Here’s Why Avon’s Shares Are Plunging
Thu Feb 16 2017
Mark Cooper (2132 articles)

Here’s Why Avon’s Shares Are Plunging

Avon isn’t looking so pretty today.Shares of the beauty company fell more than 20% to $ 4.65 in midday trading Thursday after it reported quarterly earnings that fell short of expectations. Revenue fell 2% to $ 1.57 billion from a year ago, which marks the 21st straight quarter of revenue declines. The company also took a loss of $ 10.7 million.

Avon’s stock has been having a rough go of it over the last several years. As recently as May 2013, shares were trading for more than $ 24, but as the company’s sales have lagged, so has its demand on Wall Street. The company now sells for about a tenth of what it was worth in May 2004, when it was trading for over $ 44.

Avon (avp) relies on a network of around six million sales representatives to sell its products around the world, usually door-to-door. The company’s sales took a hit last quarter thanks to a 2% drop in the number of sales representatives hawking its products.

Revenue was down in all of Avon’s markets except for south Latin America, which saw a 9% increase. North Latin America had a revenue decline of 10%, while the Europe, the Middle East and Africa division reported a 7% drop.

To fight off the years-long negative trend, Avon announced a three-year turnaround plan more than a year ago, which included the sale of its North American arm to Cerberus Capital Management in March for roughly $ 435 million. The company also moved its global headquarters over to the U.K. last month. The moves, which aim to ultimately cut $ 350 million in costs, have so far gone further than expected and have saved Avon $ 120 million to date. The company was also able to chop $ 260 million off its debt last year, $ 10 million more than it had originally hoped for.

Moving forward, Avon has already started investing nearly $ 350 million in order to update its business model by shifting away from direct door-to-door sales. Of that total, $ 200 million is going towards new sales model technology. The other $ 150 million will be used for social media development, which Avon hopes will connect it with a new generation of customers who see direct, in-person sales as a foreign concept.

Mark Cooper

Mark Cooper

Mark Cooper is Political / Stock Market Correspondent. He has been covering Global Stock Markets for more than 6 years.


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