Avon earnings fall in Q3, warns of 2017 guidance miss
Avon still wasn’t able to pull itself out of its financial slump in the third quarter, despite overall increased sales, according to figures released on Thursday.
Total revenue increased 1 percent to $1.4 billion in the quarter ended September 30, 2017. Meanwhile, net earnings fell 66.6 percent to $11.9 million, down from $35.6 million compared to the same period last year.
In the third quarter, beauty sales prove to be the most promising, climbing to $1.03 billion, up from $1.01 billion in 2016. The company’s fashion and home division fell 2 percent for the quarter, to $345 million in net sales.
“While we saw mixed results, I am encouraged by the revenue improvement in many of our top 15 markets and the underlying business trends we are beginning to see,” said Sheri McCoy, Chief Executive Officer, Avon Products, Inc.
“Our innovation pipeline is starting to gain traction and we are close to realizing our annual cost reduction milestone. We remain intensely focused on improving our Representative experience, which results in higher engagement and her success."
The company is in the second year of its three-year transformation plan, which is focused on three pillars - reducing cost, improving financial resilience and investing in growth.
The company said it recorded about $120 million in cost savings last year and is on track to achieve its three-year goal.
Most recently in October, Avon's President, Miguel Fernandez, directed the company to invest $120 million to improve product, make technological updates, and to train its sales people to perform better.
The majority of the money, some $110 million dollars, will go to new product development and sales people training, while the remaining $10 million will be used update technology to help expand the retail network.
Still, McCoy warned that it would take some time before the company would reap any benefits from the new initiatives.
"It will take time to fully realize the benefits from our near and long-term initiatives in this highly competitive market, but with the right team in place we are poised to accelerate the pace of our progress," she said.
Despite mixed results in Q3 and some positive trends, the company does note expect to meet its 2017 guidance and instead will fall below it.
Avon is also still looking for a new CEO. McCoy will leave the company next March.
"The search for a new Chief Executive Officer for Avon is underway. The Board is pleased with the progress and the strong interest we are receiving," said Chan Galbato, non-executive Chairman of Avon Products' Board of Directors.
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