By Ted Nuyten
Avon Products (NYSE: AVP), a globally recognized leader in direct selling of beauty and related products, today announced its results for the quarter ended March 31, 2017.
“Our first quarter was broadly in line with our expectations and we remain confident in our strategic initiatives and the progress against our plan,” said Sheri McCoy, Chief Executive Officer, Avon Products, Inc.
“We are moving into the second year of our three-year Transformation Plan, in which we will continue to build on the robustness of our brand, drive beauty innovation, and invest in initiatives to enhance Representative engagement while ensuring continued cost discipline. Today we are providing full-year 2017 guidance consistent with our longer-term financial goals.”
Highlights for First Quarter of 2017:
- Revenue increased 2% to $1.3 Billion; Decreased 1% in constant dollars1
- Active Representatives and Ending Representatives, both from Reportable Segments, declined 3% and 1%, respectively
- Operating Margin increased 160 bps to 2.2%; Adjusted1 Operating Margin decreased 130 bps to 2.9%
- Diluted Loss Per Share From Continuing Operations of $0.10; Adjusted Diluted Loss Per Share From Continuing Operations of $0.07
- Foreign currency favorably impacted both Diluted Loss Per Share and Adjusted Diluted Loss Per Share by an estimated $0.03 per share
- The Company is on track to achieve its 2017 cost savings target of $230 million
- As part of its Transformation Plan, the Company completed the implementation of a new Representative-facing system in Brazil
First-Quarter 2017 Income Statement Review (compared with first-quarter 2016)
- Total revenue for Avon Products, Inc. increased 2% to $1.3 billion, but decreased 1% in constant dollars.
- From reportable segments:
- Total revenue increased 3% to $1.3 billion, but decreased 1% in constant dollars.
- Active Representatives declined 3% with decreases in all segments except North Latin America, which was relatively unchanged.
- Average order increased 2% with growth in all segments except Europe, Middle East & Africa, which declined.
- Ending Representatives declined 1% primarily due to a decline in Asia Pacific.
- Gross margin and Adjusted gross margin both increased 90 basis points to 61.2%, primarily due to the favorable net impact of price/mix.
- Operating margin was 2.2% in the quarter, up 160 basis points, while Adjusted operating margin was 2.9%, down 130 basis points. The operating margin comparison benefited from lower costs to implement restructuring in the current year. Both the operating margin and Adjusted operating margin year-over-year comparisons were negatively impacted by higher bad debt expense, primarily in Brazil, an out-of-period adjustment related to equity compensation and higher transportation costs. These factors were partially offset by the favorable net impact of price/mix and by approximately 60 basis points of benefit from foreign exchange.
- The provision for income taxes was $30 million, compared with a benefit from income taxes of $2 million for the first quarter of 2016. On an Adjusted basis, the provision for income taxes was $31 million, compared with $37 million for the first quarter of 2016. The effective tax rate and Adjusted effective tax rate, both from continuing operations, were not meaningful in the quarter. These rates were negatively impacted by the country mix of earnings and the inability to recognize additional deferred tax assets in various jurisdictions, including the impact caused by the recognition of withholding taxes associated with the repatriation of cash to the U.S.
- Loss from continuing operations, net of tax was $37 million, or a loss of $0.10 per diluted share, compared with a loss of $156 million, or a loss of $0.36 per diluted share, for the first quarter of 2016. Adjusted loss from continuing operations, net of tax was $28 million, or a loss of $0.07 per diluted share, compared with loss of $27 million, or a loss of $0.07 per diluted share, for the first quarter of 2016. Earnings allocated to convertible preferred stock had a negative $0.02 impact on Diluted earnings per share and a negative $0.01 impact on Adjusted diluted earnings per share.
- Loss from discontinued operations, net of tax in the prior year of $10 million, or a loss of $0.02 per diluted share, was associated with the previously separated North America business.