What Are the Factors That Would Drive the Revenues and Earnings of Avon In the Next 2 Years?

by Trefis Team
Avon Products
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Avon (NYSE: AVP), is a globally recognized leader in direct selling of beauty and related products. During the latest quarter, its top line marginally increased to $1.4 billion, up by 1% on a y-o-y basis, driven by recent growth initiatives taken by the Company. Its top line remained under pressure as the company continued to operate in challenging macro and competitive conditions, particularly in the largest markets. With the recent inductions made in Avon’s top management, the company is positive that injecting new talent and capabilities into the business will steer Avon toward the path of growth. The company is striving to generate efficiencies with a focus on execution capabilities by strategically redirecting investments to support underlying growth initiatives.

Going forward for the next two years, we are projecting revenues for all 3 segments of the Company to grow earnings as the company is working on developing their long-term strategic plan for sustainable growth. The company remains on track with the Transformation Plan that targets achieving cost savings of $65 million in 2018, of which $44 million was reached in the third quarter.  They also  completed the early redemption of their 2019 bonds to reduce their debt and further strengthen their balance sheet. We have built an explanatory dashboard for Avon’s Revenue and Earning Growth in the Next 2 Years to outline its growth over the next two years.

Estimating Avon’s Revenue & Earnings Growth

Total revenue for Avon is comprised of the Beauty Segment, Fashion Segment, and Home Segment.

These revenue segments are expected to continue to drive future revenue and profitability growth for the company, in line with the guidance provided by the company, where the Beauty segment will continue to be the major contributor to its top line growth. The company is focused on improving performance in the Fashion and Home segment, improving the customer experience in stores and online, and improving assortments in compelling new product launches.

Avon is expecting that it would be able to grow its top line and earnings in the next two years by executing significant operational improvements, despite continued competitive pressures. The company also plans on continuing to realize cost savings to improve financial resilience and to be able to invest in its growth. Its long term financial goal is mid-single digit constant dollar revenue growth and low double-digit adjusted operating margin. The Company is more than ever focused on execution, ongoing improvements in top-line growth, and continuing actions to expand margins and accelerating their strengths to create more value for their consumers, customers, colleagues, and shareholders. All these factors, coupled with strong sales momentum, will enable Avon to continue to grow.

Our detailed estimates have been highlighted in our dashboard above. You can make changes to our assumed figures to arrive at your own revenue and growth estimates for the company.



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