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Edited Transcript of AVP earnings conference call or presentation 31-Oct-19 1:00pm GMT

Q3 2019 Avon Products Inc Earnings Call

NEW YORK Nov 14, 2019 (Thomson StreetEvents) -- Edited Transcript of Avon Products Inc earnings conference call or presentation Thursday, October 31, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Amy Greene

Avon Products, Inc. - Chief Communications Office & Head of IR

* Gustavo Arnal

Avon Products, Inc. - Executive VP & CFO

* Jan Zijderveld

Avon Products, Inc. - CEO & Director

* Miguel Angel Fernandez

Avon Products, Inc. - Executive VP & Global President

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Conference Call Participants

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* Stephanie Marie Schiller Wissink

Jefferies LLC, Research Division - Equity Analyst

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Presentation

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Operator [1]

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Greetings. Welcome to Avon's third quarter earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded.

The company will use slides to support today's prepared remarks. The slides will be visible via the webcast available on the company's Investor Relations website. A downloadable PDF of the presentation will be made available following the call.

During the call today, the company will reference certain non-GAAP financial measures, which they believe to be useful to investors, although they should not be considered superior to the measures presented in accordance with GAAP. A reconciliation of these non-GAAP financial measures to their comparable GAAP measures is included in the appendix of this website -- webcast and in the company's earnings release. Both are located in the Investor Relations section of the company's website.

The call will also contain forward-looking statements that concern the company's business and financial strategies. These statements involve risks and uncertainties, which are detailed in the cautionary statement available in today's slides on the company's Investor Relations website and in the company's SEC filings.

I will now turn the conference over to Amy Greene, Chief Communications Officer and Head of IR. Ms. Greene, you may begin the conference.

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Amy Greene, Avon Products, Inc. - Chief Communications Office & Head of IR [2]

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Good morning, and thank you for joining us to review Avon's third quarter 2019 results. I'm here with Jan Zijderveld, Avon's CEO; Gustavo Arnal, Avon's CFO; and Miguel Fernandez, Avon's Global President. Jan, Gustavo and Miguel will take you through our progress and our third quarter results, and then we will move to a Q&A session. Slide 4 has this morning's agenda.

I will now hand the call over to Jan.

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Jan Zijderveld, Avon Products, Inc. - CEO & Director [3]

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Thanks, Amy, and good morning, everyone, and thank you for joining us today.

We will start with an update on the Q3 financial results from Gustavo, then Miguel will give us an update on our markets, and I will close up with an update of our opening up transformation.

Before I hand over to Gustavo, let me take a look at our strategy, which we've been executing against for the past year.

Moving to Slide 5. Last year, we rolled out our opening up Avon strategy to rebuild our business fundamentals and reset the business to restore our competitiveness and modernize our business model. This year has been about starting to execute the plan, building a healthier, more profitable and sustainable business.

On this page, you see the outline of our Avon formula and the key highlights for quarter 3. Restoring the value and brand relevance, in other words, the consumer pool. We are continuing to strengthen the brand, making Avon more relevant and on trend, and through this, restoring our pricing power.

This quarter, we achieved a 9% improvement in price mix, with effective pricing, stronger and higher-priced innovation with a focus on improved mix and fewer discounts. We're also sharpening and focusing our portfolio specifically in fashion and home.

In rebooting direct selling, or the push element of our go-to-market model, we continue to drive productivity of our representatives, while creating an environment that making joining Avon a more attractive process and business opportunity.

Over the past several quarters, we have been working to strengthen our representative base, and, this quarter, we saw a slight uptick sequentially with 1% more active representatives than we had in the quarter 2. We used average representative sales as a measurement of improving productivity and retention, and we are continuing to improve the productivity of our beauty entrepreneurs and making it easier for them to earn money. Average representative sales increased 4% this quarter.

In terms of increasing access to our brand, we continue to drive our digital agenda, achieving 80% more online sales this quarter, closing in on our goal to double the size of this business in 2019. We have been kickstarting the development of Avon beauty entrepreneurs as Avon influencers and bloggers to accelerate social selling with some great pilots both in Russia and Brazil.

We continue to expand new digital tools that enable consumers to shop anywhere, anytime, and improve representative's experience with better digital tools and training to run her business.

