Avon Products Inc. (AVP) swung to a first-quarter loss as the
door-to-door cosmetics vendor recorded charges related to
restructuring, extinguishment of debt and the devaluation of
Venezuelan currency, though adjusted earnings beat Wall Street
expectations.
"Our first-quarter results reflect continued signs of
stabilization, including early progress in our cost reduction
efforts," said Chief Executive Sheri McCoy, adding that while she's
pleased with the performance of the company's Latin America and
Europe, Middle East and Africa regions--particularly in Brazil and
Russia--there remains work to be done in Avon's other markets,
particularly in the U.S.
Avon has faced deep investor dissatisfaction in the past year as
it failed to deal quickly with poor results in important overseas
markets, as well as a messy federal probe into allegations of
bribery of officials overseas.
The company is reassessing its long-range business plan, and
earlier this month said it will cut its global headcount by more
than 400, restructure or close certain operations in Europe, Middle
East and Africa, and exit the Ireland market as part of a broader
plan to save costs in order to stabilize results in the near
term.
Avon characterized those actions as a bid to take the focus off
certain smaller, underperforming markets and instead concentrate on
high priority markets, with the moves bringing the company's total
cost savings to about $115 million to $120 million on an annual
basis, or about 29% to 30% of Avon's target.
Those moves come in addition to the elimination of 1,500
positions and exiting from the South Korea and Vietnam markets,
plans which the company announced in December.
For the latest period, Avon reported a quarterly loss of $13.7
million, or three cents a share, compared with a year-earlier
profit of $26.5 million, or six cents a share. Excluding
restructuring charges, a one-time charge to the devaluation of
Venezuelan currency, and other items, earnings totaled 26 cents a
share.
Net sales fell 4% to $2.43 billion.
Analysts polled by Thomson Reuters recently forecast earnings of
14 cents a share on $2.51 billion in sales.
Sales in the main beauty business fell 5% to $1.77 billion.
Sales in Latin America--which accounts for the bulk of the
company's business--were flat at $1.14 billion.
Last week, the company said chairman and longtime board member
Fred Hassan resigned, continuing a leadership turnover at the
company one year into Chief Executive Sheri McCoy's tenure. Avon
named current board member Douglas Conant as its new chairman,
effective immediately.
Shares ended Monday at $22.24 and were inactive premarket. The
stock is up 3% in the last 12 months.
Write to Anna Prior at anna.prior@dowjones.com
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