www.avoncompany.com
Corporate Sales: $10 billion
Beauty Sales: $7.3 billion
Key Personnel: Sheri McCoy, chief executive officer; Robert Loughran, acting chief financial officer; Pablo Munoz, senior vice president and president, North America; Brian Salsberg, senior vice president, global strategy.
Major Products: Direct sell color, fragrance, skincare and personal care products, including Avon Anew, Anew Clinical, Anew Genics, Clearskin Professional and Avon Solutions, Outspoken fragrances by Fergie, Derek Jeter fragrances, Hervé Léger Homme, Step into Sexy, Rare Diamonds, Eternal Magic, Far Away.
New Products: Ultra Color Bold Lipstick, Big & Daring Volume Mascara, Avon Luck fragrance, Anew Clinical Skinvincible/E-Defense Deep Recovery Cream and Multi-Shield Lotion (SPF 50), Avon Papaya Whitening Cleanser, Clearskin Liquid Extraction Strip, Totally Kissable Lipstick, True Color Eyeshadows, Advance Techniques Hair Strengthen and Protect Collection.
Comments: While certainly not an upbeat year for Avon, CEO Sheri McCoy, said 2013 was an important one in the company’s route to a turnaround. But the numbers didn’t necessarily back up the progress made. Total corporate revenue of $10 billion decreased 6%, or1% in constant dollars, from the previous year. Beauty sales declined 7%, or 2% in constant dollars, partially due to unfavorable foreign exchange. Total Beauty sales reached $7.3 billion. Even Active Representatives dwindled 2% although average orders increased 1%.
On the upside, McCoy said that in 2013, the company improved performance in Brazil and Russia, two of its largest markets. She also said Avon’s financial performance and capital structure were in better shape than before. With a continued drive to cut costs, they had managed to achieve about one-third of their three-year, $400 million savings goal. They also exited several small, underperforming markets.
As far as Beauty category performance, 2013 saw a small growth in Fragrance, as well as some progress in Color Cosmetics. Avon continued its drive in skincare where they believe they have good potential for growth, especially due to anti-aging and other “first-to-market” technologies.
Overall, Beauty declined 7%; Fragrance, 4%; Color, 6%; Skincare, 12%; and Personal care, 7%.
Constant dollar revenue was impacted by net declines in North America and Asia Pacific; however, these declines were partially offset by improvements in Latin America and Europe, Middle East & Africa. Growth in Latin America was driven by Brazil and Venezuela mostly due to inflationary pricing. In Europe, Middle East & Africa, growth was driven by South Africa, Russia and Turkey, which was partially offset by a revenue decline in the UK. North America experienced deteriorating financial results, primarily as a result of the decline in Active Representatives. Asia Pacific’s revenue decline was mostly due to continuing weak performance of Avon’s China operations and operational challenges in the Philippines.
Sales in Latin America reached $4.8 billion, 3% lower than the year before due to the unfavorable impact from foreign exchange, including the Venezuelan currency devaluation. On a constant basis, revenue grew 6%.
In Europe, Middle East & Africa, sales declined 1% to $2.9 billion. Avon also closed all operations in France at the end of 2013.
North American sales experienced a dramatic double-digit drop, falling 17% to $1.5 billion. Sales from beauty products declined 19%, due in large part to skincare losses.
Sales also fell dramatically in Asia Pacific, down 16% to $758 million. The decline was driven by the unfavorable results of Avon’s China operations and a decrease in Active Representatives in the other Asia Pacific markets. The region’s revenue was also negatively impacted as a result of Avon’s decision to exit the South Korea and Vietnam markets.
McCoy conceded that the company’s future success depends on their ability to improve financial and operational performance and to fully execute their global business strategy.
During the early part of 2014, Avon signed a deal with its one-time bidder Coty, to distribute fragrances in Brazil through its representatives. The company also formed a partnership with the Greek brand Korres, which granted the direct seller the exclusive right to develop and market Korres products in Latin America.
In June, tennis star Maria Sharapova signed with Avon as the face of Avon Luck, a pair of fragrances for women and men.
But things didn’t turn around as fast as McCoy had hoped. In June 2014, Avon cut 600 additional jobs, after reporting a net loss of $168-million in the first quarter, dragged down again by plunging sales in North America.
At the end of the second quarter, in July, things looked even grimmer, with a 40% decline in quarterly profits. Avon blamed increased competition in key markets such as Latin America and the U.S. Still, McCoy tried to remain optimistic, stating: “As we move to the second half of the year, we continue to expect improved performance.”
The goal of achieving mid-single-digit growth by 2016 hinges on having a strong U.S. market. Improving Avon’s American business is the company’s number-one priority this year, she said.
Just when it seemed things couldn’t get worse came word that Avon’s executive vice president and chief financial officer had resigned effective October 2, 2014. Kimberly Ross had joined Avon in 2011. The news left Wall Street even less confident of a recovery.