Financial Performance

Avon Stock Dives on ‘Unsatisfactory’ Results

The beauty company's new CEO says it is implementing "near-term fixes" and "moving with deliberate urgency to design our turnaround plan."
Matthew HellerMay 3, 2018
Avon Stock Dives on ‘Unsatisfactory’ Results

Avon Products shares tumbled on Thursday after its new chief executive said its latest quarterly results were “unsatisfactory” and the beauty company was designing a turnaround strategy with “deliberate urgency.”

For the first quarter, Avon narrowed its net loss to $20.3 million from $36.5 million a year earlier. Excluding one-time items, the adjusted loss was 2 cents per share, in line with Wall Street expectations.

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The company also reported that revenue rose 5% to $1.39 billion, edging past the average estimate of $1.35 billion. But the number of Avon door-to-door salespeople contributing to revenue fell 4% percent, the steepest decline since at least early 2015.

If not for a 6% benefit from the adoption of new revenue recognition standards, sales would have dipped 1%.

Avon shares have fallen more than 90% over the past five years. In trading Thursday, they were down 9.6% at $2.26.

“Avon’s first-quarter results were unsatisfactory and do not represent the underlying potential of the business,” CEO Jan Zijderveld said in a news release, adding that he had spent the first 90 days of his tenure conducting “a comprehensive review” of Avon’s operations.

“We are already implementing near-term fixes that support the success and satisfaction of our representatives — starting with actions to improve service delivery,” he said. “Our long-term mission is clear, to return Avon to a competitive market position, and we are moving with deliberate urgency to design our turnaround plan.”

As Reuters reports, London-based Avon hired Zijderveld in February “to help turn around the iconic cosmetics brand,” which has been losing customers to bigger companies such as Estee Lauder and specialty retailers such as LVMH’s Sephora.

Sales in Latin America, Avon’s biggest market, were hit the hardest in the first quarter due to economic and political instability, and the number of active representatives in the region fell 6%.

Zijderveld told Reuters that the company needs a clear strategy for its future, better marketing capabilities and has to invest in its sales representatives. “I’m still as convinced as ever of the potential of the business,” he said.