Avon turnaround on track as company posts Q3 profit


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Avon turnaround on track as company posts Q3 profit

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Avon Products has made progress in its turnaround bid by posting third quarter net income attributable to the company of $91.4 million, versus a loss of $5.5 million a year earlier.

The New York-headquartered firm has been implementing its cost saving initiative and other strategies to aid the turnaround; and it seems to be paying off, with the EMEA region a particular highlight.

It posted total revenue of $2.1 billion for the third quarter, an 8% decrease, but an increase of 1% in constant dollars. Beauty sales declined 9%, but increased 1% in constant dollars.

"We began the year with the expectation that the second half of 2014 would show improvement relative to the first half and Avon's third-quarter results are consistent with modest improvement on both top and bottom line,"​ said Sheri McCoy, Chief Executive Officer of Avon Products.

"We saw good results from our EMEA region, while a sluggish performance in Brazil contributed to softer results in Latin America. Despite the strong headwinds in a number of markets, we continue to make progress on Avon's turnaround journey."

Russian boost

EMEA was the Q3 stand-out performer as constant-dollar revenue increased, thanks to higher average order and an increase in active representatives.

Growth in the region was largely driven by Russia where revenue was up 4%, or 14% in constant dollars, primarily due to an increase in active representatives and higher average order, reflecting actions to drive unit sales in Beauty.

South Africa also felt the benefit of more Avon reps with revenue up 13% in constant dollars, although Turkey revenue was down 1% in constant dollars, primarily due to a decrease in seller numbers.

LatAm stalling

Over in Latin America, which in the past has been a good performer, particularly in make-up, there was a slight decline in color in Brazil which saw Beauty sales decrease 4%, as the country’s revenue remained relatively unchanged in constant dollars due to a challenging macroeconomic environment and high levels of competitive activity.

Mexico revenue declined 6% on a constant-dollar basis, due to a decrease in Avon reps, partially offset by higher average orders.

Rep decrease effect

It was a similar story in North America and Asia-Pacific as a decrease in rep numbers took its toll on a number of markets, but was partially offset by higher average orders.

In North America units sold declined as constant-dollar Beauty sales and Fashion & Home sales both declined 15%.

In APAC, third-quarter constant-dollar revenue increased due to higher average order which was driven by an increase in units sold, with the only downside coming from the aforementioned rep situation.

Revenue in the Philippines was up 5% on both a reported and constant-dollar basis, and revenue in China also increased on both a reported and constant-dollar basis, thanks to an increase in units sold, due to the comparison with a year ago when the company took actions to reduce inventory levels held by the beauty boutiques.

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