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Avon Q2 2012 Revenue Down 9%

Posted: August 1, 2012

Avon Products, Inc. reported second-quarter 2012 results. "Avon's second-quarter financial results are not good, and they reflect the complex challenges that Avon faces. We are working to stabilize the top-line, improve cost structure and cash generation, and instill a more disciplined culture of accountability," said Sheri McCoy, Avon's CEO. "We will also put the consumer and representative back at the center of our business and ensure our associates are engaged and aligned. It will take time, but I am confident that we can turn the business around and reach a point of sustainable growth."

Total revenue of $2.6 billion decreased 9%, or down 1% in constant dollars. Total units declined by 4% and price/mix increased 3% during the quarter while active representatives were down 3%. Avon Beauty sales declined 9%, or were flat in constant dollars. On a reported basis, fragrance was down 8%, color was down 9%, and skin care and personal care both declined by 10%. On a constant-dollar basis, fragrance increased 1%, color was flat, and skin care and personal care were both down 1%. In the quarter, the company also took further action to enhance its operating model, reduce costs and improve efficiencies.

For Latin America, second quarter revenue was $1.24 billion, down 9% from Q2 2011; the constant-dollar revenue for the period was driven by growth in both average order and active representatives. Brazil was down 19%, or 1% in constant dollars, driven by a decline in active representatives and decreased demand, which was partially due to increased competition as well as uncompetitive pricing in fashion and home. Mexico was down 7%, or up 6% in constant dollars, driven by higher average order and an increase in active representatives while Venezuela grew 26% in both reported and constant dollars, as average order benefited from inflationary price increases.

The Europe, Middle East and Africa region was down 14% in revenue for the quarter compared to Q2 2011, to $663.1 million. The constant-dollar revenue decline was due to a decline in active representatives and lower average order. Russia was down 15%, or down 6% in constant dollars, due to a decline in active representatives in a tough economic and competitive environment, and the U.K. was down 10%, or down 7% in constant dollars, also due to a decline in active representatives and lower fashion and home sales. Turkey was down 29%, or down 19% in constant dollars, reflecting executional challenges and a highly competitive environment, and South Africa was down 5%, or up 12% in constant dollars, as growth in active representatives was partially offset by lower average order.

For North America, revenue was $467.4 million, down 6% from Q2 2011. Avon's core U.S. business (which excludes Silpada) was down 4%, primarily due to a decline in active representatives, partially offset by growth in average order. The continued impact of redistricting from the One Simple Sales Model implementation also resulted in lower activity in the quarter.

The Asia Pacific region saw revenue of $218.4 million for the quarter, down 4% from Q2 2011. Second-quarter constant-dollar revenue for the region decreased primarily due to continued weakness in China, as China declined 21%, or 23% in constant dollars, as the company’s transitions to a direct-selling business is facing greater-than-expected challenges in the country. The Philippines grew 8%, or 7% in constant dollars, primarily due to growth in active representatives driven by our recruitment initiatives.

More information on Avon’s Q2 2012 financial results is available here.