Avon Products Inc.'s (AVP) first-quarter 2012 earnings of $0.10 per share missed the Zacks Consensus Estimate of $0.28 and dipped nearly 73% from the prior-year quarter. Moreover, the company's net sales inched down 2%, reflecting a fall of 1% in total units, partially offset by benefit from favorable price mix.
The disappointing results were primarily due to sluggish performances in every category, coupled with increased input costs and operating expenses. The North American market remains sluggish, with sales falling 4% in the quarter. Moreover, the company's initiatives to change product mix and reposition the business in the U.S. market will require significant advertising and promotional expenditures, which may dent its margins.
Further, we believe Avon has missed the opportunity of reviving itself citing Coty's withdrawal of its takeover bid. Currently, we are maintaining a long-term Underperform recommendation on the stock and a Zacks #5 Rank.
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