May 3, 2018 / 11:01 AM / in 7 months

Cosmetics maker Avon's shares sink after underwhelming results

(Reuters) - Avon Products Inc’s (AVP.N) quarterly results disappointed Wall Street, as the number of its door-to-door salespeople contributing to revenue fell at the worst rate in at least three years, driving the cosmetics maker’s shares lower on Thursday.

The number of Avon’s active representatives — salespeople who helped make the brand popular through the 20th century — fell 4 percent in the first quarter, the steepest decline since at least early 2015.

“I’m still as convinced as ever of the potential of the business, but it’s fair to say that, obviously, the business is not performing,” Chief Executive Officer Jan Zijderveld said in an interview.

Avon needs a clear strategy for its future, better marketing capabilities and has to invest in its sales representatives, Zijderveld added.

London-based Avon, a direct-selling company, hired Zijderveld in February to help turn around the iconic cosmetics brand after coming under pressure from activist investors such as Barington Capital.

Barington blamed former CEO Sheri McCoy’s inability to plug losses in the five years she was at the helm as Avon lost customers to bigger companies such as Estee Lauder Cos Inc (EL.N) and specialty retailers such as LVMH’s (LVMH.PA) Sephora.

Avon sold a majority stake in its underperforming North America business to private equity firm Cerberus Capital in 2015.

Sales in Latin America, Avon’s biggest market, were hit the hardest due to economic and political instability, and the number of active representatives in the region fell 6 percent.

However the Europe, Middle East and Africa region recorded a 12 percent increase in sales.

Avon’s underlying business still remained “soft,” said Jefferies analyst Stephanie Wissink.

The company’s shares fell 10.8 percent to $2.23 on Thursday afternoon.

Its first-quarter revenue rose 5 percent to $1.39 billion, edging past the average estimate of $1.35 billion, according to Thomson Reuters I/B/E/S.

Avon also reported higher sales but Wissink noted that the increase was the result of an accounting change, without which sales would have dipped 1 percent.

Net loss attributable to the company narrowed to $20.3 million in the three months ended March 31 from $36.5 million a year earlier.

Excluding one-time items, Avon reported a loss of 2 cents per share, matching Wall Street expectations.

Reporting by Jaslein Mahil and Aishwarya Venugopal in Bengaluru and Richa Naidu in Chicago; Editing by Amrutha Gayathri and Sai Sachin Ravikumar

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