New York, NY
www.avoncompany.com

Corporate Sales: $8.9 billion

Beauty Sales: $6.3 billion

Key Personnel: Sheri McCoy, chief executive officer; Fernando J. Acosta, senior vice president & president, North Latin America and Andean Cluster and head of global brand marketing; John Higson, senior vice president and president, Europe, Middle East & Africa and head of global field operations; David Legher, senior vice president and president, Avon Brazil and South Market group; Pablo Muñoz, senior vice president and president, North America; Nilish Patel, senior vice president and president, Asia Pacific; Brian Salsberg, senior vice president, global strategy.

Major Products/Brands: Skin Care, Color Cosmetics, Personal Care, Hair Care and Fragrance brands including Anew, Anew Clinical, Anew Genics, Anew Men, Skin So Soft, Mark, Moisture Therapy, Avon Naturals, Clearskin Professional, Avon Solutions, Footworks, Outspoken and Outspoken Intense by Fergie, Derek Jeter Driven and Derek Jeter Black, Hervé Léger Homme.  

New Products: Avon Makeup Collection, Avon Big & Daring Mascara, Smooth Minerals, Advance Techniques Frizz Control Lotus Shield, Avon Forever, Avon Ultra Color Indulgence, Anew Vitale, Clearskin Professional.

Comments: Avon’s efforts toward a turnaround continued in 2014, but sales and representatives continued to decline. Overall, while it was the door-to-door company’s third consecutive year of losses, they were able to dig out of their financial debt somewhat with new terms and a new credit facility. The company also strove to get an established management team in place. Globally, according to the direct seller, four Avon lipsticks and two Avon mascaras are sold every second.

Total corporate sales fell 11% to $8.9 billion. Beauty sales, which constitute about 73% of the corporate total, declined 12% (but were relatively unchanged in constant dollars), reaching $6.3 billion. Skin care dropped 13% over the previous year to  $2.6 billion; Fragrance also dipped 13% to $2.1 billion; Color saw the lowest loss at 11%, totaling $1.6 billion (basically flat in constant dollars). The first half of the year proved more challenging than the second. Skin care actually grew slightly in the second half, the first time since 2008. The business remains the most challenged in bringing on additional representatives.

Still, Sheri McCoy, chief executive officer of Avon Products, Inc., remained optimistic, saying, “While progress against our financial goals in 2014 was slower than I would have liked, I am pleased with the sequential improvements we made in several key markets and categories in the second half of the year. We have stronger management teams across our key markets and better discipline in executing consistently against Avon’s core processes.” She added: “Going into 2015, we intend to build on that momentum. However, based on strengthening of the U.S. dollar, we expect the impact of foreign currency on our reported results to be significant. We are working to mitigate as much of the impact as possible. Avon has weathered emerging market cycles in the past and I’m confident we will do so again.”

Geographically during 2014, constant dollar revenue was impacted by net declines in North America and to a lesser extent, Asia Pacific, which were partially offset by net growth in Latin America and Europe, Middle East & Africa. North America continued to experience year-over-year revenue declines, driven by a decrease in Active Representatives. Constant revenue growth in Latin America was primarily driven by Venezuela largely due to inflationary pricing, which was partially offset by declines in Mexico.

Constant dollar revenue growth in Europe, Middle East & Africa was driven by South Africa and the UK, which was partially offset by revenue declines in Russia and Turkey. In Asia Pacific, constant dollar revenue declined as compared to 2013 as growth in the Philippines was more than offset by declines in the other Asia Pacific markets.

For the fourth quarter of 2014, total revenue of $2.3 billion decreased 12%, but increased 5% in constant dollars. Active Representatives were down 4%, while average orders increased 9%. Beauty sales declined 14%, but increased 5% in constant dollars.

News of Note

In January, Avon appointed ex-J. Crew executive James S. Scully to serve as executive vice president and chief financial officer. The company also ceased operations in 16 Caribbean nations, no longer accepting orders from many of the island nations. 

With most of its sales coming from developing markets, earlier in this year, Avon was reportedly exploring a sale of its North American operations as a possible way to turn around the struggling unit.

Avon Products sold Liz Earle, its wholly owned, UK-based natural skin care brand to Walgreens Boots Alliance for £140 million in an all-cash transaction.

In June, Avon launched a new fragrance called Amour, represented by award-winning actress Olivia Wilde.

In August, Avon scientists announced what they called an “anti-aging breakthrough,” saying they had solved “a key piece of the skin-aging puzzle.” The team of researchers focused on a transporter protein called dynein, which plays a critical role in carrying nutrients as well as mitochondria, the “powerhouses” within cells, to where they are needed, keeping skin cells productive and functioning optimally.

For 2015, the direct seller says it expects to continue to make progress against its strategic objectives, but faces continuing challenges from negative impact from foreign currency translation. What looms ahead is the potential impact from a pending tax law change on cosmetics in Brazil, called Industrial Production Tax.