Avon Products Stumbles Over Missed Earnings

Avon Products Inc. (NYSE: AVP) reported its fourth-quarter financial results before the markets opened on Thursday. The company had a net loss of $0.01 per share on $1.6 billion in revenue. The consensus estimates from Thomson Reuters had called for $0.08 in earnings per share (EPS) on revenue of $1.82 billion. In the same period of the previous year, the company posted EPS of $0.20 and $2.34 billion in revenue.

It’s worth noting that foreign currency had a huge impact on the earnings in this report — -$0.16 per share.

Revenues declined 20% in this quarter, but they increased 3% in constant dollars, excluding the divestiture of Liz Earle. Additionally, the year-over-year comparison is affected by certain tax items in Brazil.

Excluding the impacts of Liz Earle and certain Brazil tax items, constant-dollar revenue would have grown approximately 6%2. The company’s Latin America markets experiencing high inflation (Venezuela and Argentina) contributed approximately three points to this constant-dollar revenue growth.

At the same time, gross margin was 58.7%, down 280 basis points. Adjusted gross margin was 58.8%, down 270 basis points. These year-over-year comparisons were negatively affected by roughly 70 basis points due to the combined impact of the VAT credits in 2014 and the IPI tax in 2015.
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Sheri McCoy, CEO of Avon, commented on earnings:

Our operating performance for the fourth quarter and fiscal year was in-line with our most recent outlook. Looking back at 2015, our key local markets drove steady improvement in overall performance. Importantly, we improved year-on-year Active Representative trends – with full-year growth of 1%. We are on track to close our partnership with Cerberus and fully engaged in executing our transformation plan.

On the books, cash and cash equivalents totaled $686.9 million at the end of the fourth quarter, compared to $936.4 million in the same period from last year.

Shares of Avon were trading down roughly 15% at $2.76 on Thursday, with a consensus analyst price target of $4.52 and a 52-week trading range of $ 2.21 to $9.47.