Avon Products Inc. , a leading global beauty company, is going through a rough phase due to waning top and bottom lines, and a highly leveraged balance sheet. The company’s stock has lost nearly 45% over the past one year due to repeated dismal quarterly performances. Also, the company’s shares slipped nearly 12.6% since the release of its first-quarter 2016 results.

Avon posted the third straight quarter of lackluster results as first-quarter 2016 loss per share of 7 cents reflected a marked deterioration from earnings of 3 cents per share in the year-ago quarter. The Zacks Consensus Estimate was earnings of 2 cents per share. Concurrently, the company’s sales plunged year over year. Results were mainly marred by adverse currency fluctuations, the sale of Liz Earle and unfavorable taxes in Brazil.

Also, a look at Avon’s earnings history reveals a negative picture. The company’s has a negative earnings surprise of 187.5% for the past four quarters.

Further, the company expects results in 2016 to continue being hurt by currency headwinds. All these factors pose concerns over Avon’s future performance, thereby leading the Zacks Consensus Estimate to trend downward. The Zacks Consensus Estimate slumped 45.5% to 12 cents per share for 2016 and 3.1% to 33 cents per share for the fourth quarter, over the past 30 days.

However, the company remains on track with its recently announced transformation plan, which seeks to lower costs and attain its long-term goal of delivering a low double-digit operating margin and constant-dollar revenue growth in the mid-single digits. As the first step toward the execution of the plan, Avon completed the separation of its North American business in Mar 2016. With the Transformation Plan underway, Avon envisions generating roughly $350 million worth of pre-tax annualized cost savings after three years, comprising nearly $200 million from supply chain reduction and about $150 million from other cost reductions.

Further, the company is progressing with strategic endeavors to boost top-line growth, trim costs and improve working capital. Avon has also made significant progress in improving its balance sheet through refinancing activities and cutting costs by slashing jobs and exiting operations in the underperforming markets.

In Mar 2016, the company also announced a change in its operating model that would bring in more cost savings. The plan includes the streamlining of corporate infrastructure, shifting of the headquarter to the U.K., and eliminating about 1,700 filled and 800 open positions. These actions are likely to help in saving nearly $50 million of the $70 million targeted cost savings anticipated in 2016, while the remaining $20 million of savings are expected to come from supply chain and sourcing initiatives.

Also, this Zacks Rank #3 (Hold) company is on the right track with its target of expanding Active Representatives, with strength seen in most of its top markets in the first quarter, anticipating 1–2% growth in 2016.

We believe these actions will help Avon to streamline operations by focusing more on high-priority markets and activities, and enhancing its efficiency.

Stocks to Consider

A better-ranked stock in the same industry is The Estée Lauder Companies Inc. (EL Quick QuoteEL - Free Report) , with a Zacks Rank #2 (Buy). Other favorably placed stocks in the related industry include Cabela’s Inc. and ULTA Salon, Cosmetics & Fragrance Inc. (ULTA Quick QuoteULTA - Free Report) , also with a Zacks Rank #2.

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