Avon’s Q4 profit tops estimates

A von Products Inc on Thursday reported its first earnings beat in six quarters as it signed up more sales representatives in Europe, Middle East and Africa to sell its lipsticks, anti-ageing creams and fragrances.

Sales in EMEA, which accounts for more than 40% of total sales, rose 3%. It was the only market to report a rise in sales as well as an increase in Avon Ladies, the company’s sales representatives.

The strong earnings report comes days after Avon named its first male chief executive officer in almost two decades, appointing Unilever veteran Jan Zijderveld to succeed Sheri McCoy, who stepped down in August last year.

Zijderveld joins Avon at a time when it is focusing on emerging markets, after struggling to hold its ground in the United States where women are increasingly taking their makeup cues from social media rather than door-to-door sellers.

In Latin America, its biggest market, sales were weak due to economic and political instability in many countries. Sales in south Latin America fell 2%, while those in the north were flat.

“Our top line remains under pressure as we continue to operate in challenging macro and competitive conditions, particularly in our largest markets,” chief financial officer Jamie Wilson said in a statement.

Avon’s cost-cutting measures resulted in savings of $250 million in 2017, exceeding the company’s target by $20 million for that year. The measures were part of a threeyear plan initiated in 2016.

These measures, lower bad debt expense in Brazil and lower fixed expenses helped boost operating margin by 150 basis points in the fourth quarter, while gross margins rose 70 basis points.

Excluding one-time items, Avon earned 12 cents per share, beating analysts’ average estimate of 7 cents.

Net income attributable to the company was $91.5 million, or 17 cents per share, in the fourth quarter ended Dec 31, compared with a loss of $10.7 million, or four cents per share, a year earlier.

Net sales remained flat at $1.57 billion, missing the average analyst estimate of $1.60 billion.