InterCo: Good evening, everybody, or good morning if you’re connected from US. I’m very happy to show you the results of our first quarter this year in an extremely volatile geopolitical environment and challenging market dynamics, Intercost posted its fourth consecutive quarter of double digit growth. Our sales grew 13% in the quarter with the EBITDA, adjusted EBITDA up by 41 and the margin, EBITDA margin gain of 225 basis points. Important to note, at least for us, that on a rolling twelve months basis is the first time we crossed the €150,000,000 bar. In terms of net debt, we had a slight increase in terms of net debt, which is led by CapEx due to the well communicated roadmap of plant expansion that we have started a few months ago.
Now going more into the details of our sales performance looking at business units, our growth was driven by our core category makeup, which posted an excellent plus 23%. All regions were up, including Asia. There was the euro last year in terms of growth for this category. Multinational in terms of clients showed a very strong growth, especially in prestige segment. So we see makeup growing 23 followed by air and body, which was our second best contributor, maintaining a very strong high single digit trend, driven in this case by air care with fragrances flat in the quarter.
Skin was the only declining category. This was the only category facing a tough comp of last year when we grew 22% versus 02/2023. Asia and Europe were performing well for skincare, but we saw a contraction from US clients. I remain extremely confident that in the remainder of the year, we will see good numbers coming also in skincare. Looking now at the performance by region, I’m very happy to underline that all our regions posted double digit increases.
The euro was once again Asia despite the fact that we had very high comps of last year where we posted a plus 24%. Also this year, we posted plus 18% with both Korea and China performing extremely extremely well. America was the second contributor to our growth, and this was mainly led by makeup with also some positives coming from hair care. Europe posted a plus 10%, which was mostly driven by makeup once more and slightly also from makeup, which was positive in the quarter for this region. Looking at numbers by customer type, our growth was driven by multinationals, first and foremost, but also retailers performed very well.
Multinational posted a plus 28%, as I said earlier, was mainly from prestige clients, but not only. And this was also positive in terms of mix for our EBITDA margin. As for the retailers, we posted a plus 16% after several quarters. Actually, the whole year last year was difficult for retailers. But this year, we profited from the solution of problem that I had highlighted last year, especially of one client that was in financial difficulties that are now sold and this retailer has come back strongly in our numbers.
Emerging brands was a bit the surprise after many, many quarters of consecutive double digit growth. Emerging brands were flat this quarter facing plus 15% of last year. Again, this is a group of clients that has driven exponential growth in the recent past. So a bit of consolidation is pretty normal in this phase of business. Now looking forward, we continue to be focused on the key trends of the company.
Number one, innovation. We have seen in the course of the first of the first quarter many clients. We had about 450 clients visiting our Cosmos of stand or our reporter in Agrate during the Cosmoprof season with very strong feedbacks on the innovation plan that we presented to clients. So I’m particularly confident on the innovation and the potential of business that this will drive in the months and years to come. Second strength is our diversification.
And especially, I think that it’s not a surprise for anybody that the geographical diversification is becoming more and more important. And this time is not only for agility reasons or environment related reasons, but more substantially because of duties and trade wars that are ongoing since the beginning of the year. So all this, I think, puts us in a strong position in the mid long term. And this is very reassuring about the performance that we can project for the company. This being said, for the time being, we confirm the guidance we have highlighted during our last call for a growth above market trend between plus five and plus seven at constant FX rates.
As you have seen, it’s very volatile also the current see trends. So it’s very difficult to understand what can happen on that front. Last point to conclude my brief presentation, as you know, we have already disclosed the fact that we’re not going to communicate on orders entry any longer, but I want to reassure everybody that the order entry trend continues to be extremely solid. The four months that we have in our back are a record high for the company. So no alarm sign coming on that front either.
That’s all I had planned to say to you. I’m ready to take your questions.
Chorus Call Conference Operator, Chorus Call: This is the Chorus Call conference operator. We will now begin the question and answer session. Please pick up the receiver when asking questions. The first question is from Pilevo from Morgan Stanley. Please go ahead.
Hi. Good evening. Thanks for taking my questions. The first question is just on your margin. So, obviously, margin was up a lot year on year compared to quarter impacted by the cyber attack, but was below 2023 levels.
