Avon Profit Rises Slightly, but Sales Fall

Avon Products Inc.'s profit rose slightly in the latest quarter, though sales declined as the direct seller works through continued shifts in consumer trends in the beauty industry.

"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," said Avon Chief Executive Sheri McCoy.

Ms. McCoy said the company's performance had improved with cost-cutting and pricing discipline in an effort to build the brand name.

Avon sells cosmetics, perfumes and accessories through a network of roughly 6 million representatives world-wide. In March, after completing the sale of its North American operation to Cerberus Capital Management LP for about $435 million, Avon said it would eliminate about 7% of its workforce and move its corporate headquarters to the United Kingdom, the latest step in a yearslong turnaround of the struggling beauty company.

In recent years, as consumers have turned away from Avon's signature direct sales approach and moved toward the internet, and as the cosmetics industry has become more competitive, Avon stock has fallen sharply.

For the quarter ended June 30, the beauty-products maker posted a profit of $33 million, a rise from $28.8 million a year earlier. On a per-share basis, earnings fell to 6 cents a share from 7 cents a share a year earlier. Adjusted earnings were 7 cents a share, up from 9 cents a share a year earlier.

Revenue fell 8.3% to $1.43 billion.

Avon beat expectations of analysts polled by Thomson Reuters, who had forecast 2 cents in per-share earnings on $1.41 billion in revenue.

Sales in Avon's Europe, Middle East and Africa segment fell 2% year-over-year to $520.9 million. South Latin American sales fell 12% to $535.7 million, North Latin America sales declined by 5% to $224.4 million, and the Asia Pacific segment's sales fell 10% to $141.9 million.

Avon's number of representatives actively selling products rose 1% compared with last year; increased numbers in Europe, the Middle East and Africa and North Latin America were offset by declines in Asia Pacific. The average order grew 4% during the quarter, helped by favorable pricing.

Gross margin fell to 60.6%, down 0.4% year-over-year.

Avon stock, which has lost 27% of its value over the past 12 months, was up 6.9% premarket at $4.45 a share.

Write to Brittney Laryea at [e-mail]

(END) Dow Jones Newswires

August 02, 2016 09:25 ET (13:25 GMT)

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