Avon struggles continue as losses mount

Avon struggles continue as losses mount

In a continuation of its recent poor performances, Avon again announced a quarterly loss with its most recent, second-quarter statement.

The beauty player, which divested its North American operations last year in a bid to turn around its struggling performance, also warned on its outlook for the rest of this year.

"Second-quarter performance fell below our expectations as we cycled a strong quarter last year.  As previously guided, we expect the second half to yield a stronger performance based on our exciting product innovation plans and other initiatives to increase Representative activity," said Sheri McCoy, Chief Executive Officer, Avon Products, Inc.

"We continue to implement the strategies defined in our Transformation Plan to better meet the needs of our Representatives and continue progress towards delivering sustainable profitable growth in the longer term."

On the back of these results, the company has announced that McCoy will be stepping down as CEO next spring.

UK move: limited improvement

 Avon Products shifted its international headquarters to the UK in the past year, and is moving to reduce its workforce by 2,500 as part of its transformation plan for the ailing business.

These efforts built on its spin-off of the Avon North America business, after its divestment to Cerberus Capital Management was cleared by regulators, creating a separate business.

“The company has struggled to compete in recent years, as direct selling has slipped in importance in many of its key developed market,” research provider Euromonitor International said of the firm towards the end of last year.

In these second quarter results for 2017, the following are headline stats and figures:

  • Revenue decreased 3% to $1.4 Billion; Decreased 4% in constant dollars
  • Operating Margin decreased 430 bps to 2.3%; Adjusted Operating Margin decreased 230 bps to 5.0%
  • Diluted Loss Per Share From Continuing Operations of $0.12; Adjusted Diluted Loss Per Share From Continuing Operations of $0.03

Avon notes, however, that it believes it is on track to achieve its 2017 cost savings target of USD 230 million.

Halfway through the plan period, the Company has seen solid progress against its first two pillars. In 2016, the Company generated approximately $120 million of cost savings and improved financial resilience by significantly strengthening the balance sheet as it lowered debt by approximately $260 million and extended its maturity profile.

“In 2017, the Company's cost savings target is $230 million, which includes both run-rate savings from 2016, along with in-year savings from current year initiatives. Based on savings realized through the first half of 2017, the Company believes it is on track to achieve this target. These savings have helped offset the impact of inflation.”

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