Could you just talk about the moving parts there relative to 2023? I how much of that delta is just related to sort of an increased proportion of packaging, or are there any other factors there? And how does that feed into your expectations for EBITDA for the full year? And then there’s my second question on the emerging brands performance that you mentioned. So, obviously, a weak performance for emerging brands in The US, but it seems that multinationals performed well across regions.
Is that a trend that you’re observing in The US beauty market overall as multinationals proving more resilient than the smaller emerging brands? Or is that more to sort of specific to your particular set of customers? And is there any impact from that on your profitability, the difference between doing business with multinationals versus emerging brands? Thanks very much.
Renato Senerari, CEO, InterCo: Hi, Katie. Thank you very much for your questions. First of all, margins evolution, now it’s true that we had the cyber attack last year affecting our marginality, but we shouldn’t forget that we are coming out of a period where the mix has changed quite significantly and the packaging component has become more important. Now those clients have not faded away, so that has a carryover effect in the sense that that, you know, different split of clients and businesses is still valid. So, you know, it’s last year, we declined 30% in EBITDA.
This year, we grew 41%. I see still it as a positive rather than a negative. So there isn’t a magic one change in terms of mix. There is an improved performance on marginality based on relatively stable mix of orders. Trend of emerging brands, well, it’s a bit different, difficult to say whether there is a a, you know, change of trends that will substantially see a modification of things.
I I I must say that I’m very happy to see multinationals coming back. They’ve been the bulk of our business for many, many, many years. We still have very good trends in Asia where emerging brands are particularly strong. They continue to go very well. I’m talking about the local, especially the local Chinese brands.
So this is all coming positively. Now we have a number of emerging brands that had exponential growth in the past years that are now has taken the size where continuing to grow at the speed that they had is becoming a bit more challenging. There is also in The US a bit of a, let’s say, cautious approach because nobody knows exactly how to dance in this volatile geopolitical environment. So it’s not surprising that they are taking a bit more of a conservative approach on how to move forward and and what place orders they have to place. So I think that is a bit too early to assess whether there’s gonna be a fundamental change in terms of trends going forward.
So let’s see what happens in the in the coming months. But all in all, I must say that emerging brands continue to have a significant portion of the pie. In terms of difference of marginality between multinationals and emerging brands, There isn’t a clear difference between the two. It all depends what kind of emerging brands, what kind of multinationals, how they’re buying, are they buying pre issue, or are they buying in full service with packaging. So it’s a mixed bag of things.
The difference can be seen on a client and product basis. You won’t see a difference all in all by cluster of brands. So I wouldn’t conclude absolutely on the fact that seeing growth from multinationals and stability from emerging brands is a good thing or a bad thing. It’s neither of the two. The important thing is that we have an healthy underlying business with both of them and hopefully, with a higher share of free shoes, so no packaging related orders because that, yes, makes the difference in terms of marginality.
I hope I’ve answered your questions, Dizzy.
Chorus Call Conference Operator, Chorus Call: Yes. That’s great. Thank you very much.
Renato Senerari, CEO, InterCo: Thank you.
Chorus Call Conference Operator, Chorus Call: The next question is from Francisco Grilli of Intermont. Please go ahead.
Francisco Grilli, Analyst, Intermont: Yes. Good evening. Can you hear me?
Renato Senerari, CEO, InterCo: Yeah. Yeah. Sure.
Francisco Grilli, Analyst, Intermont: Okay. Thanks for the presentation, and good evening to the national team. Just a couple of questions from my side. First question is on makeup. If if you can help a little bit on on understanding the underlying growth rate of the category that you’re expecting going forward that are having in mind that the growth posted in this quarter was announced by the companies where makeup was particularly impacted by by the cyber attack.
So what what are your expectation also going forward also in terms of of mix for of clients for this category? And and the second one is if you can help us with with some reference to to to understand or try to assess the potential impacts from from the current scenario of of tariffs worldwide based on on your current production footprint and and deliveries?
Renato Senerari, CEO, InterCo: So, Francesco, thank you for your questions. Okay. Now makeup, yes, you are absolutely right. This is the category that was most affected by the cyber attack. So it’s not very surprising to see it growing at such a fast pace.
