Published February 14, 2012
Avon Products (AVP) swung to a fourth-quarter loss from a year-earlier profit on Tuesday as sales slumped in almost all of its markets and the number of representatives directly selling to consumers dropped 3%.
The New York-based maker of beauty products, jewelry and footwear, which it sells through independent sales reps and distributors, has been fighting an expensive internal bribery investigation that began in China four years ago as well as a probe by federal officials.
The company’s stock is down more than 55% from 2008 when it started internally investigating allegations of bribery at its Chinese business. It has fallen 23% since October 2011, when it disclosed a Securities and Exchange Commission probe.
While the company gave no updates regarding either of those, its shares were still up 2.6% to $18 Tuesday morning after Avon said it would announce cost-cutting initiatives as early as this quarter and maintain its 92-cent annual dividend.
Revenue for the three-month period ended Dec. 31 was down 4% to $3 billion, missing average analyst estimates in a Thomson Reuters poll.
The slowdown was greatest in Brazil, which was hit with a faulty new computer system, and Russia, which saw sales fall 10% on aggressive pricing from competitors, partially offset by sales growth of 12% in Mexico.
The company reported a loss of $400,000 in the fourth quarter, compared with a year-earlier profit of $229.5 million a year ago. Excluding certain one-time items, Avon said it made 39 cents a share, below the Street’s view of 51 cents.
Avon has been struggling to revamp operations and turn around its business. Costs have remained stubbornly high and the bribery issue has left a cloud over its business and frustrated sales reps.
Avon relies on the reps to directly sell products to customers, but it lost 3% of them during the latest quarter.
“While 2012 is a year of transition and we are not planning for margin recovery, our priorities are to improve top-line performance, cost management, and cash generation,” Avon CEO Andrea Jung said in a statement.
In December, Avon said Jung, CEO since 1999, would step down sometime this year.