To simplify our business, we continue to make progress to simplify our business, focus and reduce the size of line, driving efficiencies and restoring cost competitiveness while improving our cash flow and margin. This quarter, we generated 4x more free cash flow and doubled our adjusted operating margin compared to last year.

Monetizing assets has enabled us to fully fund our restructuring expenses, and we are on track to achieve our fuel for growth goals as we set out last year, all with a much smaller workforce, underscoring all our activities and our continued focus to reenergize our purpose to empower women and make a positive impact on the lives of our beauty entrepreneurs, their families and their communities. I will provide a more detailed update on the various elements of our strategy later in the call.

Now I would like to hand over to Gustavo, who will walk through the numbers.

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Gustavo Arnal, Avon Products, Inc. - Executive VP & CFO [4]

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Thank you, Jan.

Let me start by sharing Q3 highlights on the 3 key financial metrics: revenue, margin and cash flow. As expected, revenue declined. Adjusted constant dollar revenue was 6% below last year as we continue to drive productivity and implement healthier sales practices. Encouragingly, price/mix growth of 9% and average representative sales increase of 4% are clearly translating into a more efficient P&L and more productive representatives.

These improvements enabled adjusted operating profit results of $67 million and yielded adjusted operating margin of 6%. This is double the margin of last year, driven by price/mix and cost savings. Gross margin also expanded despite unfavorable FX.

In terms of cash, we generated $65 million of free cash flow, 4x higher than the prior year, driven by profitability and working capital. Year-to-date, our free cash flow is $114 million better than last year even after funding $119 million of restructuring investments.

As mentioned, constant dollar revenue from reportable segments declined by 6% in Q3 while productivity improved. This quarter, we continue to see improvement in price/mix as well as an increase in average rep sales. We believe that we can drive pricing in a sustainable way with a combination of strong innovation, focus on mix, training and optimization. This is imperative to improve margins and to enhance our representatives' earnings.

Worth noting, as we said during a recent investor conference, the number of active reps in Q3 were slightly above the prior quarter.

Reducing diluted sales is helping to improve profitability even if there is a short-term impact on volume. We continue to emphasize the right mix and margin across portfolios. We are resetting assortment to optimize value. We are aiming to shift away from heavily discounted low sales.

For example, in our fashion category, a large part of our unit declines came from items that were dilutive. We're working to improve the assortment based on productivity, profitability and complexity. This means, resetting of our portfolio towards greater item continuity and dramatically less SKUs.

Similarly, as we work on improving rep productivity and making more selective appointments, active reps are down 10% versus last year. That said, we're beginning to see stabilization as active reps have increased versus prior quarter.

More importantly, rep productivity is improving as they sell 4% more on average due to training and a continued improvement in price/mix. Training has been and continues to be a key focus for helping reps obtain meaningful earnings and, in turn, make meaningful contributions to Avon.

As planned, we have delivered adjusted operating margin expansion through each quarter this year. Year-to-date adjusted operating margin of 6% is up 170 basis points above last year. Further, $210 million in year-to-date profit is almost the same amount delivered in all of last year.

Sustained price/mix growth each quarter, coupled with aggressive cost optimization, are the key to margin expansion despite FX headwinds. As expected, FX pressure continued in Q3 primarily coming from Argentina and Brazil. Brazil is lapping FX levels versus the prior year, yet growing pressure continues in Argentina.

The third quarter FX impact to reportable segment revenue was 5% versus last year, lower than the 8% last quarter. We still expect, though, negative currency impact to continue through Q4.

Our Q3 adjusted operating margin of 6% was up 300 basis points, 2x higher than last year, given improvements in both gross margin and SG&A. Price/mix improvements added 280 basis points to adjusted operating margin, enabled by mix and lower discounts as well as more effective pricing. This is an ongoing effort in managing our revenue growth, which continues to be supported by our innovation pipeline.

Unfavorable FX impact of 130 basis points continue to pressure margins. While the impact is less than it was in the second quarter, we continue to see a drag and expect it to persist in Q4.

Finally, cost savings and other items, it provided 150 basis points of benefits to adjusted operating margin during the quarter. These savings are largely from procurement transformation efforts and lower bad debt, resulting from tighter credit control processes.

Selective appointments and tighter credit are contributing to a lower number of more productive reps. Gross margin improved by 100 basis points, largely on price/mix, partially offset by FX and adverse material costs. SG&A improved by 200 basis points on cost savings.

