Avon’s sales in North America took another hard blow posting first quarter revenue losses amounting to one-fifth of the business.
Ongoing declines in representatives are to blame as Avon management struggles to find the right blend of financial incentives and product and price offerings to engage and retain associates.
Total sales dropped 11%, or 3% in constant dollars to $2.2 billion, with a net loss of $168.3 million compared to a loss of $13.7 million. Beauty sales declined 12% or 4% in constant dollars. Worldwide rep count was down 4%, with an 18% dropoff in the U.S. Avon was also impacted by negative currencies, consumer weakness in Russia and competitive discounting in Mexico.
“I am not satisfied with our performance but am encouraged by our progress,” said CEO Sheri McCoy, referring to its cost cutting, team building and select product successes. “I am confident we are heading in the right direction. We are about where we expected to be in the first half of the year.”
Sales in North America declined 22% to $295.7 million, with units down 25%. To strengthen the U.S. Avon has introduced a recruitment kit with product samples, made brochure improvements and is zeroing in on districts with the highest potential. “We need more representatives selling more products,” declared Sheri.
One analyst queried whether more dramatic action was needed, such as introducing a collection for retailers, such as Walmart or Walgreens. Sheri said a new U.S. web site launching in September would enable direct consumer access to the brand. Additionally she pointed to initiatives outside the U.S. with Korres and Coty brands that also broaden Avon’s consumer reach.
In U.S. product news, Avon has introduced the Femme fragrance after its success in Europe, and will rollout the Far Away Gold fragrance to celebrate the 20th anniversary of its top seller, Far Away. In skin care, Anew Clinical Infinite Lift with roller ball applicator has been unveiled and the Anew Reversalist collection is being upgraded.
Foreign Corrupt Practices Act Charges Settled
After a long negotiation, Avon has settled with the SEC and DOJ to resolve bribery charges in China from 2008. The terms call for payments totaling $135 million, a compliance monitor for 18 months followed by a self-monitoring period of 18 months. Criminal charges are deferred, pending three years of compliance. At midday Avon’s stock was down 12.6% to $13.35.