The FINANCIAL — Avon Products, Inc. on August 2 reported second-quarter 2016 results.
Total revenue for Avon Products, Inc. declined 8% to $1.4 billion, but increased 4% in constant dollars1 and increased 5% in constant dollars when excluding the impact of the sale of Liz Earle2. In addition, Diluted earnings per share from continuing operations increased $0.01 per share versus the same period last year, including a negative currency impact of approximately $0.10 per share, driven by the strength of the U.S. dollar against the currencies of the countries in which the Company operates. Adjusted diluted earnings per share from continuing operations decreased $0.02 per share versus the same period last year and included a negative currency impact of approximately $0.10 per share, driven by the strength of the U.S. dollar against the currencies of the countries in which the Company operates, according to Avon.
“Our second quarter results came in slightly above our expectations, driven by operating performance that was better than anticipated. We also saw some modest easing in foreign currency pressure. Importantly, our performance improvements were broad-base with nine of our top 10 markets growing in local currency,” said Sheri McCoy, Chief Executive Officer of Avon Products, Inc. “We continue to make steady progress on a number of fronts: improving pricing discipline; driving additional cost out of the business; and, continuing to build our brand and enhance the Representative experience.”
As a reminder, in the first quarter the Company announced several reporting and disclosure changes. A summary of these changes, including the changes to segment reporting and the deconsolidation of Venezuela, is included in the Reporting and Disclosures section later in this release. The Company has also included a subtotal of Total from reportable segments, which the Company believes is a clearer reflection of the ongoing business.
Second-Quarter 2016 Income Statement Review (compared with second-quarter 2015)
Total revenue for Avon Products, Inc. declined 8% to $1.4 billion, but increased 4% in constant dollars and increased 5% in constant dollars when excluding the impact of the sale of Liz Earle2.
Total revenue from reportable segments declined 7% to $1.4 billion, but increased 5% in constant dollars.
Active Representatives were up 1% year-over-year, as increases in Europe, Middle East & Africa and North Latin America were partially offset by declines in Asia Pacific.
Average order increased 4% due to growth in all reportable segments as the Company continues to benefit from pricing.
Ending Representatives improved 2% due to growth in Europe, Middle East & Africa and South Latin America, partially offset by declines in Asia Pacific.
Gross margin was 60.6%, down 40 basis points while Adjusted gross margin was 60.6%, down 70 basis points. These year-over-year comparisons were negatively impacted by an approximate 290 basis point impact from foreign exchange, partially offset by pricing actions, favorable mix and lower supply chain costs.
Operating margin was 6.6% in the quarter, up 90 basis points while Adjusted operating margin was 7.3%, up 100 basis points. These year-over-year comparisons benefited from the favorable net impact of price/mix, as well as continued benefits from cost savings initiatives, partially offset by approximately 350 basis points of unfavorable impact of foreign exchange.
The effective tax rate from continuing operations in the quarter was 50.2% and on an Adjusted basis was 54.0%.
Income from continuing operations, net of tax was $36 million, or $0.07 per diluted share, compared with $29 million, or $0.06 per diluted share, for the second quarter of 2015. Adjusted income from continuing operations, net of tax was $37 million, or $0.07 per diluted share, compared with $39 million, or $0.09 per diluted share, for the second quarter of 2015. Within the diluted earnings per share calculation, earnings allocated to convertible preferred stock was $5.9 million and this had a negative $0.01 impact on both Diluted earnings per share and Adjusted diluted earnings per share.
Loss from discontinued operations, net of tax was $3 million associated with the previously separated North America business, or a loss of $0.01 per diluted share, compared with income of $1 million, or $0.00 per diluted share, for the second quarter of 2015.
