The global beauty company, Avon Products Inc.’s (AVP) adjusted earnings of 34 cents per share for fourth-quarter 2013 surpassed the Zacks Consensus Estimate of 29 cents but declined 5.6% from the year-ago quarter’s earnings of 36 cents.
Moreover, on a reported basis, the company posted a loss of 16 cent per share compared with a loss of 8 cents in the year-ago comparable quarter.
Total revenue for the quarter declined 9.7% year over year to $2,667.2 million compared with $2,952.2 million a year ago. Furthermore, total revenue missed the Zacks Consensus Estimate of $2,764.0 million. On a constant currency basis, total revenue declined 4% year over year.
During the quarter, the company registered an increase of 6% in price/mix, while Active Representatives and total units declined 5% and 10%, respectively.
Avon, which competes with Inter Parfums Inc. (IPAR), Nu Skin Enterprises Inc. (NUS) and Coty Inc. (COTY), registered an 11% revenue decline in its Beauty Products and 8% decline in Fashion & Home revenues.
Adjusted gross margin of this Zacks Rank #4 (Sell) company expanded 140 basis points year over year to 61.2%, on account of favorable mix and pricing primarily resulting from the price increases in Latin America.
Adjusted operating margin contracted 100 basis points to 8.2%, attributable to revenue decline related to fixed expenses along with increased carrying costs, bad debt expense and net brochure costs, mainly in Latin America. Other factors impacting operating margin included negative foreign currency translation, offset by gross margin gains.
Region-wise Performance
In the quarter, Avon’s revenues in Latin America fell 7% year over year to $1,236.3 million, while it rose 4% on a constant-dollar basis. Revenue growth on a constant dollar basis resulted from an increase in average order, offset by reduction in Active Representatives. On a currency neutral basis, revenue increased 6% in Brazil and 29% in Venezuela, while it declined 15% in Mexico. Units sold were down 6% during the quarter, while Active Representatives dipped 4% year over year.
In North America, sales skidded 21% year over year to $370.8 million, mainly due to a fall in Active Representatives and diminished average order. On a constant dollars basis, revenues were down 20%. Units sold for the region waned 27% year over year, while Active Representatives slipped 17%. Regional Beauty sales fell 25% due to weakness in skincare and personal care sales, while Fashion & Home sales were down 16%.
The beauty product manufacturer’s revenue of $867.7 million in Europe, the Middle East and Africa was down 4% year over year. On a currency neutral basis, revenue dipped 2%, driven by a fall in average order and a decline in Active Representatives. Regional breakup shows that sales declined in all regions with Russia down 7%, U.K. down 5%, Turkey down 9% and South Africa down 12%. For the region, Avon registered a 1% decline in Active Representatives, while units sold fell 7%.
The Asia-Pacific division’s revenue dipped 22% to $192.4 million, while constant dollars revenue declined 18%. The region marked a 19% decline in Active Representatives and an 18% fall in units sold. Country wise, the region recorded a 48% and 9% revenue decline in China and Philippines, respectively.
Analyzing Full-year 2013
For full-year 2013, the company reported adjusted earnings per share of $1.02, above the Zacks Consensus Estimate of 98 cents and prior-year earnings of 84 cents. Total revenue for the year totaled $9,955.0 million, down 5.7% year over year and short of the Zacks Consensus Estimate of $10,063.0 million. On a constant currency basis, total revenue dipped 1% year over year.
Other Financial Details
The leading global beauty company exited the year with cash and cash equivalents of $1,107.9 million, long-term debt (excluding current maturities) of $2,532.7 million, and shareholders’ equity of $1,127.5 million.
Moreover, prior to the earnings release, the company announced a quarterly dividend of 6 cents, payable on Mar 3, 2014, to shareholders of record as on Feb 28.
Headquartered in New York City, Avon directly sells cosmetics, fragrances, toiletries, jewelry and accessories. The company markets globally through more than 6 million independent sales representatives and is the world’s largest direct seller of beauty products.
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