February 15, 2018 / 12:00 PM / 10 months ago

Avon Products' profit tops estimates as EMEA becomes bright spot

(Reuters) - Avon Products Inc (AVP.N) on Thursday reported its first earnings beat in six quarters as it signed up more sales representatives in Europe, Middle East and Africa to sell its lipsticks, anti-aging creams and fragrances, sending its shares up 14 percent in morning trade.

Sales in EMEA, which accounts for more than 40 percent of total sales, rose 3 percent. It was the only market to report a rise in sales as well as an increase in Avon Ladies, the company’s sales representatives.

The strong earnings report comes days after Avon hired Jan Zijderveld, a former Unilever executive as its chief executive officer, after his predecessor stepped aside, bowing to pressure from activist investors.

Zijderveld joins Avon at a time when it is focusing on emerging markets, after struggling to hold its ground in the United States where women are increasingly taking their makeup cues from social media rather than door-to-door sellers.

In Latin America, its biggest market, sales were weak due to economic and political instability in many countries. Sales in south Latin America fell 2 percent, while those in the north were flat.

FILE PHOTO - The Avon Products headquarters is seen in midtown Manhattan area of New York, June 21, 2013. REUTERS/Brendan McDermid/File Photo

“Our top line remains under pressure as we continue to operate in challenging macro and competitive conditions, particularly in our largest markets,” Chief Financial Officer Jamie Wilson said in a statement.

Avon’s cost-cutting measures resulted in savings of $250 million in 2017, exceeding the company’s target by $20 million for that year. The measures were part of a three-year plan initiated in 2016.

These measures, lower bad debt expense in Brazil and lower fixed expenses helped boost operating margin by 150 basis points in the fourth quarter, while gross margins rose 70 basis points.

Excluding one-time items, Avon earned 12 cents per share, beating analysts’ average estimate of 7 cents.

Net income attributable to the company was $91.5 million, or 17 cents per share, in the fourth quarter ended Dec. 31, compared with a loss of $10.7 million, or 4 cents per share, a year earlier.

The latest quarter benefited from a $30 million tax gain related to the recent overhaul of the U.S. tax code.

Net sales remained flat at $1.57 billion compared to the previous year, missing the average analyst estimate of $1.60 billion, according to Thomson Reuters I/B/E/S.

The New York City-based Avon’s shares were up 6.3 percent at $2.42 in morning trading.

Reporting by Karina Dsouza and Nivedita Balu in Bengaluru; Editing by Saumyadeb Chakrabarty and Shailesh Kuber

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