Avon Products Q2 financial results are in

By Deanna Utroske

- Last updated on GMT

direct-sales beauty company Avon Products Q2 financial results are in
Without adjusting to constant dollars, the direct-sales beauty company’s revenue was down in every region: Europe, the Middle East, and Africa; South Latin America; North Latin America; and the Asia Pacific.

At the start of the year, Avon Products introduced a transformation plan meant “to enable the Company to achieve its long-term goal of a targeted low double-digit operating margin and mid single-digit constant-dollar revenue growth,” ​over the course of three years (as the company mentions in a press release about the latest financial results).

This transformation plan has Avon Products realizing a cost savings of $350m in total. This year’s savings target is $70m, $50m of which will result from changes in the company’s operating model. And the remaining $20m will be saved through supply chain and sourcing initiatives.

The Americas

Avon Products is no longer operating in the US, Canada, or Puerto Rico, since New Avon LLC became a stand-alone, privately owned company in March​. Nonetheless, the company operates in two regions in the Americas market: North Latin America and South Latin America.

North

In North Latin America, Avon Products revenue was down by 5% this quarter. But in constant dollars that revenue figure becomes a 6% increase. And in Mexico where revenue dropped 8%, the constant dollar number was up 7%. Both in that country and the North Latin American region as a whole, the company’s “constant-dollar revenue benefited from an increase in Active Representatives and higher average order,”​ according to the press release.

South

The numbers for South Latin America are no rosier. Revenue was down in the region by 12%, which in constant dollar terms was a revenue increase of 5%.

Brazil’s particular economic situation was of course a factor here. “Constant-dollar revenue was negatively impacted by an estimated 2 points due to MVA taxes in Brazil, which are additional VAT-like state taxes that went into effect in various jurisdictions in Brazil in the latter part of 2015,” ​notes the company. “The Industrial Production Tax ("IPI") in Brazil, levied by the Brazilian government on cosmetics, which began in May 2015, had an estimated 1 point unfavorable impact on this constant-dollar revenue growth.”

Avon Products revenue for that county declined too, by 10%. That equates to only a 2% uptick in constant dollar terms. Also in Brazil the company saw a drop in the number of active sales representatives. Argentina stood out by adding about 3 points to constant-dollar revenue growth for the South Latin America region.

Elsewhere

Revenue figures for the company’s other two regions were down as well. In the Asia Pacific there was a 10% drop, only 5% in constant dollars. There the Philippines was the standout country, with a revenue increase of 1%, or 6% in constant dollars.

In the Europe, Middle East, and Africa region revenue was up 7% in constant dollar terms, and in actual terms down 2%. Russia did an okay business for Avon Products in Q2 with a revenue drop of only 7% that translates to a 15% increase in constant dollars. 

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