AVP Avon Products Inc

The global beauty company, Avon Products Inc. (AVP) commenced fiscal 2013 on a strong note by posting adjusted earnings per share of 26 cents for the first quarter owing to better-than-expected bottom-line results. Additionally, the company’s earnings substantially surpassed the Zacks Consensus Estimate of 14 cents, while it surged over twofold from the comparable year-ago quarters’ earnings of 10 cents.

However, on a reported basis, the company reported a loss of 3 cents per share for the first quarter compared with the year-ago earnings of 6 cents.

Total revenue for the quarter declined 4% year over year to $2,483.7 million compared with $2,575.4 million a year ago. However, on a constant currency basis, total revenue remained flat year over year. Further, total revenue missed the Zacks Consensus Estimate of $2,515.0 million. During the quarter, the company registered an increase of 3% and 1% in price/mix and active representatives, respectively, while total units declined 3%.

Avon, which competes with Inter Parfums Inc. (IPAR), Nu Skin Enterprises Inc. (NUS) and L'Oreal SA (LRLCY), registered a revenue decline in its Beauty Products and Fashion categories, where sales decreased 5% and 4%, respectively. However, sales at the company’s Home category business improved 8%. The decline in Beauty revenues was primarily due to short fall in its color, skincare and personal care products.

Adjusted gross margin of this Zacks Rank #2 (Buy) company expanded 160 basis points year over year to 62.5%, on account of lower freight and material costs and improved productivity. Adjusted operating margin improved 450 basis points to 8.3%, attributable to higher gross margin, reduced advertisement expenses and lower professional fees.

Region-wise Performance

In the quarter, Avon’s revenues in Latin America remained flat while on a constant currency basis it increased 7% year over year to $1,144.4 million. On a currency neutral basis, revenues at Brazil, Mexico and Venezuela increased 11%, 3% and 3%, respectively. Units sold were down 2% during the quarter, while Active Representatives grew 4% year over year.

In North America, sales skidded 15% year over year to $406.2 million, mainly due to a fall in Active Representatives. At Silpada, sales were down 18% as average orders and Active Representatives declined. Units sold for the region waned 13% year over year, while Active Representatives slipped 13%.

The beauty product manufacturer’s revenues in Europe, the Middle East and Africa inched up 1% year over year to $733.1 million, primarily due to improvements in units sold and Active Representatives. Regional breakup shows that sales escalated 3% in Russia, while revenues in UK, Turkey and South Africa declined 9%, 2% and 11%, respectively. Avon registered a 4% increase in Active Representatives, while units sold were up by 4% during the quarter.

The Asia-Pacific division’s revenues dipped 10% to $200.0 million. The region marked a 4% decline in Active Representatives and an 11% fall in units sold. Country wise, the region recorded a 30% and 1% revenue decline in China and Philippines, respectively.

Other Financial Details

The leading global beauty company exited the quarter with cash and cash equivalents of $1,488.4 million, long-term debt (excluding current maturities) of $2,685.5 million, and shareholders’ equity of $1,177.9 million.

Moreover, earlier this morning, the company announced a quarterly dividend of 6 cents, which is payable on Jun 3, 2013 to shareholders of record as on May 14.

Headquartered in New York City, Avon directly sells cosmetics, fragrances, toiletries, jewelry, and accessories. The company markets around the world through 6.2 million independent sales representatives and is the world’s largest direct seller.

 
AVON PRODS INC (AVP): Free Stock Analysis Report
 
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