I would like to remind everybody though that also the last quarter of last year saw double digit growth from makeup. So overall, the trend of makeup is is very promising. Now difficult to give you an estimate of what is the growth rate expected for makeup in the remainder of the year. You know, the world has become more and more volatile. Doing projections is becoming tougher and tougher to be very transparent.
I’m very confident that makeup will grow faster than the market. This is something that, as you well know, we are committed to do year on year. We want to grow twice as fast as the market. And I think that we are well positioned to achieve this goal also this year. Again, there will be swings, there will be instability in the short term relay and this is a good bridge to your second question related to tariffs, especially in in US because the impact of tariffs on U.
S. Productions is big. So although in the mid long term, our position and our footprint allows us to find the best solution for our clients in order to minimize impacts from duties, and and this is a significant competitive edge even more than in the past, I would say, today. In the short term, it it creates instability and changes in the flows of goods that will create some turbulence in the short term. So this will have an impact.
I would expect it to have an impact, especially in the next quarter. And then going forward, we we have several plans to optimize things. Now this is depending on what is going to happen in reality with tariffs, And I wish I could give you some more precise answers because it would mean I know what’s the plan. And the plan, I think nobody knows what it is in reality. So we need to see what happens in July, which are the countries that will be impacted.
We in relative terms to what was announced in the Liberation Day, and that will will create some further adjustments to to the sourcing plans of different brands. So what we are seeing today is, you know, some insecurity and some, let’s say, conservatism on the client side in placing orders where because they don’t know exactly what’s going to happen in the next few weeks. So there will be an impact short term probably. We will minimize. Now we have been very clear in telling that to clients that we’re gonna pass on the impact of duties that we have to pay for their supplies.
But on the other hand, we’ve also reassured them that we are ready to put in place mitigation plans, leveraging our global footprint so that we can minimize going forward the impact of tariffs. This is always based on the fact that at one point, there will need to be clarity on what’s going to happen on that front.
Francisco Grilli, Analyst, Intermont: Yeah.
Renato Senerari, CEO, InterCo: I’m sorry for the answer which is pretty vague, but honestly, I I have no crystal ball and it’s it’s going to be difficult to give you a more precise answer till we know exactly what is going to be done.
Francisco Grilli, Analyst, Intermont: Yeah. Thank you. Thank you very much.
Chorus Call Conference Operator, Chorus Call: The next question is from David Hayes from Jefferies. Please go ahead.
Renato Senerari, CEO, InterCo: Thank you. Just give me sorry, David. Sorry to interrupt you, but we hear you very, very far away, so it’s very difficult to hear you. Is that better? Just be quiet.
A lot better. Thank you so much.
David Hayes, Analyst, Jefferies: Sorry for that. Apologies. Apologies. Three questions for me if I can actually. So on the first one, just on just following up on that last answer on tariffs.
Just to understand, was there some inventory building by customers in the first quarter, and now you’re seeing them buying less as we go into the second quarter, and they’re waiting to see where tariffs end up, or or was there no real impact in terms of customer buying behavior from the tariffs in the first quarter? But the second question is just on the outlook. You didn’t mention the cash we grow as a 4% even though you kept your guidance for your own performance. Was there a reason for leaving that out? Is there is there less visibility on the cash we grow than
Renato Senerari, CEO, InterCo: you saw back in March?
David Hayes, Analyst, Jefferies: Or is it or was there a note here? It was just just not in there this time. And then the last one was just on the skin growth recovery. You’re you’re confident of that recovery happening. Is is that just the the comp dynamic that you talked about?
Or is there reasons that you think from an outlook perspective, the underlying demand will will improve? Thanks.
Renato Senerari, CEO, InterCo: Okay. Thank you, David. First answer on tariffs, no. We have seen no orders increase as a way to preempt the impact of tariffs. And and the reason is pretty simple.
It was so immediate that, you know, if anybody had any visibility on it, the moment they place the order, then it takes at least three weeks to get goods from China. So they would have paid tariffs no matter what. So, no, there was no speculative inventory build in the first quarter because of that. Now is there more conservatism going forward? Yes.
