What To Expect From Avon’s Q4 Earnings

by Trefis Team
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Avon Products
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Avon (NYSE: AVP) is scheduled to announce its fourth quarter earnings on February 15. The company has struggled with its performance over the first three quarters of 2017. Although its revenues showed a slight recovery in constant dollar terms, its bottom line has remained dampened.  Certain factors have helped revive the company’s performance including selling-off of its North American business, receiving $650 million funding, and undertaking restructuring plans. Currently, the company has a strength of 8 million active representatives that makes it one of the world’s largest direct selling workforces. In the upcoming Q4 we anticipate Avon to show modest growth backed by recent drives towards innovations, solid team execution, and improving Representative experience. However, the company will likely fully realize benefits from these strategies over the longer term.

Please refer to our dashboard analysis on Avon.

Below we discuss the main focus areas that will likely aid Avon in reviving growth in the upcoming Q4 2017 results:

Geographic And Brand Focus

The company is concentrating on its top ten markets for most of its growth. These are: Brazil, Mexico, Russia, Philippines, the UK, Argentina, Colombia, Turkey, Poland, and South Africa. Avon is the Number 1 direct selling beauty company in all these markets, except Brazil where it is Number 2. These markets are at present growing for Avon at a faster rate than the company’s overall growth. The company is also focusing on better representative engagements in its top markets. Along with its markets, Avon has also decided to focus on around 40 of its top brands that contribute about 80% of its growth. It is segregating its brands under three tiers: Upper Mass, Mass, and Value.

Digital Focus

Given the importance of digital progress and social media in a brand’s reach and popularity among its clientele (especially the younger ones), Avon has started focusing on digital and e-commerce initiatives. The company’s social media presence has increased with it having the third largest fan following among beauty brands. Along with increasing investments on advertisement, the company is also shifting most of its campaigns to the digital platform. In our view, this will positively impact results as an increasing number of customers are buying beauty products online.

Short Term And Long Term Financial Goals

Enabled by these strategies, the company plans on driving out cost, improving financial resilience, and investing in growth over the next three years. Its long term financial goals include: mid-single digit constant dollar revenue growth and a low double-digit adjusted operating margin.

Overall, we expect Avon to continue to post improving results in its upcoming earnings with moderate growth in the top line.

 

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