Avon just met second quarter expectations, total revenue decreases
Avon on Tuesday reported its second quarter 2016 results, which were slightly above company expectations despite a decrease in revenue.
Total revenue decreased 8% to $1.4 billion, but it increased 4% in constant dollars and 5% in constant dollars when excluding the impact of the sale of Liz Earle, which was deconsolidated on March 31, 2016.
EMEA revenue was down 2% with Russia’s revenue down 7% and UK revenue down 7%. In constant dollars, EMEA revenue went up 7% and Russia revenue increased 15%. South Latin America revenue was down 12%, but up 5% in constant dollars; North America revenue was down 5% and up 6% in constant dollars and Asia Pacific revenue was down 10% and down 5% in constant dollars. Brazil and Mexico revenue were down 10% and 5%, respectively, while Philippines revenue was up 1%.
"Our second quarter results came in slightly above our expectations, driven by operating performance that was better than anticipated. We also saw some modest easing in foreign currency pressure. Importantly, our performance improvements were broad-base with nine of our top 10 markets growing in local currency," said Sheri McCoy, Chief Executive Officer of Avon Products, Inc. "We continue to make steady progress on a number of fronts: improving pricing discipline; driving additional cost out of the business; and, continuing to build our brand and enhance the Representative experience."
Gross margin was 60.6%, down 40 basis points, and operating margin was 6.6%, up 90 basis points. Adjusted operating margin was up 100 basis points at 7.3%.
Income from continuing operations, net of tax was $36 million, or $0.07 per diluted share, compared to $29 million, or $0.06 per diluted share, in the previous year’s second quarter.
Net cash used by operating activities of continuing operations was $130 million for the first six months of the year compared to $107 million in the prior year and net cash used by investing activities of continuing operations decreased $4 million from the previous year to $44 million.
In January 2016, Avon announced a three-year Transformation Plan to improve its cost structure and reinvest its growth. As a result of the plan, Avon expects pre-tax annualized cost savings of $350 million after three years and plans to reinvest a portion to growth initiatives including media, social selling and information technology systems that will help the Company modernize its business.
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