Tags: avon | profit | dividend | earnings

Avon Slashes Dividend as Profit Plunges 81%

Thursday, 01 Nov 2012 09:59 AM

Direct beauty products seller Avon Products said Thursday its third-quarter net income fell 81 percent, hurt by the stronger dollar and an impairment charge. The company also slashed its dividend as it works on a turnaround.

Avon, whose products include Skin So Soft lotion and Mark makeup, has struggled for years to turn around results home and in emerging markets.

CEO Sheri McCoy, brought on in April to replace longtime CEO Andrea Jung, called the results disappointing but said improvement will take time.

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"The challenges that Avon faces developed over time, not overnight, and it will take time to implement the solutions as well," McCoy said.

Avon shares fell 24 cents, or 1.6 percent, to $15.25 per share.

The beauty products company reported net income fell to $31.6 million, or 7 cents per share, for the July-September period from $164.2 million, or 38 cents per share, a year ago. Excluding an impairment charge profit was 17 cents per share. Analysts expected earnings of 22 cents per share, according to FactSet.

Revenue fell 8 percent to $2.55 billion from $2.71 billion a year ago. Analysts expected $2.58 billion.

In North America, revenue fell 6 percent as the company enlisted fewer direct sellers and a 10 percent drop in units sold.

Revenue from Latin America fell 6 percent to $1.27 billion, hurt by a 19 percent decline in Brazil due to the stronger dollar, which lessens the value of overseas sales.

Revenue from Europe, the Middle East and Africa fell 11 percent to $620.7 million, hurt by lower average orders. In Asia Pacific, revenue fell 8 percent to $215.7 million.

Avon says it plans to cut costs to save $400 million in three years. It cut its quarterly dividend to 6 cents from 23 cents. The dividend is payable on Dec. 3 to shareholders of record as of Nov. 15.

Avon's long term goal is for revenue to increase in the mid-single digit percentage range, excluding the effect of currency fluctuations.

Avon did not give an update on its long running bribery probe. The problems began in 2008, when it started to investigate possible bribery in China related to travel, entertainment and other expenses, and soon widened the probe to other countries, with the Securities and Exchange Commission and Justice department getting involved.

In September, the SEC decided it wouldn't recommend any action against the company over whether Avon contacted analysts inappropriately during a separate bribery investigation. But Avon still faces wider probes about possible bribery in China and other countries.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

Founded in 1886, Avon became a fixture in households across the United States as its legions of "Avon ladies" went door to door selling makeup to family, friends and acquaintances.

Today, the company markets to women in more than 100 countries via 6 million independent sellers.

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Avon Products Inc. slashed its dividend by nearly 74 percent on Thursday, while also announcing measures to cut costs by at least $400 million within three years in moves designed to shore up its finances while it new chief executive officer works on a turnaround. The...
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Thursday, 01 Nov 2012 09:59 AM
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