Avon swings to profit, but revenue hurt by dollar

Avon swings to profit, but revenue hurt by dollar

Avon swings to profit, but revenue hurt by dollar

The FINANCIAL -- Avon Products, Inc. on November 3 reported third-quarter 2016 results.

Total revenue for Avon Products, Inc. declined 2% to $1.4 billion, but increased 4% in constant dollars1. Diluted earnings per share from continuing operations of $0.07 improved $1.58 per share versus the same period last year. Adjusted diluted earnings per share from continuing operations of $0.02 improved $0.13 per share versus the same period last year. Foreign currency negatively impacted both Diluted earnings per share and Adjusted diluted earnings per share by an estimated $0.03 per share, driven by the strength of the U.S. dollar against the currencies of the countries in which the Company operates, according to Avon.

"Avon's third-quarter results reflect broad-based performance improvements resulting in local currency sales growth across our top markets and significant operating margin expansion versus the prior year," said Sheri McCoy, Chief Executive Officer of Avon Products, Inc. "We have also taken actions to significantly improve our balance sheet and have accelerated the pace of our 2016 cost savings initiatives. I am pleased with our progress against the Transformation Plan as we continue to position Avon to deliver sustained long-term profitable growth."

Third-Quarter 2016 Income Statement Highlights (compared with third-quarter 2015)

Total revenue for Avon Products, Inc. declined 2% to $1.4 billion, but increased 4% in constant dollars.

Total revenue from reportable segments declined 2% to $1.4 billion, but increased 4% in constant dollars.

Active Representatives were relatively unchanged year-over-year, as increases in South Latin America and Europe, Middle East & Africa were offset by declines in Asia Pacific.

Average order increased 4% due to growth in all reportable segments as the Company continues to benefit from pricing.

Ending Representatives improved 1% due to growth in Europe, Middle East & Africa and South Latin America, partially offset by declines in Asia Pacific.

Gross margin was 60.9%, down 20 basis points while Adjusted gross margin was 60.9%, down 60 basis points. These year-over-year comparisons were negatively impacted by an approximate 250 basis point impact from foreign exchange, largely offset by inflationary and strategic pricing and lower supply chain costs.

Operating margin was 8.0% in the quarter, up 480 basis points while Adjusted operating margin was 7.0%, up 310 basis points. These year-over-year comparisons benefited from the favorable net impact of price/mix, as well as continued benefits from cost savings initiatives. These benefits were partially offset by approximately 260 basis points of unfavorable impact of foreign exchange on operating margin and approximately 270 basis points of unfavorable impact of foreign exchange on Adjusted operating margin.

The effective tax rate from continuing operations in the quarter was 51.3% and on an Adjusted basis was 72.5%.

Income from continuing operations, net of tax was $36 million, or $0.07 per diluted share, compared with a loss of $668 million, or $1.51 per diluted share, for the third quarter of 2015. Adjusted income from continuing operations, net of tax was $16 million, or $0.02 per diluted share, compared with a loss of $48 million, or $0.11 per diluted share, for the third quarter of 2015. Earnings allocated to convertible preferred stock had a negative $0.01 impact on Diluted earnings per share and a negative $0.02 impact on Adjusted diluted earnings per share.

Loss from discontinued operations, net of tax was $1 million associated with the previously separated North America business, or $0.00 per diluted share, compared with a loss of $29 million, or $0.06 per diluted share, for the third quarter of 2015.