Avon Products Inc. stock is taking a beating after the beauty company said sales dropped for the 16th straight quarter.
Avon’s fourth quarter total revenue dropped 20 percent to $1.6 billion and missed the FactSet estimate of $1.8 billion. The net loss was $333 million, or 76 cents a diluted share, compared with last year’s fourth quarter loss of $331 million, or 75 cents a share.
The net loss for Avon for the full year of 2015 was $1.1 billion, or $2.60 a diluted share, compared with a loss in the prior year of $389 million, or 88 cents a share.
Avon decided last month to sell 80.1 percent of its interest in its North American business to Cerberus and so those results are no longer included in the numbers, but instead listed as discontinued operations.
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“Our operating performance for the fourth quarter and fiscal year was in-line with our most recent outlook. Importantly, we improved year-on-year Active Representative trends — with full-year growth of 1 percent,” said Sheri McCoy, chief executive officer of Avon. “We are on track to close our partnership with Cerberus and fully engaged in executing our transformation plan.”
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However, the Latin American markets are experiencing high inflation and that has hurt its business. Latin American revenue dropped 26 percent as Brazil revenue fell 44 percent and Mexico declined by 13 percent. Avon said on its earnings conference call that it expects Brazil to remain challenging for the year.
For the fourth quarter, gross margin was 58.7 percent, down 280 basis points, and operating margins were 3.9 percent, down 480 basis points. Both were affected negatively by the impact of VAT credits and negative tax events. Total units decreased 2 percent, driven by declines in Latin America and Asia, but the price/mix was up 3 percent.
Europe, Middle East and Africa revenue dropped by 13 percent, but was up 6 percent in constant dollars. Russia revenue fell by 8 percent, but was up 29 percent in constant dollars. Asia-Pacific revenue fell 16 percent, and was down 8 percent in constant dollars.
Avon is in the beginning stages of a transformation plan that includes $350 million in cost savings; however, currency devaluations and a slowing global economy are not helping the company’s growth plans. The stock is falling over 7 percent in early trading to $3.00.