Friday, 17 February 2012 12:35
Avon Products Inc. reported weaker-than-expected fourth-quarter results as sales slid in most markets, and executives raised the possibility of layoffs soon.
At the same time, representatives who work on commission and are essential to selling Avon's cosmetics directly to consumers were leaving the company in greater numbers than in several years.
Still, Avon shares were up more than 3 percent, rising after outgoing Chief Executive Officer Andrea Jung pledged to let her successor take steps to fix the company without impediment. Analysts and investors have been concerned that her staying on as chairman would make it hard for Avon to recruit a successor with a plan of his or her own.
"Just to be very clear, the new CEO will have absolute autonomy to define his or her strategic and operational priorities," said Jung, who agreed in December to step down from the CEO post that she has held since 1999.
Avon's shares have come under intense pressure in the last year because of weak performances in key emerging markets including Brazil and Russia. The stock has also suffered from fallout from an expensive internal bribery investigation that began in China in 2008 as well as a probe by U.S. prosecutors.
The company said it would again pay a dividend of 92 cents per share in 2012 despite investors' fears that its operations would not generate enough cash for the $400 million payout.
Avon said on Tuesday that it would wait for the announcement of Jung's replacement before updating its business review, which it was initially to present in early 2012. The company has given no timetable for naming a new CEO, although it is expected to be this year.
Avon reported a net loss of $400,000, or nil per share, compared with year-earlier net income of $229.5 million, or 53 cents per share.
Excluding some items, Avon made 39 cents per share from continuing operations, well below the 51 cents Wall Street analysts were expecting, according to Thomson Reuters I/B/E/S.
Revenue fell 4 percent worldwide to $3 billion, also missing Wall Street estimates.
The results point to declining business in Russia and Brazil, where Avon has banked on growth to mitigate a long-term slide in its home market of North America. The company said problems in those countries were the biggest factor in the drop-off in representatives.
Revenue fell 1 percent in Brazil. Poor implementation of a new computer system there has frustrated sales representatives, many of whom also represent rivals such as Brazil's Natura Cosmetics SA.
Revenue fell 10 percent in Russia, where Avon faced aggressive pricing from competitors and sales reps dropped out.
Jung said the computer problems in Brazil had "stabilized" and that the decline in representatives in Russia had eased at the end of 2011.
The only bright spot in Avon's revenue was Mexico, where sales were up 12 percent in constant dollars.
Phil Wahba - Reuters
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