(AVP—NYSE) Avon Products Inc.’s second quarter 2014 results still show a struggle for the beauty company, but its ongoing turnaround plan is slowly making itself known as sales improve in key regions. Reporting before markets opened Thursday, Avon’s revenue came in at $2.2 billion, falling 13 percent (or 3 percent in constant dollars). Adjusted earnings were 20 cents per share, a penny below the Zacks Consensus Estimate, dropping 31 percent from 29 cents the previous year.
While the volume of products sold dropped 6 percent and active representatives worldwide were also in decline, average orders went up by 3 percent in the quarter. The company also reported that quarterly sales grew in the U.K. for the first time since 2010, up 11 percent, or 1 percent in constant dollars, primarily due to higher average orders.
“As anticipated, our second-quarter results were tough,” said Avon CEO Sheri McCoy. “While Avon’s turnaround remains challenging, we are putting the people and processes in place to lay the foundation for returning Avon to sustainable, profitable growth. As we move to the second half of the year, we continue to expect improved performance.”
Second quarter 2014 gross margin and adjusted gross margin were 63.0 percent. Adjusted gross margin was 30 basis points lower than the prior-year quarter, primarily due to the unfavorable impact of foreign exchange driven by Latin America and Europe, Middle East & Africa.
Operating profit was $93 million and operating margin was 4.3 percent in the quarter. Adjusted operating profit was $186 million and adjusted operating margin was 8.5 percent, down 100 basis points from the second quarter of 2013.
Second quarter 2014’s net income from continuing operations was $20 million, or 4 cents per diluted share, compared with net income from continuing operations of $85 million, or 19 cents per diluted share, for the second quarter of 2013. Second quarter 2014’s adjusted net income from continuing operations was $91 million, or 20 cents per diluted share, compared with adjusted net income from continuing operations of $127 million, or 29 cents per diluted share, for the second quarter of 2013.
Net cash used by operating activities was $7 million for the six months ended June 30, 2014, compared with net cash provided of $70 million for the same period in 2013, unfavorably impacted primarily by lower earnings. The overall net cash used during the six months ended June 30, 2014 was $330 million, which was comparable with the same period in 2013.
Avon’s net debt (total debt less cash) at June 30, 2014 was $1.9 billion, up $240 million from the year-end 2013 level, and $170 million lower than at June 30, 2013.
Avon also declared a regular quarterly dividend on its common stock of 6 cents per share, payable Sept. 2, 2014, to shareholders of record on Aug. 14, 2014.