Sales Decline Continues at Avon

Executives at Avon Products, Inc. insist that the company is on its way back, but sales through nine months fell 11% to $1.4 billion. For the thrid quarter, Avon said total reportable segment revenue in reported currency increased 1% to $1.4 billion, but addjusted total reportable segment revenue in constant dollars decreased 4% on a like-for-like basis. Gross margin was 62.2%, with adjusted gross margin increasing 10 basis points to 61.3% on a like-for-like basis, favorably impacted by the net impact of price and mix, according to the company. However, active representatives and ending representatives, both from reportable segments, declined 5% and 6%, respectively.

 
“As we said at the recent investor day, it is going to take time for us to execute this turnaround,” said Avon CEO Jan Zijderveld. 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. We are beginning to see benefits from recruiting and training initiatives that have been put in place in countries around the world.”


According to Zijderveld, 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 her to succeed with Avon, will ensure our long-term success,” he said. “While we are still in the beginning stages of our turnaround, we are beginning to see early results of various initiatives.”


Through Avon Opportunity Meetings, Zijderveld said the company is bringing significantly more people in the Asia Pacific region, global training programs are exceeding participation goals and faster launched, on-trend beauty products are being met with strong acceptance in the marketplace. 


“We know that in order to make “Her” successful, we have to move more quickly than we ever have in the past, make it easier for her to do business and help her improve her earnings,” he concluded.


According to CFO Jamie Wilson, during the third quarter, Avon completed the restructuring actions associated with the cost savings program initiated in 2016, exiting 2018 with run rate savings of $350 million, as targeted.


“We began implementing programs against our new cost savings initiative announced last month. The new initiative focuses on simplifying the business to generate efficiencies, improve revenue management, and generate interest and tax savings and is expected to free up approximately $400 million over the next three years to support underlying growth initiatives,” he explained. “In addition, our focus on revenue management contributed to our ability to expand gross margin 10 basis points in the quarter.”