Avon says PHL revenue down on unfavorable factors

Posted at 08/02/14 10:06 AM

Avon Products Inc. (API) reported on Thursday second-quarter 2014 results “were tough…as anticipated,” with its Philippines operations reflecting most of the company’s worldwide operations.

“As anticipated, our second-quarter results were tough. While Avon’s turnaround remains challenging, we are putting the people and processes in place to lay the foundation for returning Avon to sustainable, profitable growth,” API CEO Sheri McCoy was quoted in a statement as saying.

In her conference call, McCoy said that API posted a 13-percent decrease in total revenue for the second quarter of 2014 to $2.2 billion.

“Total units decreased 6 percent and price/mix was up 3 percent during the quarter. Active Representatives were down 6 percent, while average order increased 3 percent,” the company said in a statement.

Worldwide, beauty sales declined 13 percent, or 3 percent in constant dollars, while fashion and home sales declined 15 percent, or 5 percent in constant dollars, API added.

“In Asia-Pacific, revenue declined 9 percent on a constant dollar basis,” McCoy said in her conference call.

“Active Representatives declined 8 percent, while units were down 5 percent. Adjusted operating margin was 0.9 percent, down 540 basis points.”

McCoy said the decline in the adjusted operating margin in API’s Asia-Pacific business “was due to the impact of lower revenue on our fixed cost, as well as lower gross margin, due to unfavorable currency and unfavorable price/mix in the Philippines.”

“Asia-Pacific, overall, remains challenging, and we expect results to remain soft in the near term.”

In her conference call for the first quarter, McCoy said Asia-Pacific is a small portion of API’s business, “but should be a bigger contributor to Avon’s overall performance.”

“We see this region as a source of longer-term growth; however, our initial focus is on simplifying and stabilizing the existing business.”

In the first three months of the year, API also posted a revenue decline of 10 percent from its Asia-Pacific operations.

In the first quarter, “Philippines revenue declined 1 percent on a constant dollar basis, due to a lower number of Active Representatives,” McCoy has said.

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