Avon Products Inc. (AVP—NYSE) on Thursday reported a greater-than-expected quarterly loss as demand waned in Latin America, the beauty company’s biggest market.
Per a Dec. 17, 2015, announcement, Avon is in the midst of selling off an 80.1 percent stake in its struggling North America business to Cerberus Capital Management, which will privately own and manage the unit. Avon’s earnings report anticipates that change, showing the results of continuing operations outside North America.
Management, relieved of domestic pressures, faces a new set of challenges across the brand’s international markets. Revenue from continuing operations fell 20 percent to $1.60 billion in the fourth quarter, beating analyst expectations of $1.47 billion, according to S&P Global Market Intelligence. The results reflect a 26 percent drop in Latin America, which accounts for half of total revenue. Though constant-dollar revenue was relatively flat in the region, reported revenue was hurt by tax items in Brazil and high inflation in Venezuela and Argentina.
EMEA (Europe, Middle East and Africa) revenue dropped 13 percent to $669.5 million, despite a strong performance in Russia, where constant-dollar revenue rose 29 percent. In Asia Pacific, revenue was down 16 percent, hurt by a 44 percent plunge in constant-dollar sales in China. Like many direct selling companies, Avon has struggled to grow sales while complying with strict regulations in the market.
“Our specific challenge in China has been our business model,” CEO Sheri McCoy told investors during the company’s earnings call. “We operate beauty boutiques, so we don’t have the more traditional Avon model, and that’s been under pressure for some time now. As I said during our Investor Day, we are looking at strategic partnerships or opportunities in China to figure out how we better serve the customer there.”
The company reported a loss of $333 million, or 76 cents per share, down from a loss of $331 million in the fourth quarter of 2014. On average, analysts had projected earnings of 4 cents per share. Due to a variety of factors impacting Avon as it closes the deal with Cerberus, management declined at this time to provide detailed financial guidance for 2016.
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