Avon Products’ Focus On Top Markets And Brands Might Lead To A Stronger Q2 Performance

by Trefis Team
Avon Products
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Avon’s results so far have been dampened by macroeconomic travails and increased competition in its most important market, Brazil. However, Avon’s transformation plans are going according to schedule and the management expects the business to show recovery towards the second half of this year. The company has started giving more focus on its strategically important markets and its top forty brands, as their performance would pull up the company’s overall performance and help it in getting out of its persistent growth slump. In Q1, Avon’s top 15 markets’ growth surpassed the growth rate of the rest of its business. Approximately, 10 out of these 15 markets grew with stellar performances from countries like Argentina, South Africa, and Brazil. We expect this momentum to continue into the second quarter as well.

Avon Is Trying To Improve Its Performance In Brazil Through Several Measures

Brazil’s economy is gradually improving, however a proliferation of competitors, especially in the color cosmetics segment, is making matters worse for Avon. Avon is trying to strengthen its position further with a new digital platform which it completed rolling out in Q1. The platform includes features such as mobile responsiveness and an integrated social media network along with training modules. Avon’s performance in Brazil grew slightly (in local currency terms) in Q1 and is expected to follow the trend in Q2, as well. The higher average order led to this growth, though the reduction in the Active Representative pool dampened it. This, in turn, increased the level of bad debt in Brazil. With a better collection process and more stringent terms of recruitment, the bad debts are expected to decline towards the second half of this year. The digital platform is expected to improve representative engagement and aid them in doing more business. Avon also has a pipeline of new products up for release in the region.

Avon Is Into The Second Year Of Its 3-Year Transformation Plans And Things Look Hopeful

Avon is in the second year of its three-year transformation plan, and so far everything is progressing as per schedule. The company aims in achieving a mid single-digit constant dollar growth in revenue by 1% to 2% and a low double-digit adjusted operating margin by the end of this three-year period.

The company aims to manage costs and it is currently on track to save around $350 million by the end of next year. Avon is also investing on its brand name which has an over 130-year old legacy. Its ongoing investments continue towards the positioning of the company in line with its new theme, Beauty for a Purpose. By now, one-third of the target group of women in its top ten markets are aware of the Beauty for a Purpose positioning. The number is expected to be even higher with time. There has also been a 20% increase in its social media reach with the company garnering over 21 million fans on Facebook, making it the third most popular beauty brand on the platform.

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1) The purpose of these analyses is to help readers focus on a few important things. We hope such 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

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