Natura (NATU3) Faces Ongoing Avon Challenges in 2025: CEO Warns of Repositioning Delays

• Why Is Avon Dragging Down Natura's Performance?
• What's the Timeline for Avon's Turnaround?
• How Did Natura Achieve Its Q2 Profit Surprise?
• What's Next for Natura Investors?
• Natura (NATU3) 2025 Outlook: Your Questions Answered

Natura & Co's (NATU3) financial performance continues to feel the weight of its Avon acquisition, with CEO João Paulo Ferreira projecting difficulties throughout 2025. While the company reported a surprising Q2 profit turnaround, analysts remain cautious about Avon's drag on operations. The Brazilian beauty giant is now racing to complete Avon International's sale within 12 months as it struggles with brand repositioning that won't bear fruit until 2026. Meanwhile, Natura's Core brands show resilience, with Brazil operations growing 10.3% and Spanish-speaking Latin America surging 17.8%.

Why Is Avon Dragging Down Natura's Performance?

The numbers tell a sobering story: Avon Brazil sales plummeted 12.9% year-over-year, while international operations continue burning cash. CFO Silvia Vilas Boas revealed the company's net debt/EBITDA ratio hit 2.2x due to Avon International's struggles - well above the 1-1.5x target range management promises to achieve by year-end. "It's like trying to run a marathon while carrying a backpack full of bricks," remarked one São Paulo-based analyst who asked not to be named. The bright spot? Natura's namesake brand is picking up the slack, with innovation pipelines flowing while Avon undergoes its painful transformation.

What's the Timeline for Avon's Turnaround?

Ferreira laid out a clear but protracted roadmap during Tuesday's earnings call. The much-touted Avon repositioning won't deliver results before 2026, meaning 2025 will remain messy. "We're essentially rebuilding the entire innovation funnel from scratch," he admitted. On the M&A front, auditors have officially reclassified Avon International and CARD operations as "held for sale," with deals expected within 12 months. A dedicated team of financial and legal experts is evaluating strategic alternatives, though Ferreira declined to name potential suitors. Market reaction was brutal - NATU3 shares plunged over 5% by early afternoon trading as investors digested the news.

How Did Natura Achieve Its Q2 Profit Surprise?

The second quarter brought a dramatic reversal: R$195 million net profit versus R$859 million loss in Q2 2024. Adjusted net income reached R$598 million, with recurring EBITDA hitting R$796 million (14% margin). But peel back the layers, and the picture gets complicated. Revenue actually dipped 1.7% in BRL terms (though up 5.5% in constant currency), revealing the strain of Argentina's volatility and Mexico's Onda 2 integration. "This is classic 'good news, bad news' earnings," noted the BTCC research team. "The kitchen sink quarter included R$403 million in non-operational adjustments - great for cleaning up the balance sheet, but it masks ongoing operational challenges."

What's Next for Natura Investors?

All eyes now turn to the Avon International divestment. Successful execution could dramatically improve Natura's capital structure, while delays WOULD prolong the pain. The company's guidance suggests confidence - maintaining full-year leverage targets despite Q2's spike. But with Avon Brazil's struggles continuing and the international sale process still opaque, analysts recommend caution. "We're in the 'show me' phase with management," said one fund manager holding NATU3 shares. "The 2026 timeline for Avon's repositioning feels distant when you've got quarterly results swinging hundreds of millions."

This article does not constitute investment advice. Market data sourced from TradingView and company filings.

Natura (NATU3) 2025 Outlook: Your Questions Answered

When will Avon stop hurting Natura's results?

CEO Ferreira expects Avon-related challenges throughout 2025, with repositioning benefits not materializing until 2026. The international sale could provide earlier relief if completed within the 12-month window.

Why did Natura shares drop despite the profit turnaround?

Markets focused on the quality of earnings (heavy non-operational adjustments) and ongoing Avon uncertainty rather than the headline profit number.

How is Natura compensating for Avon's weakness?

The CORE Natura brand delivered 10.3% growth in Brazil and 17.8% in Spanish-speaking Latin America, offsetting Avon's declines.

What's the biggest risk for NATU3 investors?

Execution risk around the Avon International sale and whether Avon Brazil can stabilize before 2026's repositioning.