Avon Products Net Falls 70% as Sales Decline

Avon Products Inc.'s (AVP) second-quarter earnings fell 70% as sales declined in all of the door-to-door cosmetics vendor's categories and margins worsened.

"Avon's second-quarter financial results are not good and they reflect the complex challenges that Avon faces," said Chief Executive Sheri McCoy. "We are working to stabilize the top-line, improve cost structure and cash generation, and instill a more disciplined culture of accountability," she added.

Avon has faced deep investor dissatisfaction over the past year as it failed to deal quickly with poor results in important overseas markets as well as a messy federal probe into allegations of bribery of officials overseas. The company is reassessing its long-range business plan and has planned some layoffs and other cost savings to stabilize results in the near term.

While the company was fighting off fragrance maker Coty Inc.'s now abandoned $10.7 billion buyout offer, Avon tapped Ms. McCoy--a highly regarded Johnson & Johnson (JNJ) executive who was a candidate for the health-care giant's top spot--as its next CEO to steer the company's turnaround. Andrea Jung had stepped down from the CEO post in December, but continues to serve as executive chairman.

Avon reported a profit of $61.6 million, or 14 cents a share, down from $206.2 million, or 47 cents, a year earlier. The most-recent quarter included restructuring charges of six cents a share, compared with two cents a year ago. Adjusted earnings from continuing operations fell to 20 cents from 49 cents.

Revenue dropped 9.3% to $2.59 billion.

Analysts polled by Thomson Reuters had most recently forecast earnings of 21 cents on revenue of $2.67 billion.

Operating margin dropped to 4.9% from 11.1%.

Beauty sales fell 9%, color category sales were down 9% and fragrance declined 8%. Both skincare and personal care sales decreased 10%.

Shares closed Tuesday at $15.49 and were inactive premarket. The stock has fallen 40% over the past year.

Write to Melodie Warner at [e-mail]

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