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Not a Pretty Quarter for Avon

January 23, 2013

“Avon’s third-quarter results remain disappointing,” said Sheri McCoy, CEO, on release of the company’s performance. “The challenges that Avon faces developed over time, not overnight, and it will take time to implement solutions as well.”

For the third quarter, total revenue was $2.6 billion, down 8%. Total units grew 1% and price/mix was flat during the quarter. Active representatives were down 1%, according to the firm.

Avon Beauty sales declined 9%, or flat in constant dollars. On a reported basis, fragrance was down 7%, color and skin care both declined 11%, and personal care was down 9%. On a constant-dollar basis, fragrance increased 2% while color and skincare declined 1% and 3%, respectively. Personal care was flat, the company said.

Yet, in her statement, McCoy pointed to a positive: “However, we have identified the first critical actions to return Avon to a position of financial health and improve our competitive position.With a clear focus on growing the top-line, managing costs, and improving our working capital, I am confident that we are moving Avon toward a steady recovery.”

According to the company, management is focused on stabilizing the business and returning Avon to sustainable growth and has set financial goals of mid single-digit constant-dollar revenue growth and a low double-digit operating margin over the next three years, the company said.

In addition, Avon said management has the team fully aligned around actions that will accelerate top-line growth, reduce costs and improve working capital. Management is also targeting cost savings of at least $400 million by the end of the three years to be largely driven by a reduction in selling, general and administrative expenses, according to the company. Avon also expects that there will be charges associated with the achievement of these goals.
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