Since her arrival in April, Avon Products Inc. chief executive officer Sheri McCoy has worked to wring out costs, and the strategy seems to have put the company on more solid ground.
“We have early signs of stabilization in some key markets, a strong management team in place and a disciplined approach to cost and cash management,” McCoy told analysts during the company’s earnings call on Tuesday. “We have a lot of work to do, and as we move forward into 2013 there are likely to be a few bumps along the way. But with that said, I’m confident that we’re in a good position to continue making progress toward our goals.”
In the fourth quarter, the company’s net loss attributable to Avon widened to $162.2 million, or 37 cents a diluted share, compared with a loss of $400,000, or nil on a per-share basis, in the year-ago period. The quarter ended Dec. 31 included a restructuring charge of $58 million related to Avon’s cost-cutting plan, which has included trimming head count by about 1,500, closing several distribution centers and exiting both South Korea and Vietnam.
Adjusted earnings of 37 cents a share came in 10 cents better than the 27 cents analysts projected.
The company’s total revenue in the quarter declined 1.3 percent to $3 billion, from $3.04 billion, but ticked up 1 percent in constant dollars.
The results sent Avon’s shares up 20.3 percent to $20.79 on Tuesday.
Avon Beauty sales declined 2 percent, or gained 1 percent in constant dollars. On a reported basis, fragrance was flat, color and personal care declined 1 percent and skin care declined 5 percent.
The company’s U.S. business remained a drag on earnings. Total revenue in North America decreased 12 percent to $516.2 million, driven by a decline in active representatives and the Silpada jewelry business, which declined 18 percent. Avon said it is exploring “strategic alternatives” for Silpada, which the company acquired in 2010 for $650 million. Silpada generated $155 million in sales in 2012, according to Avon.
Kimberly Ross, Avon’s executive vice president and chief financial officer, acknowledged that North America “remains challenging,” noting that new products and holiday offerings failed to resonate with consumers. “We need to improve our marketing and merchandising execution.” She later added, “This is a complex business and it will take time to fix, but we are committed to taking whatever steps are necessary to return the U.S. market to health.”
McCoy said the company aims to “slow the decline” in the U.S. and make it less of a drag on earnings while continuing to shift its focus to developing markets. Asked by an analyst if Avon would consider exiting the U.S., McCoy said Avon is focused on “optimizing our geographies and understanding the role that each of the geographies plays” and then investing behind faster-growing markets.
Across Avon’s remaining regions, sales for the quarter in Latin America gained 2 percent to $1.33 billion; sales in Europe, the Middle East and Africa increased 1 percent to $905.8 million, and in Asia-Pacific, sales declined 3 percent to $246.6 million. Avon continues to struggle in China — with revenue sliding 23 percent — where the bulk of its business is done through a beauty-boutique-selling model.
During the call, McCoy was asked to also defend the direct-selling model in Asia. She responded, “Asia is certainly a very important region.” Citing macro factors such as population growth, she added, “We have an opportunity to do a lot more there. If you look at competition, there are a number of very successful direct sellers, and direct selling makes sense and works there.…Certainly I have my sights on Asia-Pacific. Right now we’re stabilizing some of our other key markets.”
For the year, the net loss attributable to Avon was $42.5 million, or 10 cents a diluted share, compared with a gain of $513.6 million, or $1.18, in the prior year. Total revenue declined 5.1 percent to $10.72 billion, compared with $11.29 billion.
Ross said, “Looking forward to 2013, we remain focused on driving sales, operating profit and cash flow improvement. We are managing to a very conservative level of sales growth, and we are putting measures in place to drive the necessary sustainable recovery, but we aren’t going to get ahead of ourselves until we witness clear signs of sustainable improvement in key markets.”
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews