Avon Turnaround Proceeding Slowly

The cosmetics company posted breakeven earnings per share and sales fell year-over-year.
William SprouseNovember 1, 2018
Avon Turnaround Proceeding Slowly

Avon Products reported break-even earnings per share for the quarter ended September 30, down from three cents per share a year ago.

The cosmetics company reported net income excluding one-time items of $7 million, down from $18 million last year. The company said including one-time items it posted a profit of $114 million, or 21 cents per diluted share. That was up from $12 million, or $0.01 per diluted share, for the same period last year.

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The company’s revenue for the quarter fell 2.2% to $1.35 billion from $1.38 billion last year. The FactSet estimate for earnings per share was $0.01 on sales of $1.32 billion.

Avon turnaround“While we are not yet satisfied with the overall quarterly results, I am encouraged by the speed at which initiatives are being adopted in our markets,” Chief Executive Officer Jan Zijderveld said. “As we said at the recent investor day, it is going to take time for us to execute this turnaround.”

The number of door-to-door salespersons selling the company’s cosmetics fell 5% for the quarter, Avon said. Meanwhile, a one-time tax reversal in Brazil resulted in a $168 million revenue increase.

Chief Financial Officer Jamie Wilson said the company completed restructuring actions associated with a cost-cutting program initiated in 2016 and was exiting 2018 with run- rate savings of $350 million, as targeted. Wilson said the program was expected to free up $400 million over the next three years.

“In addition, our focus on revenue management contributed to our ability to expand gross margin 10 basis points in the quarter,” he said.

Zijderveld said: “At its heart, Avon is the world’s largest social selling company, focused on improving the lives of women. Rebooting our sales model and returning the 6 million women to the center of everything we do, making it easier for [them] to succeed with Avon, will ensure our long-term success.”

Avon shares were up 6.6% in early trading though the gains were erased by midmorning. The U.K. company’s 52-week high is $2.99 per share.

Photo: Getty Images