Avon Misses Earnings Estimates as North American Sales Suffer

NEW YORK, United States — Avon Products Inc., the cosmetics seller that's been pondering a sale of its North American business, reported first-quarter results that missed analysts' estimates, hurt by currency effects and sputtering domestic revenue.

Excluding some items, earnings amounted to 4 cents a share in the period, the New York-based company said in a statement Thursday. Analysts surveyed by Bloomberg had estimated profit of 7 cents a share on average.

Chief Executive Officer Sheri McCoy has cut jobs and exited underperforming markets such as Ireland, aiming to improve results at the more-than-century-old business. Still, its North American operations remain in a slump. Unit sales in the region plunged 25 percent last quarter, worse than any other location. Avon has been considering a sale of the business or some other deal, according to people familiar with the matter.

"Avon's North America business continues to be a drag on the overall company," Ali Dibadj, an analyst at Sanford C. Bernstein & Co., wrote in a report earlier this month. "The company must be willing to make major structural changes, through selling parts of its business, raising capital or cutting dividends."

Avon shares fell 1.3 percent to $8.67 on Wednesday in New York. The stock is down 7.7 percent this year, even after deal speculation gave it a boost in January and again earlier this month.

International Sales

Overseas sales also have slowed, hampered by greater competition, said Dibadj, who has a market perform rating on the shares, the equivalent of a hold.

Avon postponed an investor meeting that was scheduled for May 13 to later this year, citing the recent departure of its chief financial officer.

“Even amid trading difficulties, this is unusual behavior, and has perhaps helped to stoke the divestment rumors,” said Deborah Aitken, a consumer analyst at Bloomberg Intelligence.

The door-to-door sales model on which Avon was built “continues to struggle,” Aitken said, growing only 2 percent last year. That compares with a 3.5 percent gain in beauty and personal-care sales at mass merchants.

By: Lindsey Rupp; Lauren Coleman-Lochner: Nick Turner.