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.”
@kering_official is spinning off its stake in puma in an effort to focus on its luxury brands, the brand operator announced yesterday. “We are proud to have supported the turnaround of Puma, which now has unrivaled capabilities to take full advantage of the specific dynamics of its global markets and is poised to achieve substantial growth,” said François-Henri Pinault, Kering’s chief executive officer and chairman. Artémis will become a “long-term strategic shareholder” of Puma with a 29 percent stake. #wwdnews #wwdfashion (📷: @jilliansollazzo)
The fashion world mourns for celebrated street style photographer, Nabile Quenum, who died at age 32 in Paris.
Quenum, creator of the fashion blog “J’ai Perdu Ma Veste,” was a fashion week fixture, and regularly shot for New York magazine’s The Cut, among other outlets, and brands such as Louis Vuitton, Moncler and Adidas. He was also actively involved in the #NoFreePhotos initiative, which kicked off in the fall. Read more about Quenum in @kbsmoke's story on WWD.com. #wwdnews
@verwanggang and @maisonladuree have teamed up on a dessert collab called Vera Wang Pour Ladurée. The collection, which launched this week, features a specialty macaroon, as well as a wedding cake inspired by one of the designer’s gowns. “I could not imagine a more delicate or sophisticated creation to grace any couple’s celebration,” said Wang. #wwdfashion
“I’m Russian and I love to use all these little tricks that I got from my grandma or my mom. We didn’t have a lot of money for creams or anything like that so we would use a garden as a beauty treatment regime. We’d put cucumber in the fridge and do a cucumber mask,” says model @irinashayk on one of her beauty hacks. WWD asked celebs what their go-to self-care rituals are. See what Naomie Harris, Freida Pinto and more said on WWD.com. #wwdeye #wwdbeauty (📷: @zefashioninsider)
Exclusive: @viktorandrolf are teaming up with @Zalando on a collection made from leftover clothing. The lineup, which lands at the retailer February 1, includes 17 pieces adorned with sliced up and repurposed overstock from the retailer’s private label collection. Pictured here is a look from the collection –– see more on WWD.com. #wwdfashion #wwdnews
@duewestnyc is the newest bar joining the collection of intimate neighborhood-focused spaces in the West Village. The cocktail menu, which includes bitters and syrups made in-house, offers a “Build Your Own Old-Fashioned” – like the one pictured here – where guests can choose from a list of spirits and unexpected sugars and bitters. #wwdeye
Spotted at last night’s National Board of Review gala in NYC: Angelina Jolie. Jolie – along with Meryl Streep, @lupitanyongo and more – continued the all-black dress code from Sunday’s Golden Globes. #wwdeye (📷: @lexieblacklock)