Avon Revenue Falls on Currency Headwinds

Avon Products Inc. on Thursday said its first-quarter revenue fell 18% on a bigger-than-expected hit from the strong dollar and continued struggles in the North American segment.

The results come as the 129-year-old cosmetics empire, one of the biggest direct sellers of beauty products, has struggled with identity issues and weakness in North America. The Wall Street Journal reported earlier this month that the retailer has explored the possibility of a sale of the company.

Like other retailers, the beauty-products company has been hurt by the negative effects of the strong dollar. The company said currency headwinds would hurt revenue by 17 percentage points this year, instead of the 12 percentage points it had expected in February. It added that it expects revenue to be up modestly on a constant basis.

Chief Executive Sheri McCoy said the results were "in line with our expectations despite currency pressures that were greater than anticipated."

In the March quarter, beauty sales fell 17%, but increased 3% in constant dollars, while fashion and home sales fell 19%, or 3% in constant dollars. Active representatives, a closely watched barometer of future sales, fell 1% though the metric increased sequentially.

In the struggling North American sector, sales dropped 18%, mostly due to fewer active representatives. In that division, sales have fallen for over half a decade, including a 17% drop last year.

Sales fell 22% in Latin America, though they edged up 3% in constant dollars. Sales dropped 16% in EMEA, while rising 9% in constant dollars due to an increase in active representatives in the area, especially in Russia. Sales fell 1% in Asia Pacific, but edged up 2% in constant dollars.

In all, Avon posted a loss of $147 million, or 33 cents a share, narrowing from a year-earlier loss of $168 million, or 38 cents a share.

Excluding special items such as restructuring costs, per-share earnings fell to four cents from 12 cents in the year-earlier period.

Revenue decreased to $1.79 billion from $2.18 billion, but rose 1% in constant dollars.

Analysts polled by Thomson Reuters had expected earnings of seven cents a share on revenue of $1.83 billion.

Shares have declined 8% this year through Wednesday's close.

Write to Angela Chen at [e-mail]

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