Avon Products Desperately Needs To Show Some Improvement In Its Third Quarter Results
Avon Products (NYSE: AVP) is slated to release its Q3 2017 earnings results on November 2nd. The company’s poor performance on account of weakness in its important markets, representatives attrition, and in general, sinking demand for its products, has been a constant for the last few years. In its Q2 earnings call, Avon announced the stepping down of its chief executive, Sheri McCoy, who will formally leave the position by March next year. Ms. McCoy had been unable to turn around Avon’s position since she took her post five years back. Towards the beginning of 2016, things looked hopeful after Avon received $650 million funding from Cerberus and other investors and after it sold off 80% of its North American business. However, Avon’s revenue decline continued even till Q2 2017 and the company desperately needs to show some improvement in its performance in order to make its stakeholders happy. We have a $2.59 price estimate for Avon’s stock, which is around 15% higher than the current market price.
Avon’s Problems Seem To Multiply
Along with the constant problems in its important markets and in relation to representatives, lately Avon is facing hiccups while trying to make strategic changes to its operations. The last couple of quarters saw disruption in its supply chain in many markets thus leaving the representatives even more frustrated with the company.
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Has The Company Lost Relevance Over Time?
One of the biggest problems with Avon is that the company’s direct selling model is not that high in demand these days. With the advent of digital media, beauty companies are targeting its users mostly through social media and other forms of digital advertising. Though Avon too has started its own digital efforts, those are too small when compared to the industry behemoths. Another important way to grow for beauty companies is through acquisition. L’Oreal and Estee Lauder have taken over several small but niche brands over the past and have grown those, in turn gaining more and more loyal users. Avon doesn’t have the resources to undertake acquisitions. The other option that remains is that of the company being acquired by a bigger entity. However, even when the company was at the brink of bankruptcy in 2015, there were rumors that the company didn’t manage to find a buyer.
Sinking Representative Base
Under these circumstances, it comes as no surprise that its representative base, the most important element that can help grow the company through the sale of its products, is also dwindling. Even though Avon is trying to project how representatives can build their own futures with the help of campaigns, such as its recent #BeautyBoss campaign, the company is still struggling to retain its representatives and attract newer ones into its fold. We do hope Avon’s efforts to make a turnaround shows some positive result in the near future, otherwise it is difficult to say how long the company can keep running with losses and with so many problems.
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