* Expects improved results in second half 2014
* Q2 revenue falls 13 pct, but Brazil improves
(Adds details from conference call, analyst comment, updates
By Devika Krishna Kumar
July 31 Avon Products Inc, a direct
seller of cosmetics, said it expects its North American business
to turn profitable in 2015 as it cuts costs and introduces more
incentives for its sales representatives.
The company's shares rose as much as 8 percent in early
trading on Thursday, making the stock one of the top percentage
gainers on the S&P 500 index.
Avon, which reported its seventh straight quarter of
operating loss in North America, said it hired a "chief
representative officer" for the region and would upgrade its
website in September in a bid to retain its representatives.
The new website will allow representatives, called "Avon
Ladies", to reach more shoppers by increasing their online
The company has had troubles bringing in new representatives
and holding on to its existing ones in North America, which
contributes about 14 percent to its total revenue.
The cosmetics maker said in June it would cut about 600
jobs, largely in its North America unit, and said it expected
restructuring efforts to save about $50-$55 million a year.
Avon has been trying to stem a decline in sales and profit
since Chief Executive Sheri McCoy took control in 2012.
The company said it expects to report better results in the
second half of 2014 as it manages its representatives better and
introduces market-specific products in Russia and Mexico.
"With less negative FX impact anticipated in 2H14 we
continue to anticipate modest year-over-year margin expansion
resulting from announced cost savings and improved top-line
results," Stifel Nicolaus analysts said.
While Avon's second-quarter profit and sales fell short of
Wall Street's expectation, sales rose in its largest market,
"Overall, we believe the result is better than feared,
particularly given concerns about World Cup disruptions in
Brazil, the company's largest and most important growth market,
and geopolitical unrest in Eastern Europe and Russia," Stifel
analysts wrote in a research note.
Avon's rivals have been piling on the pressure by lowering
prices in Russia, Brazil and the United States.
Avon's revenue from Brazil rose 3 percent in constant
currency in the second quarter ended June 30.
Net income attributable to Avon fell to $19 million, or 4
cents per share, in the second quarter ended June 30, from $31.9
million, or 7 cents per share, a year earlier.
Excluding items, the company earned 20 cents per share from
Revenue fell 13 percent to $2.19 billion. Excluding the
impact of a strengthening U.S. dollar and monetary policies in
overseas markets, revenue fell only 3 percent.
Analysts on average expected earnings of 21 cents per share
on revenue of $2.23 billion, according to Thomson Reuters
Avon's shares were up 4 percent at $13.50 in afternoon
trading on the New York Stock Exchange. They earlier touched a
high of $14.06.
(Reporting by Devika Krishna Kumar in Bangalore; Editing by
Savio D'Souza and Don Sebastian)