Avon Reports Q1 Results

Avon Products, Inc.’s Q1 revenues decreased 18% to $1.8 billion, but increased 1% in constant dollars, driven by strong growth in Europe, Middle East & Africa, the company reported this morning.

“Overall, the first quarter was in line with our expectations despite currency pressures that were greater than anticipated. Continuing on the momentum we saw in the second half of 2014, I'm encouraged to see improvement in our active representative trends and constant-dollar revenue growth in the majority of our top markets,” said Sheri McCoy, CEO. Avon Products, Inc. “Despite continued foreign exchange pressure, I'm really impressed with how well our teams in market are managing in this volatile environment. This is a payoff for the work we've done over the past two years on strengthening our talent and improving core processes.”

Avon said active representatives were down 1% year-over-year but reflect a sequential improvement from prior quarters. The overall decline in active representatives was driven by North America, partially offset by growth in a number of markets, most significantly Russia. Average order increased 2%, which benefited from price increases in markets experiencing high inflation (Venezuela and Argentina).

Total units decreased 2%, driven by a decline in North America. Price/mix was up 3% during the quarter, aided by pricing in markets experiencing high inflation.

Beauty sales declined 17%, but increased 3% in constant dollars, according to the director seller. Avon’s Fashion & Home sales declined 19%, or 3% in constant dollars.

The firms’ net loss was $146 million compared with a net loss of $167 million for the first quarter of 2014. Adjusted net income was $17 million compared with $52 million for the first quarter of 2014.

Regionally, Latin America revenue was down 22%, but up 3% in constant dollars, negatively impacted by approximately 1 point, due to Value Added Tax (“VAT”) credits recognized in Brazil in first-quarter 2014 that did not recur in 2015. Constant-dollar revenue growth was primarily driven by higher average order, which benefited from the inflationary impact on pricing. Active Representatives declined, primarily due to declines in Venezuela and Argentina resulting from a difficult operating environment.

In Brazil revenue was down 17%, or relatively unchanged in constant dollars. Constant-dollar beauty sales grew, partially benefiting from new product launches. This market continues to be impacted by the difficult economic environment and high levels of competition. 
The firm's revenues in Mexico werr down 12%, or 1% in constant dollars, as a result of weaker Fashion & Home sales. However, Mexico grew Active Representatives.

Europe, Middle East & Africa revenue was down 16%, but up 9% in constant dollars, primarily driven by an increase in Active Representatives, led by strength in Russia.

Russia revenue was down 29%, or up 26% in constant dollars, primarily driven by an increase in Active Representatives from sustained momentum in recruiting and retention.

UK revenue was down 7%, or up 1% in constant dollars, primarily due to higher average order.

North America revenue was down 18%, or down 17% in constant dollars, primarily driven by a decline in active representatives.

Asia Pacific revenue was down 1%, but up 2% in constant dollars, primarily driven by the Philippines due to higher average order.