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

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Summary:
Persistent troubles at Avon resulted in another tough quarter, wherein both top and bottom lines for second-quarter 2014 fell shy of estimates. 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, along with reduced margins in mature markets like North America. Moreover, weakness in the emerging markets, like China as well as regulatory and cash flow issues risking dividend are the other negatives. Despite all these adverse factors we have maintained our Neutral recommendation as the company has displayed signs of improving fundamentals of late. We note that Avon has been making significant progress in improving its balance sheet through refinancing activities and cutting costs by slashing jobs and exiting operations in the underperforming markets.

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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