Avon Products Inc. (AVP—NYSE) on Wednesday posted first-quarter results that fell below expectations, as the beauty company absorbed the impact of restructuring costs, the deconsolidation of its Venezuela business, and the stronger U.S. dollar.
New York-based Avon is in the midst of a transformation plan put forth in March, when the company spun off its North America business in a deal with Cerberus Capital Management LP. Cerberus agreed to inject $435 million into the business for majority ownership of Avon’s domestic operations, which it then took private as New Avon LLC, along with another $170 million investment in the iconic beauty brand.
For the first quarter, Avon reported an adjusted loss from continuing operations of 7 cents a share, versus earnings of 3 cents a year ago. Analysts polled by Thomson Reuters had projected earnings of 2 cents a share. The adjusted results exclude a $120 million after-tax loss from the deconsolidation of its Venezuelan operations, due to the continued inability to exchange the local currency. The company also reported $46 million in restructuring costs.
Revenue declined 16 percent to $1.3 billion, in line with analysts’ expectations but driven down 18 percentage points by unfavorable currency exchange rates. When measured by the dollar, revenue was down across all regions. The most notable decline came from South Latin America, down 28 percent as a result of a new production tax levied in Brazil.
As Avon seeks to revitalize its overseas operations, the company is downsizing its corporate infrastructure, including a 7 percent reduction in global staff, and transitioning its headquarters to the United Kingdom. Management said these measures, combined with reductions in the supply chain, are expected to bring about pre-tax savings of approximately $350 million after three years.