Major Products: Color—Avon Makeup Collection; Avon
Naturals and Foot Works; Skin Care—Anew, Anew Clinical, Anew
Genics, Clearskin Professional and Avon Solutions; Fragrances—
Outspoken and Outspoken Intense by Fergie, Derek Jeter Driven
and Derek Jeter Black, Hervé Léger Homme, Step into Sexy,
Scentini Fragrance Collection, Rare Diamonds, Eternal Magic,
New Products: Color—Ultra Color Indulgence lipstick, Super
Extend Winged Out mascara; Fragrance—Outspoken Fresh.
Comments: It’s been another tumultuous year, but after all the
headlines, false bids and SEC-implemented penalties, one of the
world’s biggest names in direct selling is still, well, selling—just
not as much as it has in years past. Corporate sales fell 12% in
2014, though constant revenue fell just 1%. Beauty results were a
bit better, but just a bit; sales fell 12% and constant revenue was
flat. More specifically, skin care and fragrance sales dropped 11%
to $2.6 billion and $2.1 billion, respectively; while color cosmetic
sales fell 13% to $1.5 billion.
By region, sales fell in North America and to a lesser extent
in Asia; these declines were partially offset by growth in Latin
America and Europe, Middle East & Africa.
Avon’s North American division’s sales fell 17% last year,
and at $1.2 billion are just half of what they were in 2007. Avon
blamed a decline in active representatives in North America,
while gains in Latin America were the result, in part, of inflationary pricing in Venezuela. Elsewhere, growth in South Africa and
the UK lifted results in Europe, Middle East and Africa. Revenues
fell in Asia, despite gains in the Philippines. Overall, more than
85% of Avon’s revenues come from outside the US, which is why
many observers have urged company executives to exit the US
in favor of faster growing emerging markets that may be better
served by the direct sales model.
CEO Sheri McCoy admitted times are tough at Avon, but
she assured investors that the company’s top 12 markets are
stabilized and well positioned to continue to progress toward
sustainable, profitable growth. But in order to achieve that,
Avon has to solve the tricky issue of keeping and growing its
active representative base while improving the online experience for consumers—without alienating representatives; sort of
like a dog chasing its tail, it just goes round and round. One
good outcome from 2014 is that Avon finally put its legal woes
to rest. The company agreed to pay $135 million in fines related
to a bribery scandal in China, but only after spending $300 million in legal fees.
The new year didn’t start off with good news. For the first
quarter of 2015, corporate sales fell 18% to $1.7 billion—but
the company was quick to note that at constant exchange
rates, revenue actually rose 1%. Beauty sales declined 17% to
just under $1.3 billion, as all three units reported declines. Skin
care sales fell 17% to $532 million; fragrance sales dropped
18% to $423 million and color cosmetics sales fell 16% to $336
million. Sales in Latin America fell 22% to $836 million; sales
in Europe, Middle East and Africa fell 16% to $550 million;
North American sales fell 18% to $242 million; and sales in
Asia-Pacific fell 1% to $164 million.
• Declining sales, a dwindling sales base, fines…it couldn’t get
any worse for Avon, right? Wrong. Avon’s world turned even wackier
in May when an $8.2 billion takeover bid turned out to be a hoax. At
press time, Securities and exchange Commission (SeC) investigators
were still searching for Nedko Nedev, the 37-year-old Bulgarian who
is said to be behind the bogus takeover offer for Avon.
Regulators traced Nedev to an apartment in Sofia, but unfortunately, the Feds found out what Avon executives learned long ago—
you can knock all you want, but it doesn’t help if nobody’s home to
answer the door.
DING-DONG, THE FEDS COME CALLING
Ultra Color lipstick