We are seeing although we don’t see that in the order intake yet, but when we speak to clients, we see them being worried about tariffs and and being worried on the impact and how they should act on prices to compensate for for these tariffs. Again, difficult for the brands as it is for us to put in place a strategy. We have a number of options available. But, you know, to change the flow of goods or to change the pricing, all this needs some structural thinking and strategic thinking and structural movements that do not happen overnight. So it’s it’s obviously a bit more complicated to put them in place.
So it’s easier to put a blackboard with discount prepaid that much and the other one pays that much than finding a solution and putting it in place. So I think that everybody is watching and we will be acting we as we go along in in as soon as we have more visibility. Category growth, while the category is not going very well in general, the market is not going very well. What we had highlighted in previous calls is is still valid, which means China is still flattish or slightly declining. Europe has decelerated, although it’s still it’s still slightly growing.
I think that the the the biggest surprise is that what we had expected was the rebound of The US market. This has not happened yet. And I think that the uncertainty related to the actions that the administration is putting in place are kind of hindering what was historically the trend of the presidential election. I still believe that we will see brighter second semester, but, you know, I think that a 4% growth in the year is is already, I would say, more on the optimistic than in the conservative side. So confirming our guidance clearly points to our will to grow faster than the market.
Skincare, I continue to be positive because I’m seeing the interest of clients. I’ve seen the interest of clients to our innovation during CosmoProf. There are a number of new projects that are boiling, and they will be coming in in the second part of the year. The first quarter decline was mostly driven by iCombs on one side and a couple of important clients that had not placed high orders in in the recent past. But, you know, the order inflow we see coming is pretty positive.
So I’m I’m confident that we will see King coming back.
David Hayes, Analyst, Jefferies: Great. Thank you so much.
Chorus Call Conference Operator, Chorus Call: The next question is from Kate Rusanova from UBS. Please go ahead. Good afternoon all. Thank you for taking my questions. So I just had a couple of follow ups.
So firstly, it would be great if you can help us unpack the growth in hair and body. You mentioned that fragrances were stable versus last year. Appreciate you had a very strong growth last year, but we keep on hearing from other beauty players that the category is doing very well. So I’m just wondering, you know, if there are some market share issues on both in the banner side or if there is any other reason for that. And also, since fragrance is particularly heavy on packaging, do you expect to see a positive impact on your margins for the remainder of the year?
And also, I just wanted to check on the currency trend that you mentioned. If you were to take current spot rates, what impact do you expect to have on your top line versus last year from that? Thank you.
Renato Senerari, CEO, InterCo: Hi, Kate. I’ll answer to the first question, and then I’ll I’ll leave the second question to my currency specialist. In Air and Body, yes, you’re right, the category, I mean, going well is a bit of a statement, but it’s a it’s a segment that is holding better than other segments. That is true. It is also true that in the past, we had some important clients and especially the one you mentioned that not only had to supply the demand, the the end consumer demand, but also had to fill the pipeline of distributors and retailers with their goods.
So they were building stocks for themselves. So they were, you know, building a distribution network and a safety stock in there without this to get to a more normal supply trend. So Dolce Gabbana, as far as we know and we can see from the numbers, is doing well in terms of sellout. We have no worries related to that, but the pipeline phase of their adventure is over and that had to come to an end at one point in time. And so the comps is high also because of that factor.
In terms of marginality, Air and Body, as, you know, as you know, is the the number one issue is the business model. It’s not only packaging. Packaging is an important component, but there is the component of contract manufacturing where marginality is lower than on innovation where where we own the IP of the formulas. So I don’t expect any revolutionary change in terms of marginality. I think that it will be, you know, in the core, meaning the same trend as as in in in the past.
Currency trend, I don’t know, Stefano, Andre, you want
Francisco Grilli, Analyst, Intermont: Well, you know, you have seen in the first quarter, we
Renato Senerari, CEO, InterCo: are coming from a quarter where we had a positive impact from the exchange rate. First of all, so looking at at the full year, you need to consider this. Second of all, you know, if we look at the twelve months forward consensus of the exchange rate, we see that we are still within the guidance. Now, you know, we believe it’s a bit unfair, and we didn’t do the exercise on the spot today, spot exchange rate because it wouldn’t have made any sense, to be honest. So looking at the forward and the consensus and the split of the currencies within our top line, we are we are within the guidance that we have provided to you.
