Stock in Avon Products Inc. (AVP—NYSE) fell nearly 20 percent in Wednesday trading after the beauty company posted a loss of $50 million in the third quarter, coming in well below estimates by analysts.
New York-based Avon reported an adjusted loss of 11 cents per share, hurt by the strong dollar, a new industrial production tax in Brazil, and the sale of U.K.-based skincare brand Liz Earle. On average, analysts had expected a profit of 7 cents per share. On a reported basis, the company’s shortfall totaled $1.58 per share, compared with earnings of 21 cents per share last year. The disappointing results come amid ongoing efforts by management, led by CEO Sheri McCoy, to restructure the beauty business.
Revenue was down 22 percent to $1.7 billion, dipping 2 percent in constant dollars but narrowly beating the Zacks Consensus Estimate. Though the company derives more than 80 percent of its revenue from outside the U.S., the results reflect a 17 percent revenue decline in Avon’s home market as the ranks of active sellers continue to thin. Globally, the company’s salesforce of roughly 6 million shrank 1 percent from a year ago.
Sales in the Beauty segment fell 23 percent, or 1 percent in constant dollars, hit by the heavier tax burden in Brazil and the divestiture of Liz Earle. Fashion & Home sales dropped 15 percent, but rose 3 percent in constant dollars.
For the full year, the company expects revenue to remain flat on a constant dollar basis. However, management anticipates foreign currency declines will cut revenue nearly 19 percentage points, compared with earlier guidance of 17 percentage points. The company maintains that free cash flow this year will be positive, though lower than the prior guidance of roughly $100 million.