Free cash flow generation of $65 million in Q3 was 4x higher than the prior year. It represented an increase of $49 million. This was driven by operational improvements in both earnings and working capital and was delivered after self-funding an incremental $18 million of restructuring investments.

During Q3, we realized $42 million from monetizing assets, with $23 million coming from our portion of a new wave on sale and $19 million from an indirect tax asset. The proceeds for monetizing these help anniversary the net impact of $34 million one-time cash tax benefit in the prior year.

We remain on track for positive cash flow in 2019 as we continue delivering profit improvement, working capital efficiencies and monetizing underutilized assets to self-fund our transformation investments.

As can be seen, we have made significant financial progress this year by driving productivity, cash and margin. Year-to-date, free cash flow generation is $114 million higher than last year. The increase was generated through improving margin and optimizing working capital while asset monetization fully funded restructuring investments. Our efforts to monetize assets have delivered $119 million in proceeds so far this year, which have fully funded cash restructuring investments of nearly the same amount.

Further, our structural and operational changes have driven reductions to our annualized adjusted tax rate. Our Q3 year-to-date adjusted income tax rate was 37%, significantly lower than prior year and ahead of expectations.

Additionally, we have been reducing cash taxes over the past few years. We expect 2019 to see significant reductions at less than half of the levels in 2018.

To sum it all up, there are tradeoffs to the intentional choices we're making to improve financial performance. We are pleased with the progress we're making in transitioning to a more financially sound organization, evidenced by continued improvements in our cash and margin results. Now to Miguel.

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Miguel Angel Fernandez, Avon Products, Inc. - Executive VP & Global President [5]

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Thank you, Gustavo.

Picking up on Slide 14. Turning to the performance of our market, you can see that we continue to make business official designs to drive profitability and productivity. In the third quarter, we saw constant double digit revenue decline by 6%, as we were more selective in our recruiting practices and more focused with our portfolio choices, leading to a lower number of more profitable sales, doubling the operating margin.

As you can see in the table, price/mix improved across all regions. Average rep sales improved in all markets other than EMEA, with the largest decline in Russia, where we have been recurring the number of reps who still have work to do to get them to meaningful earnings.

While active reps declined year-over-year, we did see a slight sequential improvement from last quarter.

Results in APAC were disappointing. Operating margin has increased, while revenue and active rep numbers have declined, and this is largely due to results in the Philippines. Revenue was pressured by negative impact of price elasticity, services challenges and on competitive sales leaders incentives.

I will personally drive full reset in APAC. We will reincorporate actions and initiatives that were effective in other markets.

Moving to Slide 15. Representatives are the key to our business and must always be our top priority. As we have said for the past several quarters, the key to turn around our business is making it easier for our reps to make money while continuing to improve our overall profitability. We're working to carefully balance the 2 very important priorities.

Our active representative count has declined 10% since last year while we have been driving productivity. We're focusing on driving recruitment of reps who are joining to earn money and build businesses and have been working in each market to balance the right levels of field incentives.

We're continuing to provide tools and training to help her sell products that improve earnings and, thereby, improve retention.

One measure we use to track rep productivity is average rep sales, which increased 4% in the third quarter. The segmented recruiting and training programs that we have been developing and implementing around the world are helping her learn how to increase her productivity and earnings.

Implementing more sustainable sales practices and improvements of credit policies have continued to reduce bad debt this year while helping to maintain a healthy rep base and improved country and bridging level profitability.

Moving to Slide 16. Starting with Brazil, our largest market. We continue efforts to evolve the direct selling fundamentals. We have been focused on sharpening our portfolio, restoring our beauty business and optimizing our Fashion & Home portfolio. We have improved price/mix through reduction of depth of discounts.

Reengaging reps remains our top priority. Our biggest [quarter] continues to be ways to enhance the rep experience to attract and engage them. We hired a new head of sales to help us navigate competitive challenges and fine-tune field incentives. Recently, we entered a partnership with a local bank to provide access to bank accounts, collection machines and credit cards to our reps.

In addition, we're continuing to pilot both delivery and access projects to get products closer to the market. We continue efforts to grow our digital sales with a separate dedicated business unit, doubling online sales since last year. We have seen expanded adoption of Avon On to over 20% of our rep base and can now provide next-day delivery service to half of the country. Also we have seen significant improvements in service levels that have resulted in a 120-basis-point reduction in product returns. The new credit tools that we have implemented have helped lower bad debt by more than $20 million year-to-date.

