The global beauty company,
Avon Products Inc.
) adjusted earnings of 34 cents per share for fourth-quarter 2013
surpassed the Zacks Consensus Estimate of 29 cents but declined
5.6% from the year-ago quarter's earnings of 36 cents.
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Moreover, on a reported basis, the company posted a loss of 16
cent per share compared with a loss of 8 cents in the year-ago
Total revenue for the quarter declined 9.7% year over year to
$2,667.2 million compared with $2,952.2 million a year ago.
Furthermore, total revenue missed the Zacks Consensus Estimate of
$2,764.0 million. On a constant currency basis, total revenue
declined 4% year over year.
During the quarter, the company registered an increase of 6% in
price/mix, while Active Representatives and total units declined
5% and 10%, respectively.
Avon, which competes with
Inter Parfums Inc.
Nu Skin Enterprises Inc.
), registered an 11% revenue decline in its Beauty Products and
8% decline in Fashion & Home revenues.
Adjusted gross margin of this Zacks Rank #4 (Sell) company
expanded 140 basis points year over year to 61.2%, on account of
favorable mix and pricing primarily resulting from the price
increases in Latin America.
Adjusted operating margin contracted 100 basis points to 8.2%,
attributable to revenue decline related to fixed expenses along
with increased carrying costs, bad debt expense and net brochure
costs, mainly in Latin America. Other factors impacting operating
margin included negative foreign currency translation, offset by
gross margin gains.
In the quarter, Avon's revenues in Latin America fell 7% year
over year to $1,236.3 million, while it rose 4% on a
constant-dollar basis. Revenue growth on a constant dollar basis
resulted from an increase in average order, offset by reduction
in Active Representatives. On a currency neutral basis, revenue
increased 6% in Brazil and 29% in Venezuela, while it declined
15% in Mexico. Units sold were down 6% during the quarter, while
Active Representatives dipped 4% year over year.
In North America, sales skidded 21% year over year to $370.8
million, mainly due to a fall in Active Representatives and
diminished average order. On a constant dollars basis, revenues
were down 20%. Units sold for the region waned 27% year over
year, while Active Representatives slipped 17%. Regional Beauty
sales fell 25% due to weakness in skincare and personal care
sales, while Fashion & Home sales were down 16%.
The beauty product manufacturer's revenue of $867.7 million in
Europe, the Middle East and Africa was down 4% year over year. On
a currency neutral basis, revenue dipped 2%, driven by a fall in
average order and a decline in Active Representatives. Regional
breakup shows that sales declined in all regions with Russia down
7%, U.K. down 5%, Turkey down 9% and South Africa down 12%. For
the region, Avon registered a 1% decline in Active
Representatives, while units sold fell 7%.
The Asia-Pacific division's revenue dipped 22% to $192.4 million,
while constant dollars revenue declined 18%. The region marked a
19% decline in Active Representatives and an 18% fall in units
sold. Country wise, the region recorded a 48% and 9% revenue
decline in China and Philippines, respectively.
Analyzing Full-year 2013
For full-year 2013, the company reported adjusted earnings per
share of $1.02, above the Zacks Consensus Estimate of 98 cents
and prior-year earnings of 84 cents. Total revenue for the year
totaled $9,955.0 million, down 5.7% year over year and short of
the Zacks Consensus Estimate of $10,063.0 million. On a constant
currency basis, total revenue dipped 1% year over year.
Other Financial Details
The leading global beauty company exited the year with cash and
cash equivalents of $1,107.9 million, long-term debt (excluding
current maturities) of $2,532.7 million, and shareholders' equity
of $1,127.5 million.
Moreover, prior to the earnings release, the company announced a
quarterly dividend of 6 cents, payable on Mar 3, 2014, to
shareholders of record as on Feb 28.
Headquartered in New York City, Avon directly sells cosmetics,
fragrances, toiletries, jewelry and accessories. The company
markets globally through more than 6 million independent sales
representatives and is the world's largest direct seller of