Chorus Call Conference Operator, Chorus Call: Thank you. For any further questions, please press and one on your telephone. The next question is a follow-up of Francisco Brilli of Intermonte. Please go ahead.
Francisco Grilli, Analyst, Intermont: Yep. Yes. Just just a quick follow-up on on just one thing. You you mentioned last conference call that you had an ongoing some some projects into enhanced productivity and we that would have been positive for margins going forward. Are these still in place and did your I mean, accounting on them to to enhance this year marginality?
Renato Senerari, CEO, InterCo: Yes. We do have those still in place, and we are working to make them happen. Obviously, when you talk about industrial productivity, they are not things that happen in half an hour. They take investments. They take time to put them in place.
So they will have more impact in the second part of the year than in the first part of the year, but we are working behind that. Obviously, you may see shifts happening this year related to the different plans fixed cost absorption depending on how we will need to modify our production flow to minimize the tariffs. So if I may say in this moment, the number one worry we have or things that occupy our days is to see how we can make movements in our flow of goods to minimize the impact of tariffs more than working on the industrial optimization flow, which is still going on, but maybe wiped away if in one plant you have a lot less volume than what you had before. Again, there are investments that are connected to these programs, so we need to to put them together with the rest of the considerations before we implement and we put money on the table.
Francisco Grilli, Analyst, Intermont: Yeah. Very clear. Thank you.
Chorus Call Conference Operator, Chorus Call: For any further questions, please star one. The next question is from Misha Omanovsky from BNP Paribas. Please go ahead.
David Hayes, Analyst, Jefferies: Hi. Just one quick follow-up for me, please. On profitability, if my understanding is correct, previously, you suggested that we will we would likely see some improvement in EBITDA margin for the full year. Now I understand there is obviously a lot of uncertainty right now, but as things stand now, do you think that for the full year, you would still be able to expand margins year on year? Thanks.
Renato Senerari, CEO, InterCo: Hi, Misha. Yes. I do expect to see an expansion of margin in the course of the year. Obviously, there are a bit more question marks than what I had when I last spoke about that. But I’m pretty confident this will still be the case.
Again, you know, I think that the next quarter will be pretty rough because of all the moving parts and understanding how to dance in this new environment. But, you know, structurally, I think that we are well equipped to make that happen.
David Hayes, Analyst, Jefferies: Right. Okay. Thank you.
Chorus Call Conference Operator, Chorus Call: The next question is from Kate Usanova. It is a follow-up from UBS. Please go ahead. Oh, hello. Yes.
Me again. I just wanted to come back on the current discussion. And my question is related to your skincare business in The US because you do not have a skincare plant in there. So I just wanted to check, you know, what impact you expect from that? What measures you were taking to, you know, offset any kind of negative impact from tariffs on on particular skincare business in The US?
Renato Senerari, CEO, InterCo: Okay. Very difficult to give you an answer on that. Yes. We do not have a plan for skincare in The US. Is this a disadvantage in the mid long term?
Probably, yes. That’s why we’ve been working relentlessly to find a solution to that. I’m not sure in the short term, this will be a negative because in reality, it depends on how tariffs will be applied on different countries. To be clear, if we stay with a 10% duty from Europe, I don’t think that we will see any impact in reality because, you know, we are talking about a marginal price increase for brands to offset that that duties. If it goes to, I don’t know, 25, 30 percent, then it’s it’s it’s a different it’s a it’s a different story.
Again, the bulk of our business in skincare is not from US. It’s from Asia. No problem on that front. It’s from Europe. No problem in that front.
So it’s we’re talking about a relatively small part of our skincare business, and it all depends on what is gonna be decided in in terms of duties from Europe mostly. Duties from Europe, from Korea, from the places where we are currently sourcing things.
Chorus Call Conference Operator, Chorus Call: Thank you very much. Very clear. For any further questions, please press and one on your telephone. Gentlemen, there are no more questions registered at this time.
Renato Senerari, CEO, InterCo: Okay. If there are no more questions, I thank everybody, and have a good evening. Thank you. Thank you.
Chorus Call Conference Operator, Chorus Call: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
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