Natura profits slump 92% in Q2 2026 as Brazil business comes under pressure
Natura’s profits have slumped more than expected due to pressure on its business in Brazil, as a result of operational challenges, temporary tax effects and the macroeconomic environment.
Net income from continued operations at the Avon Latin America-owner was R$35m in the three months to the end of June 2026, down 92% from R$446m in the same period last year.
This was mainly driven by a decline in Brazil, where the beauty business was impacted by costs from settlements, currency movements and severance costs from its new operating model.
João Paulo Ferreira, CEO of Natura, said: “The operational challenges in the quarter stemmed from necessary adjustments to pave the way for future business growth, such as investments in digital and logistics capabilities, and the realignment among direct sales, online, and franchise channels, although product shortages were greater than initially anticipated.”
Across the business, revenue was R$5.2bn in the second quarter, down 9.1% year-on-year (YoY) as the performance in Natura’s Hispanic business failed to offset declines in Brazil.
Revenue in Brazil, which is Natura’s largest market, was down 14.8% YoY.
This was mainly affected by “product unavailability which, compounded by a challenging macro, drove a volume decline in the relationship selling channel and pressured performance for both Natura (-14.5%) and Avon (-22.5%)”, the statement said.
Digital and retail channels also came under pressure due to the implementation of “a new harmonised pricing policy and commercial rules across channels”, as well as the transition of all its franchise contracts to a new model.
Hispanic markets revenue was broadly flat YoY, and up 7.2% on a constant currency basis, driven by 12.3% growth from the Natura brand and 4.7% growth from Avon.
The performance was driven by “consistent progress” in Mexico and a continued recovery in Argentina.
“Q2 2026 results revealed greater-than-expected operational challenges in Brazil, which were amplified by the macroeconomic environment,” the company said in a message from management published with its financial results.
“However, efficiencies from the new operating model, combined with a healthy gross margin, kept the region’s profitability in the mid-teens – or high teens when excluding the temporary impact of indirect tax changes in the State of São Paulo.
“Conversely, performance improved across both revenue and profitability in the Hispanic markets.
“On a consolidated basis, operational challenges in Brazil weighed more heavily due to its significant share of the overall business.
“Nevertheless, backed by its resilient business model, the company generated positive cash flow to firm in Q2 2026 and achieved a slight quarter-over-quarter reduction in leverage.”
Natura said in July that it was facing an impact in the second quarter of the year.
Reiterating its plans for tackling the issues – which includes rebalancing its supply chain in the second half of the year, sales incentives for high-turnover categories and rapid store openings – Natura expects a return to growth after what it described as the temporary setback.
Ferreira said: “We have a business built on strong brands, distributed through a unique model in high-potential markets, and backed by a committed, innovative and execution-driven team.
“This is a powerful combination designed to deliver consistent financial growth, high margins, and strong returns.”