Canaccord Genuity Morning Coffee on Avon Products (AVP): In Desperate Need of a Makeover

August 2, 2012 10:51 AM EDT
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Canaccord Genuity Morning Coffee on Avon Products (NYSE: AVP): In desperate need of a makeover.

Avon said second-quarter profit plunged 70% as the world’s largest direct-seller of cosmetics sold fewer items and continued to lose sales representatives in key markets. Avon struggled in all of its main categories, with skincare and personal care sales declining the most. The beauty company sold 4% fewer items during the quarter and its sales force of “Avon Lady” representatives shrank 3%. Net income fell to $61.6 million, or $0.14 a share, from $206.2 million, or $0.47, a year earlier, the company said Wednesday in a statement. Excluding some items, profit totalled $0.20 a share, lower than the average estimate of $0.22. Revenue also missed projections of $2.68 billion, falling 9.3% to $2.59 billion. Avon is trying to stem falling sales, especially in key markets like Russia and Brazil, under new CEO Sheri McCoy, who took the reins from long-time CEO Andrea Jung in April. In its home market, North America, sales continued their years-long slide, falling 6% as the number of representatives fell by 12%. McCoy said the results “are not good” and that turning Avon around “will take time.” She also said the company is trying to stabilize revenue, rein in costs, and make being a representative more attractive. During the quarter, Avon rejected a $10.7 billion unsolicited takeover bid from smaller rival fragrance maker, Coty, saying shareholders would benefit more in the long term from a turnaround under McCoy’s leadership. It also faces a U.S. government probe into whether it broke anti-bribery laws overseas and has spent $250 million dollars on its own internal probe, which opened in 2008.

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