Avon (AVP) Calling… for Plummeting Sales

Jacob Harper |

Avon Products Inc. (AVP) reported earnings on Oct. 31 and the direct-to-customer beauty product company reported declining sales, especially in emerging markets, and shares in turn tanked.

The multi-level marketing company has sometimes been referred to as a “pyramid scheme” for its distribution system that disproportionately rewards those at the top,  and has been in hot water with regulators for some time. In 2008 the company was targeted by authorities in a far-reaching bribery scandal that could still end up costing it some $250 million.

In the midst of the ongoing legal battle, Avon launched an aggressive turnaround campaign, targeting emerging markets like Mexico and China. Sales in both those countries dropped, with revenue in China decreasing a whopping 67 percent.

Avon’s bread and butter, the American market, has likewise been sagging as the company hemorrhages  “district managers” who are responsible for roping in new clients.  In the conference call with investors, chief executive Shari McCoy admitted “Our recruiting engine fell apart.”

Avon missed significantly on both earnings and revenue, posting a loss when Wall Street had expected a modest net gain. The company’s revenues have been declining steadily for some time, falling from $2.76 billion in Q3 2011 to $2.61 billion in Q3 2012.

For their third quarter 2013 earnings report, Avon  reported a net loss of $6 million, or -$0.01 per share, versus the net gain of $33 million, or $0.07 per share, from the same period a year ago. Revenue for the quarter was $2.26 billion, as compared to $2.47 billion from the previous year. Analysts were expecting a net gain of $0.19 per share on revenues of $2.44 billion.

Avon tanked on the poor earnings call, dropping 23.53 percent in midday trading to hit $17.13 a share.

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Companies

Symbol Name Price Change % Volume
AVP Avon Products Inc. 5.53 0.14 2.60 5,305,124
ECAM Environmntl Cp Of America n/a n/a n/a 0

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