Avon’s Sales Slide in Q3

Avon Products' total revenues in the third quarter declined 22% to $1.7 billion and declined 2% in constant dollars, according to numbers released this morning. Certain tax items in Brazil and the divestiture of Liz Earle impacted the year-over-year comparison in the third quarter, according to the direct seller. Excluding the impacts of these items, constant-dollar revenue would have grown approximately 3%, the company said.
 
“This was a difficult quarter impacted by currency and other macro pressures, and our financial results were not where we would like them to be,” said Sheri McCoy, CEO of Avon Products, Inc. “Given the challenging environment, I'm proud of the progress our teams are making, driving solid top-line performance at the local level and continuing to make improvements in representative engagement.”
 
Active representatives were down 1% year-over-year, led by a continued decline in North America as well as in the Latin America markets experiencing high inflation (Venezuela and Argentina), partially offset by strong growth in Russia and solid growth in Brazil.
 
Avon said its average order declined 1%, negatively impacted by approximately 4 points due to the VAT credits in 2014 and the IPI tax in 2015, as well as by approximately 1 point from the divestiture of Liz Earle. These negative impacts were partially offset by the benefit from price increases in Russia and Brazil, as well as by pricing actions taken in the Latin America markets experiencing high inflation.
 
Total units decreased 6%, driven by declines in Latin America and North America. Price/mix was up 4% during the quarter, driven by increases across all regions.
 
Beauty sales declined 23%, or 1% in constant dollars. Fashion & Home sales declined 15%, but increased 3% in constant dollars.
 
Avon said its net loss was $697 million, or a loss of $1.58 per diluted share, compared with net income of $92 million, or $0.21 per diluted share, for the third quarter of 2014. Adjusted net loss was $50 million, or a loss of $0.11 per diluted share, compared with adjusted net income of $99 million, or $0.23 per diluted share, for the third quarter of 2014.
 
Latin America revenue was down 26%, but up 1% in constant dollars. Brazil revenue was down 42%, or down 10% in constant dollars. Constant-dollar revenue was negatively impacted by approximately 16 points due to VAT credits in 2014 and the IPI tax in 2015. Excluding the impacts of these items, constant-dollar revenue would have grown approximately 6%2, and was primarily driven by growth in Active Representatives. This market continues to be impacted by a difficult macroeconomic environment and high levels of competition.
 
Mexico revenue was down 20%, but relatively unchanged in constant dollars, as higher average order was offset by a decline in active representatives.
 
Europe, Middle East & Africa revenue was down 19%, but up 3% in constant dollars. Constant-dollar revenue was negatively impacted by approximately 3 points due to the divestiture of Liz Earle. Excluding the impact of this item, constant-dollar revenue would have grown approximately 6%2, and was driven by an increase in Active Representatives, led by strength in Russia.
 
Russia revenue was down 29%, but up 22% in constant dollars, primarily driven by an increase in active representatives from sustained momentum in recruiting and retention.
 
UK revenue was down 15%, or down 9% in constant dollars, primarily driven by a decline in active representatives, and to a lesser extent, lower average order.
 
North America revenue was down 17%, or down 15% in constant dollars, primarily driven by a decline in Active Representatives.
 
Asia Pacific revenue was down 16%, or down 8% in constant dollars, with growth in the Philippines more than offset by other declines.