Natura's Brazil Miss Traces to an ERP Rollout, Not a Demand Slump

Natura &Co's Brazilian home market did not merely soften in the second quarter of 2026: the company's own results show it was disrupted from the inside. Consolidated net revenue fell 9.1% year on year to BRL 5.17 billion, but the drag was concentrated in Brazil, where revenue dropped 14.8% to BRL 3.07 billion, a decline the company traces less to consumer pullback than to a stock shortage triggered by its own rollout of the SAP S/4 manufacturing system.

An ERP migration, not a demand shock

CEO Joao Paulo Ferreira told analysts the shortfall centered on a severe product shortage that occurred in the second half of the quarter while the company was implementing its new S/4 SAP manufacturing system. He was explicit that the disruption originated inside the company, not with suppliers: the rollout exposed flaws in an already deployed planning system, and it hit hardest where Natura depends most on physical stock, its network of door-to-door beauty consultants, who cannot sell what is not in the catalog van.

The problems were internal, it was not a break in the supply chain; suppliers had no issues, it was internal.

The brand-level numbers show where the damage landed. In Brazil, the Natura brand's revenue fell 14.5% year on year and Avon's fell 22.5%, both steeper than the market-wide 14.8% figure, a pattern consistent with a supply problem rather than a broad falloff in shopper interest. The company separately flagged a one-time tax mismatch that further pressured Brazil's EBITDA margin, which still held at 16.4%.

A second, unrelated self-inflicted cut

Layered on top of the ERP problem, Natura was mid-transition on its Brazilian franchise contracts, moving stores to a sell-out model that pays based on actual consumer purchases rather than shipments. Franchisees temporarily cut their own purchase orders while adjusting to the new terms, adding a second source of reported-revenue softness with no connection to underlying demand.

The contrast abroad

Natura's Hispanic America division, covering Latin American markets outside Brazil, ran the opposite pattern: revenue rose 7.2% in constant currency, with the Natura brand up 12.3% and Avon up 4.7%, while the region's EBITDA margin expanded 220 basis points to 7.6%. Consolidated EBITDA margin still rose 470 basis points sequentially from the first quarter, to 12.0% (13.2% excluding the tax item), even as net profit fell 82% year on year to BRL 35 million.

• Free cash flow to firm: BRL 342 million, positive
• Net leverage: 2.06 times EBITDA, down slightly from the prior quarter

Management told investors it expects the Brazilian stock shortage to normalize before the holiday selling season, so the test of this explanation arrives over the next two reporting quarters. If Brazil revenue rebounds once inventory is restored, this quarter reads as an execution failure the company created and can fix. If it does not, the operational-adjustments framing will look like cover for a deeper demand problem.

Sources: Natura &Co (PR Newswire)