Now Slide 17. Mexico is focused on increasing the recruitment of business builders and improving overall representative productivity while navigating a challenging macro environment and optimizing the Fashion & Home portfolio.

Gaining scale in key productivity and training programs are helping to improve tenure and retention. However, recruiting has been lower.

One key program that we have discussed in the past is the Stellar Circle program, where we apply segmented trainer to representative school have identified as interested in growing their business. We currently have 50,000 representatives in the Stellar Circle program, and their productivity remains 20% higher than the other reps.

While we need to increase participation, we first have to develop a larger pipeline of business builders eligible for inclusion in the Stellar Circle program. To do this, we're expanding our face-to-face early training programs and the first 90-day awarding program.

We're also implementing a program that allows reps to recruit reps, expanding dramatically our number of potential recruiters. To expand access and improve relevance, we leveraged our national roadshow to act as a forum for Mexico to reenergize their field using a new narrative to attract people, who are interested in building business.

Let's move to Slide 18. In Russia, we have been working on optimizing our portfolios, developing better brochures and having more relevant product innovation. While our recovery plans helped us regain lost reps, it takes time to achieve similar levels of productivity since new reps typically have lower average sales.

As we strive to attract younger, trendier representatives, we realize that we must give them types of product tools and experiences that they expect. One of the ways that we're reaching out to them is through pop-up stores in key relevant locations, where they can experience the Avon brand and new products firsthand.

We're implementing a 360-degree representative engagement strategy by investing in segmented field incentives designed to attract and retain productive reps.

We launched a new on-boarding program called Easy Start, enhancing experience and cultivating good practices, in addition to segmenting rep investments and incentives.

We continue to accelerate actions to expand our digital reach by launching the School of Bloggers to help Avon's micro-influencers develop social networks that get them closer to the customers and attract a new generation of representatives.

We're also doubling the number of beauty centers, which are physical locations, where we layer training and accessibility. In these locations, reps can pick up orders, helping them save on post costs and also provide an opportunity to get product and business trainings.

In terms of simplification, our cost savings in Russia have come from reducing distribution costs and lowering bad debt. We're pleased with the positive impact of the cost savings (inaudible), helping to improve the country's operating margin.

While we know that we still have work to do, we're happy with the initial progress that we're seeing with the programs and initiatives being implemented in Russia.

Now let me hand the call over to Jan.

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Jan Zijderveld, Avon Products, Inc. - CEO & Director [6]

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Thank you, Miguel.

Turning to Slide 20. I would like to give you an update on our Open Up Avon strategy and our 4 critical value creation levers: improving brand relevance and value; driving representative productivity; expanding access to the brand by digitizing Avon; and accomplishing all these things while sharpening the portfolio with clearer choices and dramatically simplifying the business and driving down costs.

First, we continue to strengthen our brand and consumer relevance to improve Avon's brand equity. In quarter 3, we drove price/mix of 9% through visually modernizing the brand in our brochure and communications and a step-up in digital marketing, increasing both the quality and pace of innovation at higher average price points and higher margins; sharpening and optimizing our portfolio with fewer, bigger brands and specifically resetting the Fashion & Home portfolio; driving mix to higher value categories with lessening frequency and depth of discounting.

Second, we are continuing to improve the productivity of our beauty entrepreneurs. This quarter, average representative sales increased by 4%, while active representatives are stabilizing and increasing slightly over the last quarter.

Third, increasing access to Avon and expanding our consumer base through strong growth in e-commerce and a step-up in developing our new generation sales leaders into Avon digital influencers and social sellers.

Fourth, we are becoming simpler, leaner and faster, focusing our assets and activities to ensure they are fit for purpose, more cost-competitive and able to meet the realities of our business, and all with a significantly lower head count.

We had $71 million in cost savings this quarter with year-to-date savings 80% higher than last year.

Now let me unpack some of this in a little bit more detail. On Slide 21, in order to restore our relevance and build a healthy, sustainable and profitable growing business, we need to strengthen both the push and the pull of our business model. They are inseparable. In our business model, you need to have both working together. We need consumer pull by being a relevant, accessible on-trend beauty brand. And at the same time for our beauty entrepreneurs, we must make it easier for her to sell, earn money and get better service and support from us.

