Avon posts a net loss on the back of falling Q4 sales

By Simon Pitman

- Last updated on GMT

Related tags: Revenue, Us

Avon Product’s fourth quarter sales take a significant dive as it continues to be impacted by operational issues in Brazil and economic challenges in the developed markets.

The company said that revenue fell by 4 percent to $3.04bn, down from $3.18bn in the corresponding period last year, reflecting the fact that the number of units sold declined by 2 percent, while the head count for the number of direct sales staff fell by 3 percent.

The results also reflected the fact that sales in the North America region fell by a steep 7 percent, while sales in the company’s US division fell by 5 percent during the quarter.

All geographic regions reported declining sales during the quarter, except in the Latin America region where sales increased by 2 percent, despite the distribution and operational problems in the Brazil market.

Costs and falling sales push profits into the red

The company was also impacted by a rise in silver prices, which hit both revenues and margins for the Silpada Designs jewelry business unit, which it acquired at the end of 2010.

Margins also took a significant dip on the back of the falling sales and rising costs, pushing net profit into the red. The loss came in at $400,000 for the quarter, compared to a positive figure of $229.5m in the corresponding period last year.

The financial world was not impressed by the results, with share prices falling by almost 5 percent in premarket trading on Tuesday, with many financial analysts now tipping the company’s shares as being a good long-term investment in view of their low price.

Results fall short of analysts' expectations

The results also fell short of industry analyst’s expectations, with analysts on average expecting the quarter’s revenues to be around $3.1bn, adding to the falling share prices.

The company was also nit by a rise in silver prices, which impacted both revenues and margins for the Silpada Designs jewelry business unit, that was acquired at the end of 2010.

For the full year 2011 revenues rose by 4 percent to $11.29bn, from $10.86bn in 2010, reflecting a stronger start to the year. Full year net earnings fell to $513.6m, down from $603.3m in 2010.

Related topics: Business & Financial, Financial focus

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