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.
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.
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.
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.
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.