Will Avon Products Be Impacted By Brexit?

-50.38%
Downside
5.57
Market
2.76
Trefis
AVP: Avon Products logo
AVP
Avon Products

It seems that troubles never cease to leave Avon Products’ side. No sooner than the company planned upon a restructuring of its business, following years of losses, that the recent Brexit decision might now cause additional troubles for the company. Following the sale of its North American business to Cerberus Capital in March, the company is expected to relocate its headquarters to Britain later in 2016. Now, Britain’s decision to exit the European Union, or Brexit, might cause further roadblocks in the path of the beauty company which had been striving very hard to revive its performance. Avon’s share prices fell by 12% by the following Monday after the Brexit decision on June 23rd. The company is sticking to its decision to move its headquarters from New York to Britain and has termed it as ‘business as usual‘ in Britain. The relocation is a part of Avon’s cost-cutting initiatives that includes around 2,500 job cuts and the saving of $350 million in costs over the next three years.

Avon’s revenues and EBITDA for the last three years and its projected revenues and EBITDA are as follows:

rev and ebitda avp

Relevant Articles
  1. How Coty Benefits From Recent Divestment & Deleveraging Plans
  2. Synergies From The Avon-Natura Merger Could Unlock More Than $1 Billion In Value For Shareholders
  3. What Does The Avon-Natura Merger Deal Mean For Investors In Avon?
  4. A Closer Look At Avon’s Global Operations, And What’s In It For Natura
  5. Key Takeaways from Avon’s Q4 Earnings
  6. Will Representatives Growth Drive Avon’s Q4 Earnings?

By the end of 2016, Avon plans on saving around $70 million through its new operating model framework. The plan includes tax benefits for the company, a reduction in corporate expenditure, and to relocate to a location which will be nearer to its European customers (which along with Middle East and Africa comprised around 40% of its revenues in 2015). With the sale of its North American business post four consecutive years of declining sales, Avon now has all its operations outside of the U.S. Though Avon’s share price fall might be a knee jerk reaction of the market to Brexit and Avon’s relocation decision, we are yet to see how Avon might be impacted by Brexit. UK cannot leave the EU before two years and that too, under certain circumstances, Brexit might not happen at all.

The near term impact of the announcement of Brexit had been a sharp depreciation of the British Pound which had declined to its lowest in 30 years against the U.S. dollar immediately after the Brexit decision. However, recovery seems to have already been set in motion as suggested by London’s benchmark index, FTSE 100’s rapid rebound in two days from the losses on account of Brexit.

So, we are yet to see whether Avon gets punished for the Brexit decision or the company finally embarks on a path towards successful recovery.

Have more questions about Avon Products (NYSE:AVP)? See the links below:

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Avon Products

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology