BeFra Battles Currency Headwinds: Is This a Buy at These Levels?

The first quarter of 2025 has been a rollercoaster for BeFra, the multibillion-dollar direct selling giant with operations in Mexico and the U.S. The company reported a 2.9% year-over-year revenue decline, driven by macroeconomic storms in its core markets. But here’s the twist: this isn’t just a story of falling sales—it’s a tale of resilience, strategic bets, and a management team fighting to turn the tide. Let’s break it down.

The Challenges: A Perfect Storm

BeFra’s struggles start with Mexico’s weakening economy. The Mexican peso has plummeted 20.3% against the dollar since last year, turning imported goods into financial grenades. For a company reliant on imported raw materials, this has sent costs soaring. Add to that slumping consumer confidence—discretionary spending in Mexico dropped, and BeFra’s Betterware division saw a 9.8% revenue nosedive as shoppers tightened their belts.

Meanwhile, in the U.S., Jafra faced its own hurdles. A rocky start to the year with Shopify+ platform glitches and political uncertainty dragged down sales, though a 27% sales surge in March (the best since 2023!) hints at a rebound.

The numbers are stark:
- Gross margin fell 353 basis points, as pricing hikes to offset costs backfired, killing demand.
- Net income plunged 48.7%, though currency hedges and lower interest rates softened the blow.

But here’s where it gets interesting: BeFra isn’t just surviving—it’s striking back.

The Silver Lining: Aggressive Moves to Win Back Control

1. Inventory Overhaul:
   Betterware Mexico is aiming to slash excess inventory by 52% by year-end (from Ps.529M to Ps.252M). This is critical—Ps.190M in inventory buildup contributed to negative free cash flow in Q1, but management insists this is a strategic bet on future growth.

2. Cost Optimization:
   The company is exploring Southeast Asia as an alternative to China for sourcing, aiming to cut costs and avoid trade tensions. Meanwhile, Jafra Mexico is overhauling its product mix, balancing affordability with margin health.

3. Market Expansion:
   While Betterware’s U.S. operations are on pause (due to tariffs and weak sentiment), Ecuador’s launch in May 2025 and Guatemala’s recovery signal growth opportunities. Jafra’s U.S. turnaround—driven by a new compensation plan and catalog redesign—could be the next big catalyst.

4. Dividend Discipline:
   Despite Q1’s cash flow struggles, BeFra proposed a Ps.200M dividend, betting that normalization is just around the corner. This confidence isn’t unfounded: the net debt-to-EBITDA ratio remains at 2.08x, within target ranges.

The Bottom Line: Is BeFra a Buy?

Let’s cut through the noise. BeFra is facing headwinds, but here’s why it’s worth considering:

• Agility in Adversity: This isn’t BeFra’s first rodeo. Past downturns (remember 2008?) saw the company emerge stronger through cost discipline and innovation. The current moves—inventory slashing, geographic expansion, and operational streamlining—are textbook Cramer-esque “action items.”

• Margin Recovery Potential: While gross margins took a hit, Jafra US’s 42.5% EBITDA improvement (excluding one-time costs) shows that efficiencies can turn the tide. If the peso stabilizes and consumer sentiment rebounds, margins could snap back.

• Dividend Signal: The proposed dividend isn’t just a payout—it’s a vote of confidence in BeFra’s ability to generate cash long-term. With a high single-digit revenue and EBITDA growth target for 2025, this isn’t just a holding play—it’s a growth story waiting to ignite.

Risk Factors? Absolutely. The peso’s volatility, U.S. regulatory delays, and lingering consumer caution could prolong the pain. But at current levels, BeFra looks like a high-risk, high-reward bet for investors willing to ride out the storm.

Final Verdict: Hold for Now, but Keep an Eye on These Triggers

BeFra’s stock is a wait-and-see story. Hold if you own it, but only buy if you see these green lights:
1. Peso Stability: A rebound above Ps.20 vs. the dollar would ease cost pressures.
2. U.S. Expansion Restart: Betterware’s return to the U.S. market (post-tariff clarity) could be a game-changer.
3. Cash Flow Turnaround: Positive free cash flow by Q3 would validate management’s “temporary” narrative.

For now, this is a company that’s fighting back, not folding. But the knockout punch? It’s still months away.

Investment Takeaway: BeFra’s Q1 results are a mixed bag, but its proactive strategy and dividend discipline suggest it’s a hold with upside potential—provided the company can navigate its macro hurdles. Keep watching those currency trends and inventory metrics—they’ll be the scorecards that decide this fight.