Avon 4Q net income disappoints
NEW YORK, United States
Avon Products Inc’s fourth-quarter net income slipped 15 per cent as sales declined in several large countries, including Brazil and Russia.
Results missed analyst expectations. Shares fell four per cent in premarket trading.
Avon, which sells makeup and skin-care products using local independent salespeople, makes about 80 per cent of its revenue outside of North America.
“As we closed out the year, we continued to experience disappointing sales results which were negatively impacted by service disruptions in Brazil and weak performance in Russia,” CEO Andrea Jung said.
It was the second consecutive quarter of disappointing results from Brazil, usually a stronghold for Avon. Last quarter, the company said relaunches of makeup such as mascara and lipstick went poorly.
The beauty company’s net income fell to US$229.5 million, or 53 cents per share, from US$269.4 million, or 62 cents per share, a year earlier.
Adjusted earnings were 59 cents per share, sharply missing analyst estimates of 66 cents per share, according to FactSet.
Revenue for the quarter ended Dec 31 edged up 1.3 per cent to US$3.18 billion, partly helped by higher prices, but fell short of analyst expectations of US$3.27 billion.
Revenue from North America, 20 percent of Avon’s total, rose one per cent to US$644.4 million, although its acquisition of Silpada, a direct jewelry seller, helped sales by 11 percentage points. Unit sales dropped 14 per cent.
Revenue from Latin America, Avon’s largest region accounting for 40 per cent of its business, rose five per cent to US$1.27 billion.
The steepest drop came from China, where revenue fell 45 per cent to US$55 million as the company continues to transition to a direct-selling system more similar to the one it uses elsewhere. Revenue was hurt by a 44 per cent drop in unit sales as the company advertised less.
Elsewhere, revenue rose nine per cent it Western Europe, the Middle East and Africa to US$477.6 million and rose eight per cent in Asia Pacific to US$215.2 million. Revenue slipped six per cent in Central and Eastern Europe.
For the year, net income fell three per cent to US$606.3 million, or US$1.29 per share, from US$625.8 million, or US$1.45 per share. Revenue rose six per cent to US$10.86 billion.
Avon cut prices during the recession but has begun raising them again. It has been focusing on acquisitions for growth and bought skin-care products company Liz Earle and silver jewelry direct seller Silpada Designs in 2010.
