After reporting dismal results over the past six quarters,
Avon Products Inc.
(
AVP
) posted better-than-expected sales and earnings results for the
fourth quarter and full year 2012. The company's adjusted
earnings per share (EPS) of 37 cents for the fourth quarter
surpassed the Zacks Consensus Estimate of 27 cents per share.
For the full year, adjusted earnings of 85 cents per share were
well above the Zacks Consensus Estimate of 76 cents. However,
adjusted earnings for the year slipped substantially from $1.64
per share reported in the year-ago quarter.
However, on a reported basis, the company reported a loss of 37
cents per share for the fourth quarter and 10 cents per share for
the full year.
Total revenue for the fourth quarter inched down 1% year over
year to $2,999.1 million compared with $3,043.7 million a year
ago. However, total revenue beat the Zacks Consensus Estimate of
$2,996 million. Total units growth of 2% as well as a 1%
improvement in Active Representatives, offset by 1% decline in
price/mix, contributed to the top-line beat.
Full year revenue declined 5% to $10,717.1 million but surpassed
the Zacks Consensus Estimate of $10,695 million.
Quarter Synopsis
During the quarter, Avon registered a revenue decline in its
Beauty Products, Fashion and Home products categories, where
sales decreased 5%, 5% and 4%, respectively. The decline in
Beauty revenue was primarily due to short falls in its color,
skincare, fragrance and personal care products.
Avon's adjusted gross margin fell 130 basis points year over year
to 59.9%, on account of the negative impact of product mix
relating to weak inventory flows, mainly in Brazil. Adjusted
operating profit dwindled 2.6%, while operating margin contracted
20 basis points to 9.2%, attributable to lower gross margin,
which was nearly offset by lower operating expenses, relating to
lower net brochure costs, lower overhead and advertising
expenses.
Region-wise Performance
In the fourth quarter, Avon delivered 2% revenue increase in
Latin America
, primarily due to a 3% decline in Brazil, partially offset by a
9% rise in Mexico and a 2% rise in Venezuela. Units sold were up
6% during the quarter, while Active Representatives grew 6% year
over year.
In
North America
, sales skidded 12% year over year, mainly due to a fall in
Active Representatives. The North American Business, excluding
Silpada, was down 11%. At Silpada, sales were down 18% as average
orders as well as Active Representatives declined. Units sold for
the region waned 11% year over year, while Active Representatives
slipped 13%.
The beauty product manufacturer's revenues in
Europe, the Middle East and Africa
inched up 1% year over year, primarily due to improvements in
units sold as well as Active Representatives. Regional breakup
shows that sales escalated in almost every operating region with
Russia and Turkey increasing 3% and 1%, respectively, while
revenue in UK and South Africa remained flat. Avon registered a
1% increase in Active Representatives, while units sold were up
by 5% during the quarter.
The
Asia-Pacific
division witnessed a 3% dip in revenues. The region marked an 8%
decline in Active Representatives and a 9% fall in units sold.
Country-wise, the region recorded a 7% revenue increase in
Philippines, largely offset by a 23% decline in China.
Other Financial Details
The leading global beauty company exited the quarter with cash
and cash equivalents of $1,209.6 million, long-term debt
(excluding current maturities) of $2,623.9 million, and
shareholders' equity of $1,233.3 million.
For the year ended Dec 31, 2012, the company earned net cash of
$556.1 million for operational activities as against $655.8
million in the prior-year comparable period. Avon expended $228.8
million in capital expenditure during the year.
Moreover, earlier this morning, the company announced a quarterly
dividend of 6 cents, which is payable on Mar 1, 2013 to
shareholders of record as on Feb 26.
Avon currently retains a Zacks Rank #3 (Hold). Stocks performing
well in the cosmetics space include
Inter Parfums Inc.
(
IPAR
),
Nu Skin Enterprises Inc.
(
NUS
), both of which have a Zacks Rank #1 (Strong Buy) and
L'Oreal SA
(
LRLCY
), which carries a Zacks Rank #2 (Buy).
AVON PRODS INC (AVP): Free Stock Analysis
Report
INTER PARFUMS (IPAR): Free Stock Analysis
Report
(LRLCY): ETF Research Reports
NU SKIN ENTERP (NUS): Free Stock Analysis
Report
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