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Slimmed-Down Avon Tops Profit Estimates

Avon soared the most in more than five months after second-quarter profit topped analysts’ estimates, helped by cost cuts and improving sales.
Source: Avon
By
  • Bloomberg

NEW YORK, United States — Avon Products Inc. soared the most in more than five months after second-quarter profit topped analysts' estimates, helped by cost cuts and improving sales.

Profit was 7 cents per share, excluding some items, the company said in a statement Tuesday. Analysts had estimated 3 cents on average, according to data compiled by Bloomberg.

The cosmetics giant is showing signs of recovery after a sales slump prompted it to split off its North American business in March. That has let the New York-based company focus purely on overseas markets, where its model of using door-to-door sales representatives may have more promise. Avon also embarked on a cost-cutting plan that includes eliminating about 2,500 jobs and moving its head office to the UK.

“Our performance improvements were broad-base, with nine of our top 10 markets growing in local currency,” chief executive officer Sheri McCoy said in the statement. “We continue to make steady progress on a number of fronts: improving pricing discipline; driving additional cost out of the business; and, continuing to build our brand and enhance the representative experience.”

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Avon soared as much as 19 percent to $4.97 after the results were released. Before the rally, the shares were up 2.7 percent this year.

Currency Relief

Avon saw some modest easing in foreign-currency pressure last quarter, McCoy said. The advance of the US dollar against other currencies had previously eroded the value of Avon’s sales overseas. The company also faced headaches in Venezuela, where the inability to exchange the local currency forced the company to split off that business and write down its assets.

Avon had said Britain’s vote to leave the European Union won’t change management’s plan to move its headquarters to the UK. The company expects to complete its relocation to Britain by the end of the year.

In March, Avon offloaded its domestic operations in a deal with private equity firm Cerberus Capital Management. Cerberus acquired majority control of the North American business, letting Avon shift its focus internationally.

By Stephanie Wong; editors: Nick Turner and Kevin Orland.

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