Avon reports disappointing third quarter 2012

Avon Products, Inc. has reported disappointing third quarter 2012 results with its total revenue of $2.6bn decreasing by 8%.

In addition, Avon Beauty sales dropped by 9%, or were flat in constant dollar terms. Looking at each sector, fragrance, on a reported basis, was down 7%; colour cosmetics and skin care both declined 11%; and personal care decreased by 9%. On a constant dollar basis, fragrance increased 2%, while colour and skin care declined 1% and 3% respectively, and personal care remained flat. Furthermore, today the company also announced a reduction in its quarterly dividend from $0.23 to $0.06 per share. Avon’s net debt, excluding cash, for Q3 2012 was $2.2bn, up $152m from the year end level.

Recovery goals identified by the company include financial goals of mid single digit, constant dollar revenue growth and a low double digit operating margin over the next three years. Targets have also been put in place to save at least $400m in costs by the end of the three years by a reduction in selling, general and administrative expenses. The dividend reduction, in conjunction with continued efforts to improve working capital, are also hoped to help provide financial flexibility.

Sheri McCoy, chief executive officer, said: “Avon’s third quarter results remain disappointing. The challenges that Avon faces developed over time, not overnight, and it will take time to implement the solutions as well. However, we have identified the first critical actions to return Avon to a position of financial health and improve our competitive position. With a clear focus on growing the top line, managing costs and improving our working capital, I am confident that we are moving Avon towards a steady recovery.”