In terms of the pull, Avon's heritage and purpose is in making amazing beauty products and innovation available to everyone. In other words, we democratize beauty. We're strengthening the brand, sharpening the portfolio and driving mix towards more profitable products and categories. We have bolstered our innovation pipeline and highlighting them more in our brochures and marketing. The famous, bigger and fewer is a very relevant theme for us at Avon.

We have increased our focus on digital marketing and the use of social media and influencers. We produce new weekly digital content and assets, which are now being leveraged and used by a new program to develop our sales leaders into Avon digital influencers and bloggers. I saw this personally in Russia last month and the impact this is having on our brand, but also how this is exciting our network of beauty entrepreneurs.

Last month, we launched our new distillery brand at a new blogger event in London. These types of experimental events get the product into the hands of influencers and creates excitement and buzz all around the Avon brand and network.

In terms of the push, our effort to make it easier for our beauty entrepreneurs to earn money, segmenting the representative is now at the heart of everything we do in how we train and communicate with her. We are also embedding segmentation in our field management, including more targeted tools, recognition programs and incentives to improve the return on investments.

We're also making progress and continue to test and refine the new compensation models to improve our earnings and the ROI on our incentives. This, however, is hard and takes time.

We are also providing more educational tools like our new Art of Selling Fragrance or the new -- a new training toolkit that teach the product benefits and features of each of the ranges. We need to equip her to upsell and on-sell and learn to sell our great products and innovation due to their unique product benefits, not just because it's on discount or promotion.

In addition, we have been developing and rolling out new digital tools designed to make it easier for her to run her business, tools to point digitally and faster, tools to promote her business online in her social network or to use our new makeup demo to show how a new makeup or lipstick looks.

Now that we have many new digital tools, it is critical to drive adoption and usage amongst our beauty entrepreneurs. Our new Avon On app is a one-stop app for our beauty entrepreneurs and incorporates many critical features, such as product ordering, training, but also the digital assets for her to share in her social network, but also tools like the try-on app, which are tools launched to help representatives engage her consumers.

Finally, we need to continue to strengthen and restore our field fundamentals and sales elements. This starts with detailed performance management reporting based on our rich data and analytics, a new sales representative development program and tools to step-up in performance and growth mindset and discipline.

Moving to Slide 22. We need an attractive, vibrant and relevant brand and product portfolio for her to sell. This more on-trend brand and sharper portfolio choices are fundamental to build a more profitable, sustainable and, therefore, healthier business. We are cleaning and focusing our portfolio much more deliberately. We're giving each category a clear role in driving key elements to win in each category in a different way with a different set of competitive realities.

For example, in color, its role is to generate excitement and drive impulse purchases. To accomplish this, we must have a high level of innovation and lead with on-trend innovations in growing subcategories.

Our pipeline is getting stronger for the second half of this year with Power Stay Lip, Lash Genius and the West Coast collection.

Skincare creates scientific credentials and trust while also creating repeatable sales of regimes, all at higher price points, helping drive representative earnings. Skincare is a bit less about innovation and more about education. Bigger and fewer innovation with more training helped drive 1% growth in this category in quarter 3. This is an area where we believe we have the greatest ability to take world-class technology and make it accessible to everyone at affordable prices.

Fragrance is all about aspiration and image, which has required us to upgrade our visual identity and the quality of marketing. We are focused on more premium media and content as well as launching a training program, the art of selling fragrances, which has been well received by the field.

Also in some regions, we are continuing to optimize the portfolio and focus our brands, where in some cases, the size of our portfolio has grown too unwieldy.

And finally, in Fashion & Home. We're focusing on fewer subcategories where we can make money and win and that are more simple to manage. Fashion & Home has a critical role to play, as it is often at higher price point and can generate extra sales, both helpful to boost her earnings.

But we needed a more focused portfolio to run it tighter and build a stronger business. To make Fashion & Home a sustainable business, we must become less opportunistic and tactical and focus the portfolio on building scale in fewer destination categories where we can win and make money. This portfolio reset has impacted revenues this quarter. But as you also heard from Gustavo, it's also helping improve our margins.

