* Avon met with top U.S. sales representatives this week
* Aims to reduce non-beauty item sales in United States
* Plans include hair care, skin care products -analysts
By Jessica Wohl
CHICAGO, April 15 Avon Products Inc's (AVP.N)
plan to ignite U.S. sales growth is good, but it will take some
time for new strategies to pay off, analysts said on Thursday.
The world's No. 1 direct seller of cosmetics is getting
ready to introduce several products in the next few months, and
is taking steps to preserve customer relationships even after
representatives who sold to them quit.
Avon is doing this because its sales in North America, its
second-largest market, slid over the years, in part because of
the recession and competition from established retailers that
cut into Avon's historical "Avon Lady" direct sales model.
Avon plans to start selling Tiny Tillia children's personal
care products in early 2011 and will add more adult hair care
products to its lineup, according to analysts who attended
Avon's U.S. sales leadership conference in Las Vegas earlier
this week. It also wants to focus on women who spend more
money, they said.
Avon declined to discuss the conference.
While Avon has several strategies, such as introducing a
"Lotus Shield" anti-frizz hair treatment this summer, Stifel
Nicolaus analyst Mark Astrachan said he does not expect U.S.
sales will grow until at least 2012.
Avon has seen more representatives sign up in North
America, but women are spending less money. North American
revenue fell 7 percent in the fourth quarter and 9 percent in
2009. In 2008, North American revenue fell 5 percent.
In the fourth quarter, North America was Avon's only region
to post a sales decline besides China, its smallest market.
Earlier this week, the company came under scrutiny after
suspending four executives pending an internal investigation of
bribery allegations in China. [ID:nN13186804]
Avon has said that regions such as Latin America are more
crucial for growth than the United States. Latin America is the
company's largest market, far bigger than North America.
SELLING MORE OF ITS MAIN GOODS
The efforts in North America come as Avon works on deriving
more of its sales from its core beauty products category.
In October, North America President Geralyn Breig said that
Avon aimed to bring non-beauty items from 45 percent of U.S.
sales to 35 percent in five years or less. Non-beauty items
include jewelry, apparel, kitchen tools and home accessories.
Breig presented a five-step growth plan on Wednesday with a
goal of increasing sales to $3 billion from $2 billion,
according to Caris & Co analyst Linda Bolton Weiser. Breig also
wants an operating margin of 10 percent, Weiser said, which
would be up from 6 percent in the fourth quarter of 2009.
Weiser expects North American sales to fall 6 percent this
year and predicted only modest growth in 2011.
Another strategy, called "Customer Connect," will launch in
September, Wedbush analyst Rommel Dionisio said.
If a sales representative leaves, as often happens in a
direct sales model, that representative's customers do not have
a way to buy products. Under the new program, Avon would reach
out to the departed representative's customers to encourage
them to buy from another local representative, Dionisio said.
Such a program "could have a significant long-term positive
impact on customer retention," Dionisio said.
Avon may also start selling the recently acquired Liz Earle
skin care line, which is from the United Kingdom, in the United
States, analysts said. Astrachan also said that Avon plans to
bring out new skin care products under its Anew brand.
(Reporting by Jessica Wohl. Editing by Robert MacMillan)