Avon released fourth quarter results showing that sales continue to slide at an alarming rate, just as it also announces a big hit from its bribery investigation.
Fourth quarter sales fell by 10% to $2.7bn, or 4% in constant terms, reflecting the fact that volumes were down by 10% for the period, while price/mix was also down, by 6%. The number of direct sales staff also fell by 5%.
The figures reflected an even bigger hit for the company’s mainstay beauty sales, which were down 11% during the quarter to $1.88bn, while fashion and home sales were down 8%.
Restructuring helps stem losses
However, the company’s extensive restructuring program does appear to be paying off with net losses for the quarter being more than halved, at $67.7m compared to $161.1m in the corresponding period last year.
The quarterly results were met with a generally negative reaction from the investment world, as share prices continued to slide further and Moody’s rating agency taking the decision to downgrade the company to a Baa3 rating, from a Baa2 rating.
For the full financial year, sales were down by 6% to $10.0bn, which represented a fall of 1% in constant dollars, and total decrease of 5% in terms of units while price/mix was down 4%.
Beauty sales for the full year were down 7% to $7.10bn, while home and fashion sales were also down by 7%. The net loss for the full year was $50.9m, compared to a net loss of $38.2m in 2012.
Bribery investigation costs mount
The results come just as the company has announced it has set aside $77m as a settlement figure to resolve a probe into bribery in China, which could put the total loss associated with the investigation in excess of $132m.
"Although the second half of the year was impacted by both execution and macro-economic factors, I'm pleased that we are making headway toward our financial goals and Avon's return to profitable growth," said Sheri McCoy, Chief Executive Officer, Avon Products.
"While much work remains to be done, we continue to make progress toward building a better, simpler and more stable business."
Regionally, Latin American sales look strongest
On a regional basis, Latin America faired best during the quarter, with net sales falling by 7% to $1.24bn, but at a constant dollar rate, the region saw revenue growth of 4% on the back of gains in Brazil, but counterbalanced by declines in both the Venezuela and Mexico markets.
In the EMEA market sales were down 4% to $867.7m, a decline of 2% at a constant dollar rate, which was put down to lower average order numbers and a decline in sales rep. Revenue was up in constant terms in Russia, but down after adjustment, while revenues were down 12% in South Africa, but up 2% in constant dollars.
In North America sales were down 21% to $370.8m for the fourth quarter, while sales in the Asia Pacific region were down 22% to $192.4m.