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Avon Products (AVP) is on Track for Turnaround: Here's Why
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Avon Products Inc. has been witnessing sales decline for the last few years on account of slowed Representatives growth. Consequently, the company has been focusing on boosting growth of Representatives, which is a key factor for the success of any direct-selling business. Can these efforts revive the company’s sales graph? Let’s find out.
Transformation Plan — Core Focus Area
Avon is in the third year of its three-year Transformation Plan that was announced in January 2016. The plan primarily focuses on investment for growth, enhancement of cost structure and improvement of financial flexibility. In 2018, it remains on track to achieve cost savings of $65 million, with roughly $15 million generated in the second quarter. Recently, management achieved a milestone in the transformation of its service supply chain — including digital advancements, leadership appointments and operational updates.
Management is likely to focus on business foundations and improve overall performance to attain its savings target. Furthermore, the company anticipates achieving the long-term target of delivering mid-single-digit constant-dollar revenue growth and low double-digit operating margin.
Initiatives to Attract Representatives
Avon made significant improvements in servicing its Representatives across the globe by enhancing delivery and service, besides improving satisfaction and retention levels. It utilized exclusive software for real-time sales planning for its Representatives. The updated technologies permit higher adaptability to demand volatility, thus, predicting Representative and customer demand, and synchronizing its ability to fulfill their demands by right-sizing inventory and boost delivery capabilities.
Avon's technologies also focus on a significant reduction in delays, higher process efficiency, optimization of resource allocation and continuous Representative engagement. The latest Machine Learning Model has been rolled in three out of Avon’s top 10 markets, and is expected to be launched in its top 15 markets by early next year. Management intends to utilize this technology to accomplish a completely automated campaign planning process over the long term.
Moreover, the company started imparting training for its Representatives by setting up a global academy to deliver training in each country. It expects to impart training to nearly 0.5 million Representatives in the second half of 2018. These actions instill optimism about the recovery of Avon’s business by reviving its Active Representatives.
Consequently, the company is on track to deliver 1-2% Active Representatives growth in the long term by revamping the experience of its 6 million Beauty entrepreneurs.
Hurdles
While the aforementioned progress looks good, investors are still wary of the company’s dismal top- and bottom-line trends. The company missed bottom-line estimates in nine of the last 12 quarters while its sales lagged in six of the last eight quarters.
Avon Products, Inc. Price, Consensus and EPS Surprise
The disappointing sales trend can be attributed to soft Representatives growth. In the second quarter of 2018, the top line was impacted by lower Active Representatives — mainly in Brazil, Russia and Mexico — along with challenges in key markets, particularly in Brazil. Further, negative impact due to the trucker strike in Brazil hurt sales.
While management has been trying to boost Representatives, this might take some time. The company expects modest improvement in revenue trends in the second half of 2018. However, it believes that there is a lot of work to be done to restore the business to top-line growth.
Additionally, the company struggles to compete with peers like Coty Inc. (COTY - Free Report) , Helen of Troy Limited (HELE - Free Report) and Nu Skin Enterprises, Inc. (NUS - Free Report) , which have relatively stable earnings and sales graphs.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Avon Products (AVP) is on Track for Turnaround: Here's Why
Avon Products Inc. has been witnessing sales decline for the last few years on account of slowed Representatives growth. Consequently, the company has been focusing on boosting growth of Representatives, which is a key factor for the success of any direct-selling business. Can these efforts revive the company’s sales graph? Let’s find out.
Transformation Plan — Core Focus Area
Avon is in the third year of its three-year Transformation Plan that was announced in January 2016. The plan primarily focuses on investment for growth, enhancement of cost structure and improvement of financial flexibility. In 2018, it remains on track to achieve cost savings of $65 million, with roughly $15 million generated in the second quarter. Recently, management achieved a milestone in the transformation of its service supply chain — including digital advancements, leadership appointments and operational updates.
Management is likely to focus on business foundations and improve overall performance to attain its savings target. Furthermore, the company anticipates achieving the long-term target of delivering mid-single-digit constant-dollar revenue growth and low double-digit operating margin.
Initiatives to Attract Representatives
Avon made significant improvements in servicing its Representatives across the globe by enhancing delivery and service, besides improving satisfaction and retention levels. It utilized exclusive software for real-time sales planning for its Representatives. The updated technologies permit higher adaptability to demand volatility, thus, predicting Representative and customer demand, and synchronizing its ability to fulfill their demands by right-sizing inventory and boost delivery capabilities.
Avon's technologies also focus on a significant reduction in delays, higher process efficiency, optimization of resource allocation and continuous Representative engagement. The latest Machine Learning Model has been rolled in three out of Avon’s top 10 markets, and is expected to be launched in its top 15 markets by early next year. Management intends to utilize this technology to accomplish a completely automated campaign planning process over the long term.
Moreover, the company started imparting training for its Representatives by setting up a global academy to deliver training in each country. It expects to impart training to nearly 0.5 million Representatives in the second half of 2018. These actions instill optimism about the recovery of Avon’s business by reviving its Active Representatives.
Consequently, the company is on track to deliver 1-2% Active Representatives growth in the long term by revamping the experience of its 6 million Beauty entrepreneurs.
Hurdles
While the aforementioned progress looks good, investors are still wary of the company’s dismal top- and bottom-line trends. The company missed bottom-line estimates in nine of the last 12 quarters while its sales lagged in six of the last eight quarters.
Avon Products, Inc. Price, Consensus and EPS Surprise
Avon Products, Inc. Price, Consensus and EPS Surprise | Avon Products, Inc. Quote
The disappointing sales trend can be attributed to soft Representatives growth. In the second quarter of 2018, the top line was impacted by lower Active Representatives — mainly in Brazil, Russia and Mexico — along with challenges in key markets, particularly in Brazil. Further, negative impact due to the trucker strike in Brazil hurt sales.
While management has been trying to boost Representatives, this might take some time. The company expects modest improvement in revenue trends in the second half of 2018. However, it believes that there is a lot of work to be done to restore the business to top-line growth.
Additionally, the company struggles to compete with peers like Coty Inc. (COTY - Free Report) , Helen of Troy Limited (HELE - Free Report) and Nu Skin Enterprises, Inc. (NUS - Free Report) , which have relatively stable earnings and sales graphs.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>