A 5% loss in representatives coupled with operational issues in core markets resulted in double-digit sales declines for Avon in the fourth quarter ended Dec. 31.
For 2014, the company is focusing on strengthening business fundamentals in its top 10 markets, which account for 80% of sales, according to CEO Sheri McCoy. Restoring topline growth is foremost, with representative recruitment and having the right product and promotional offers top priorities.
Overall fourth quarter sales slid 10% to $2.7 billion, or down 4% in constant dollars. Beauty sales dropped 11%.
North America sales fell 21% to $370 million; beauty sales in the region were down 25%, driven primarily by skincare and personal care, on both a reported and constant-dollar basis.
Along with the U.S., Mexico and Russia are among Avon’s most important markets, and respectively posted quarterly declines of 15% and 7%. Meanwhile Brazil, long an Avon stronghold, was a bright spot with constant dollar sales up 6%, thanks to larger orders and growth in personal care and fashion and home categories.
Net loss from continuing operations was $69.1 million compared with a net loss from continuing operations of $36 million for the quarter. Adjusted net income from continuing operations was $151 million, compared with $154 million in the fourth quarter of 2012.
For the year, overall revenue decreased 6% to $9.95 billion, or 1% in constant dollars. Beauty sales in 2013 dropped 7%. In North America, overall sales dropped 17% to $1.45 billion.
Avon posted a loss of $56.4 million for the year, compared to a loss of $42.5 million in 2012.
“We are making headway toward our financial goals and Avon’s return to profitable growth,” said Sheri. “Although,” she acknowledged, “we still face considerable challenges.” Restoring skin care, updating infrastructure and management improvements are also underway.
Next week, company executives will reveal a turnaround plan for North America.
A resolution with the Department of Justice and the SEC stemming from bribery charges in China and other markets is near, said Sheri. A settlement could range from $89 million to $132 million. (In the quarter, sales in China, where it has disbanded its direct selling model in favor of beauty boutiques, plummeted 50%.)
A new deal to distribute Korres products in Latin America, along with intentions to foster additional alliances, had analysts questioning Avon’s business model. Is it primarily a beauty brand or becoming a distributor? Sheri assured that its beauty heritage and brand future is intact, but allowed that she will tap into the channel to leverage other marketing opportunities “where it makes sense.”