Avon Products Inc.AVP had long been grappling with waning top- and bottom-line performances, along with a highly leveraged balance sheet.
However, after posting negative surprises in four of the last five quarters, Avon made a comeback in second-quarter 2015, reporting better-than-expected top- and bottom-line results despite continued pressure from a volatile currency backdrop. During the quarter, a significant decline in North American revenue was offset by strength in EMEA and Latin America.
Avon is on track with its strategic endeavors to drive top-line growth, trim costs and improve working capital. The company has also made significant progress in improving its balance sheet through refinancing activities and cost reduction by slashing jobs and exiting operations in the underperforming markets
In another attempt to revive its business, Avon remains focused on boosting growth of Active Representatives. Noting significant development on this front, the company revealed that the Active Representatives trend is on the right track, with strength noted in two-thirds of its top markets in the first half of 2015. Additionally, on a rolling 12-month basis, the trend has improved both globally and across its top 12 markets.
This inspires optimism about the recovery of Avon's business as Active Representatives form a key factor for the success of any direct-selling business operator.
However, the fact that the company continues to face troubles in its mature North American markets cannot be ignored. Also, its worldwide presence entails a significant negative impact on its operating results from ongoing foreign currency translations. As evidence, Avon's second-quarter 2015 results were hurt by intense currency headwinds, which pulled down revenue by 17 points and earnings by 15 cents per share.
Avon currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader consumer staples sector include Campbell Soup Company CPB , Dean Foods Company DF and Constellation Brands Inc. STZ , each carrying a Zacks Rank #2 (Buy).
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