Betterware de México's Q1 2025: Navigating Contradictions in Inventory Strategy, Consumer Behavior, and Market Conditions

Inventory levels and strategy, macroeconomic conditions and consumer behavior, U.S. business strategy, inventory strategy and consumer behavior, market and economic conditions are the key contradictions discussed in Betterware de México's latest 2025Q1 earnings call.



Revenue Decline and Operational Challenges:
- Betterware de México reported a 2.9% decline in consolidated net revenues for Q1 2025 compared to the previous year.
- The decline is attributed to macroeconomic challenges, including soft consumer trends in Mexico, disruptions in U.S. consumption, and increased tariffs in China, where 80% of their Betterware products are manufactured.

Gross Margin Contraction and Foreign Exchange Impact:
- The company's consolidated gross margin declined by 353 basis points, primarily due to a 20% depreciation of the Mexican peso.
- This increased the cost of imported goods and raw materials, affecting Betterware's profitability and leading to a decrease in sales volumes and increased promotional investments.

EBITDA and Profitability Decline:
- EBITDA decreased by 29.1%, with EBITDA margin falling to 15.3% for the quarter.
- The decline was driven by weaker sales volumes, compressed gross margins, and promotional expenditure, particularly at the Betterware Mexico business unit.

Inventory and Cash Flow Management:
- Free cash flow was negative for the quarter, partly due to increased inventory levels in Jafra Mexico related to brand renewal and innovation strategies.
- The company expects these inventory levels to decrease in future quarters, as they prioritize normalizing cash flow generation.

Dividend and Financial Position:
- Despite the challenges, the company maintained a healthy financial position with a net debt to EBITDA ratio of 2.08.
- The Board of Directors proposed a Ps. 200 million dividend for Q1 2025, aligned with their strategy to strengthen free cash flow for future growth opportunities.