Yahoo Finance Will Avon Products (AVP) Offload North America Business? - Analyst Blog
Per sources, Avon Products Inc. AVP is looking for strategic options for its beleaguered North America business. Market experts believe that the cosmetic company may offload the unit. However, finding the buyer could be a Herculean task due to the division’s deteriorating performance. Nevertheless, this speculation was enough to lead this Zacks Rank #4 (Sell) company’s shares to jump 14.2% yesterday.
Over the last five years, Avon has witnessed a declining revenue trend in North America, especially in the U.S., primarily due to a decrease in active representatives, partly offset by large average orders. Total revenue from this region declined considerably from nearly $2,293.4 million in 2009 to about $1,203.4 million in 2014. Management being concerned about this rapid decrease, has been constantly striving to stabilize the situation.
In the final quarter of 2014, Avon’s sales in North America plunged 12% year over year to $326.9 million. On a constant dollar basis too, revenues were down 11%. Units sold for the region dropped 10% year over year, while Active Representatives slipped 16%. Regional Beauty sales declined 10%, while Fashion & Home sales were down 13%.
Avon’s overall performance in 2014 reflects a disappointing picture, wherein the company delivered negative earnings surprises in 3 out of the 4 quarters. In the trailing four quarters, the company fell short of the Zacks Consensus Estimate by an average of 5.3%.
Industry pundits believe that cost-containment efforts through headcount reduction and closing of underperforming stores may not be sufficient to bring Avon back on the growth trajectory. In fact, a sound infusion of capital to revamp the company’s entire operations is the need of the hour. Nonetheless, let us keep our fingers crossed in the hope that management will announce concrete measures when it meets investors this fall. The meeting was scheduled for May 13, but was postponed.
Stocks to Consider
Better-ranked stocks in the retail industry include Burlington Stores, Inc. BURL, ULTA Salon, Cosmetics & Fragrance, Inc. ULTA and Hanesbrands Inc. HBI, all carrying a Zacks Rank #2 (Buy).
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