On Slide 23, one of the critical elements to restore Avon's health to a healthier, more sustainable level of growth and profitability is to drive our brand value and engage our network of beauty entrepreneurs through a strong pipeline of bigger and better innovation.

In the third quarter, we had 20% more sales from innovation behind the bigger brands, another 35% higher price point. We are driving our big innovations to more countries in order to increase their scale. As you may recall, we launched Vitamin C at the end of Q1 at a premium price point, and it's delivering more gross margin than the average face category price point.

With better marketing and a focus on bundles and regimes, it has enabled us to double the average skincare price point, again, at higher margins.

In quarter 2, we launched Power Stay Lip, leveraging social media and creating -- generating exciting buzz and excitement while enabling, again, a higher price point and margins.

At the end of quarter 3, we launched a brand-new brand called Distillery. Distillery is a new on-trend product range from Avon, celebrating clean beauty without compromise, using the highest concentration of active ingredients with less unnecessary fillers. This range combines high-performance, vegan-friendly ingredients with beautiful textures and the premium environmentally conscious packaging with an ethical mindset.

And in the fourth quarter, we are launching a powerful jewel of pollution protection products in the ANEW family to defend and purify your skin in some of our polluted cities. These products were designed to protect consumers from the impact of our urban lifestyles. They have powerful antioxidants to defend against invisible threats like pollution and UV that can damage and cause skin to age prematurely.

On Slide 24, you can see the significant and ongoing improvements in price/mix. As we discussed in prior calls, the company's lack of pricing over many years has led the erosion of margin and representative productivity issues we are working to correct today. Revenue management has been and will continue to be a key driver for expanding our margins.

In quarter 3, we saw progress with year-on-year price growth of 9% as we continue to implement our revenue growth management toolbox across the company. As I mentioned earlier in the call, the key driver for better revenue management this quarter were optimizing discounts and more strategic and effective pricing. We are getting better at reducing depth and frequency of discounts and optimizing the return on investments of our promotions.

In addition, and importantly, we have been also more deliberate about pricing without losing the critical value for money entry point price points, critical in our emerging market footprint.

On Slide 25, moving to the push of our go-to-market model. Rebooting our direct selling model is critical in creating an effective push go-to-market machine. In order to do this well, we need to strategically reset the way we work across our markets. We have to create a more powerful narrative of why someone would want to become and build a business with Avon or become an Avon Beauty fan.

Refining our compensation models to increase earnings for our representatives remains a critical point for Avon. We need to be competitive in local markets to provide end-to-end career opportunities for our representatives, where they can earn what they feel is a relevant earnings for her.

In order to appeal to her, we need to have the right incentives and need to train her to establish behavior that enables her to reach her meaningful earnings. As we have been saying for the past 2 years, providing her with brands, products and on-trend innovations and the critical skills and training for her to succeed is paramount for our long-term success.

We're also building our new digital entrepreneurs to help her build her business and expand her reach using our new tools and capabilities, like our new Open On (sic) [Avon On] app. This new app is now in 30 markets and also includes the rollout of our new learning platform.

We are growing the reach and influence through pilots like the School of Bloggers in Russia and the Instagram rep in Brazil. In a short period, the Instagram rep program produced nearly 10,000 stories, 100,000 clicks on Avon and the combined reach to nearly 5 million influencers. This is the future digital Avon.

Lastly, we're implementing a more commercial focus with more rigor and discipline in our field fundamentals to drive a growth mindset and with a stronger performance culture. We're also utilizing better data analytics to track progress and provide transparency on what's working and what's not working.

Moving to Slide 26. We're continuing to focus on transforming our business to be much simpler and leaner. You can see our continued focus to simplify our business and take out costs.

We made significant progress in redesigning a leaner organization. In 2018, we had an 8% reduction in head count, and we continued this in the first half of 2019 with a further 15% reduction across all level of employees. Hence, we've already achieved our goal of a 10% further reduction in head count this year.

We have reduced our total workforce from 25,000 people in 2017, '18 to less than 20,000 today. We have reduced the number of SKUs or the size of line by 21% on our way towards our goal of a 25% reduction by the year-end. We continue to manage our inventory more tightly with a reduction in inventory value of $43 million year-to-date. And lastly, we are focused on delivering more cash as well as monetizing assets with over 100 million targets well on its way. Year-to-date, we have driven $119 million through sales of assets, putting us ahead of our full year target goal.

