Avon Products Inc. (AVP): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Following a tough first half of fiscal 2014, the third-quarter marked a recovery for Avon with bottom-line results topping the Zacks Consensus Estimate and growing year over year. We applaud the company's efforts to revive its business as evident from the recent changes brought about in its management to fuel growth in Latin America and the launch of its redesigned eCommerce site in North America. We are also encouraged by the significant progress Avon has made in improving its balance sheet through refinancing activities and cutting costs by slashing jobs and exiting operations in the underperforming markets. However, we remain concerned about the challenges hindering the company's growth over the past few quarters. These include, loss of active representatives, declining volume and unfavorable foreign currency translations and reduced margins in mature markets like North America. Thus, we maintain our Neutral recommendation on the stock.

Overview:

Headquartered in New York City, Avon Products Inc. directly sells cosmetics, fragrances, toiletries, jewelry, and accessories. The company markets around the world through more than 6.0 million independent sales representatives and is the world's largest direct seller. The company's products are classified under the following categories: Beauty, Beauty Plus, Beyond Beauty, and Health and Wellness. Beauty products include cosmetics, fragrances, and toiletries under the brand names of Avon Color, Anew, beComing, Skin-So-Soft, and Advance Techniques Hair Care, among others. Beauty Plus consists of jewelry, watches, apparel and accessories. Beyond Beauty products include: home products, gifts and decorative items. Health and Wellness products include vitamins, exercise equipment and other related items.

The company provides its operational results under 4 reportable segments Latin America Europe, the Middle East & Africa (EMEA) North America and the Asia Pacific.

Management is currently focused on expanding the direct selling business in the emerging markets. The company's direct selling model is a competitive advantage, particularly in the developing markets as it allows the company to quickly penetrate the market and even access remote communities without large capital investment.



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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