She might be really hurt and start to question her self - worth. Maybe she becomes more withdrawn and less confident in herself.
Sakura could react angrily. She might confront Naruto immediately and demand an explanation. She's a strong - willed character, so she may not just take such an insult lying down. She could also try to prove Naruto wrong by showing off her skills or her inner beauty in some way.
He could also get angry. After all, being misjudged like that is unfair. His anger could lead him to either lash out verbally at Sakura or he could leave the village in a fit of rage, feeling that he is not accepted even by his friends. This could then lead to a series of events where Naruto has to find his own way and Sakura realizes her mistake later on.
Well, it could be that in this fanfiction, Naruto has some sort of hidden agenda. He might call Sakura ugly as a form of reverse psychology. He could be thinking that by doing so, she'll prove him wrong and become more confident. Or perhaps there's some miscommunication or misunderstanding between them. For example, Naruto misheard someone talking about Sakura in a negative way regarding her looks and he wrongly believes it, so he says she's ugly.
She might be heartbroken. Sakura could initially be in shock and then fall into a deep sadness. She may blame herself for Naruto's leaving, thinking that she could have done something differently.
Sakura could initially be shocked and then try to change herself. She might think that if she becomes more like what Sasuke wants, he won't find her annoying anymore. So she could start to be more reserved and less pushy in her interactions with him.
She could be heartbroken. Sakura has always loved Sasuke deeply, so his leaving for Naruto would be a huge blow to her. She might initially be in denial, not believing that Sasuke would choose Naruto over her.
He might be really hurt. Naruto has always been an outcast and being called a demon again could reopen old wounds. So he could just stand there in shock and disbelief, his eyes wide with pain.
She may feel angry at first. Sakura is a strong - willed character. She might think that Naruto has made this decision without considering her feelings. In the fanfic, she could go on a rant about how he should have talked to her before making such a big decision.
Naruto might be very forgiving right away. He has always had a big heart and cared deeply for Sakura, so he could just accept the apology with a big grin and say it's all in the past.
Naruto could also feel a deep sense of hurt. After all, he has been through a lot with Sakura. In the face of her betrayal, he might start to question his own judgment of people. However, being Naruto, he would not give up easily. He might try to find a way to redeem Sakura or at least make her see the error of her ways. He would draw on his own experiences of being ostracized in the past and use that to try to understand her actions and find a solution.
She might be confused at first. Sakura is used to Naruto being friendly and now his coldness would be a big change. She may start to question what she did wrong.