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.
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
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