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Avon Q4 sales take a dive in Asia, but Russia and Brazil save the day

14-Feb-2013

Sales in China plunged for Avon, counterbalanced by gains in both Brazil and Russia, while profits nosedive due to the impact of restructuring charges.

Revenue for the period fell by 1 percent to $3.0bn, a figure that increased by 1 percent in constant dollars when figuring in the impact of foreign currency translations.

However, one of the biggest disappointments was the results in the Asia Pacfic region, where sales for the quarter fell by 3 percent to reach $246.6m, a figure the company said was largely down to weakness in the China market, where revenues were down by 23 percent.

Elsewhere in the region sales growth of 7 percent in local currency for the Philippines, helped to prop up the results, but the company said those gains were from fashion and home sales, not cosmetics.

As expected net profits took a big hit as the company continued to implement cost saving strategies that are expected to take effect during the course of the 2013 financial year.

Capping off a poor year for Avon

The results cap off a disappointing year for Avon, which has been plagued by a number of structural problems across its operations worldwide, together with a significant loss in the number of its direct sales representatives.

However, the trend of falling sales representative numbers was bucked for the final quarter of the year, with the overall number rising by 1 percent.

In December the company announced plans to reduce its permanent workforce by 1,500 people and to exit certain markets, specifically South Korea and Vietnam.

As a result of the continued problems, the company posted a loss of $162.2m during the quarter, compared to a figure of $400,000 a year earlier.

The losses largely reflect allocated expenses for the quarter to implement the company’s massive restructuring program, which ultimately aims to cut a total of $400m related to administrative, sales and general costs.

Brazil and Russia prop up failing North American market

Breaking the group revenue down for the current quarter, the company said that sales in key developing markets, specifically Russia and Brazil, had shown a marked signs of improvement.

Counterbalancing a continued decline in the United States, sales in Brazil were 10 percent during the quarter, while Russia showed a 3 percent increase in revenues. The revenue increase in both of those markets was largely attributed to a jump in sales reps.

Conversely, sales dropped by approximately 12 percent in the North American market, which was directly impacted by a 13 percent drop in the number of sales reps.

Costs already adding up for 2013

In addition to continued costs incurred for the restructuring, the company also said it expects other write-downs for the financial year that should amount to about $100m.

Those costs will be approximately $50m attributable to the Venezuela market, following an announcement last week that the government is to devalue the country’s currency by 32 percent, together with a further $50m relating to US dollar charges for non-cash charges such as inventory.

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