Avon Products Management Discusses Q1 2012 Results - Earnings Call Transcript

Avon Products (AVP)

Q1 2012 Earnings Call

May 01, 2012 9:00 am ET

Executives

Amy Low Chasen -

Sherilyn S. McCoy - Chief Executive

Kimberly A. Ross - Chief Financial Officer and Executive Vice President

Analysts

Lauren R. Lieberman - Barclays Capital, Research Division

William Schmitz - Deutsche Bank AG, Research Division

Christopher Ferrara - BofA Merrill Lynch, Research Division

Dara W. Mohsenian - Morgan Stanley, Research Division

Wendy Nicholson - Citigroup Inc, Research Division

Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division

Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division

Nik Modi - UBS Investment Bank, Research Division

Constance Marie Maneaty - BMO Capital Markets U.S.

Javier Escalante - Consumer Edge Research, LLC

Alice Beebe Longley - The Buckingham Research Group Incorporated

Linda Bolton-Weiser - Caris & Company, Inc., Research Division

Unknown Analyst

Victoria Collin - Atlantic Equities LLP

Jason Gere - RBC Capital Markets, LLC, Research Division

Presentation

Operator

Good morning. My name is Holly, and I will be your conference operator. At this time, I would like to welcome everyone to Avon's First Quarter 2012 Earnings Conference Call. [Operator Instructions] I'll now turn the conference over to Amy Chasen, Group Vice President, Investor Relations. Ms. Chasen, you may begin your conference.

Amy Low Chasen

Thank you. Good morning, and thank you for joining us to review our first quarter results. I know you'll join me in welcoming our new CEO, Sheri McCoy, to the call. Also with me today is our Executive Vice President and CFO, Kimberly Ross. Sheri will make some opening remarks and then we'll hand the call over to Kimberly. And as always, we'll be happy to answer your questions in the Q&A session later.

With that, I refer you to the cautionary statement in today's earnings release, as well as to our non-GAAP reconciliation, which is available on the Investor Relations section of our website. As usual on the call, we'll focus on these adjusted non-GAAP financial measures.

I'll now hand the call over to Sheri.

Sherilyn S. McCoy

Thank you, Amy. Good morning, and thank you for joining us. First, let me say that I am thrilled to be here. Avon is an iconic company with a rich legacy, a unique business model and a powerful global brand. Most of all, Avon has passionate people who are committed to making a difference by empowering women across the world. I've been here for all of 7 days, so it will be premature to make any declarations about our specific path forward. And as I begin this new role, I am both realistic and confident about our opportunities.

Avon has a strong foundation, incredibly strong brand awareness. Over 6 million Active Representatives are a tremendous asset to give us both global reach and the closest possible connection with our customers. Our employees are mission-focused. They care about what they do and about empowering women's ability to earn and build their businesses. We are formidable competitors and a global leader in direct selling. We have great strength in emerging markets where millions of new consumers are rapidly joining the middle class. Our products offer great quality at a good value.

As you well know, Avon also faces significant challenges. It has lost market share and missed expectations. It has had problems executing. It has faced operational and strategic issues. The rate of growth has declined, and cost structure and cash generation need to be improved. And externally, the world is changing. We face new competitors in both mature and emerging markets. Consumer expectations are changing and people are shopping in different ways. Product life cycles are shorter, and we need to keep our representatives motivated and well compensated at a time when they, too, have more choices than ever before.

I am taking a fresh look at every aspect of the business. And stabilizing the business is my first and most urgent objective. During these early days, most of my focus will be internal, as I work to assess the skills and capabilities of the organization, and make sure we have what we need to take us into a future of consistent and sustained growth.

Between now and mid-June, I will visit some of our key markets, including U.S., Brazil, China, Mexico and Russia, to assess the strengths and weaknesses of our business and to meet with regional leadership, our management teams and our representatives. I'll be assessing the landscape of competitors, commodity cost issues, changing demographics and technologies that give customers and representatives more choices. I will review our product portfolio, as well as the representative-earning opportunity and our customer connectivity.

I will also be reviewing our operating model. This will include an emphasis on short-term business performance including financial metrics, as well as operational issues both globally and in priority markets. A lot of the diagnostic work has already been done in these areas. I've begun to review this analysis and will build on it with my own observations.

In my experience, turning around the business requires clear priorities, realistic expectations and strict accountability. My approach is disciplined. I will understand and realistically frame the situation, develop a shortlist of 5 or 6 key priorities on which we're going to focus, put in place clear metrics and accountability, be clear about expectations and deliverables and importantly, get the organization working together toward achieving these priorities. Our people need to be focused and motivated. And for our investors, we need to be very clear about our priorities and then hit our targets. This is the only way to build confidence and trust going forward.

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