Now shifting gear on Slide 27. Avon has been championing and supporting women for over 130 years. Our representatives are at the heart of everything that we do. Our success as a company is and will forever be measured by the success that the millions of women in all the countries in which we operate are selling the products that they love, Avon.

Reestablishing the culture to light them and having a very tight relationship and connect with them is vital to understanding what she wants and she needs to be successful in her markets.

As part of our opening up strategy, we are making her our boss, and listening to what she says and needs is at the heart of our culture. Her success is our success. This connection to our representatives brings us closer to the consumers and our customers around the world, and helps us provide her with what she needs to be successful.

Earlier this year, Avon launched stand4her, a plan which aims to positively impact the lives of women around the world. It is a promise to the women who work for us and with Avon to create a better world for women.

A promise to help end the violence against women and girls is gaining traction and making a real difference. We're creating a systematic change through our 10-year partnership with Vital Voices, a multiagency workshop, to drive that change. During quarter 3, these workshops were held in the Philippines and South Africa with 2.3 million beneficiaries in 66 countries. There were 3,000 individuals trained and supported.

As for education around the world, regrettably, the reality is that millions of girls are denied the right to education for a multiple of reasons, including poverty, racism and exploitation. They're also denied the right to education simply because they're female. We are making a difference by helping our beauty entrepreneurs, through training and support.

Through the Avon Foundation, its global scholarship program, we're opening up learning opportunities for our representatives and their families. We have donated nearly $15 million through Avon scholarship programs and another 200 representatives in more than 20 countries winning scholarship program grants for themselves and their grandchildren this year. These are just a few of the many examples in which Avon is championing the course for women today.

Moving to Slide 28. Earlier in the third quarter, we announced that we're entering into a merger agreement with Natura &Co. We are progressing well and continue to expect to close early in 2020. We have been working on the necessary approvals.

In addition, the F-4 proxy statement has been cleared by the SEC, and a special shareholder meeting is being held on the November 13 to seek voter approval.

Avon is committing to delivering significant value for our shareholders by executing our opening up strategy and preserving liquidity ahead of the early 2020 closing target.

Finally, on Slide 29. 2019 is the year of execution. We have been and will continue to take deliberate actions to drive a healthier, more sustainable and profitable business for the future, and we believe our actions are bearing fruit. We also know it is going to take time to reset and build a new Avon, time to restore and modernize the fundamentals of our business model and deliver a sustainable and profitable and growing business.

We hold ourselves accountable for the milestones we set at the beginning of the year, and we see delivering continued programs and improvements against the goals we set. We will stand the decline through our efforts to reboot direct selling, improve representative profitability, sharpen the portfolio and modernize the brand.

We are driving average representative sales to approximately 5%. We are tracking to meet our 2019 goal to double online sales. We are close to achieving our 25% reduction in SKUs, and head count reduction already exceeds a 10% goal, now standing at 15%. And monetizing of assets has resulted in $119 million in cash, which has fully funded our restructuring expenses.

Recapping a few of the points that Gustavo made. We have also improved the operating margin by 170 basis points year-to-date through sharper portfolio choices, pricing, cost management and simplification. We have driven $114 million more free cash flow in 2019 by growing operating margins, working capital improvements, divesting of assets and improving cash tax. We are determined to return Avon to health and return value to our shareholders.

Thank you for joining us today.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Steph Wissink with Jefferies.

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Stephanie Marie Schiller Wissink, Jefferies LLC, Research Division - Equity Analyst [2]

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I want to just compliment you on your programs around violence and education. It's really commendable. My question for you, again, is on the price/mix. It seems to be one of the big drivers of the model. How should we think about that 9% price advantage in the quarter as we look ahead? Should we model something to that degree? Or do you think something more in that mid-single-digit range is more durable over the next maybe 1 to 2 years?

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Jan Zijderveld, Avon Products, Inc. - CEO & Director [3]

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Yes. Thanks, Steph, and great you also support the causes. It's one of the things that I think that we're all really, really proud of to stand up for the important causes for women around the world. And violence against women, I must say, even also passionately -- personally, I'm very, very passionate about. It is absolutely scandalous what happens in many parts of the world. And I think the local teams, but also the global teams, are doing a lot of work to mobilize people to drive that awful violence against women trend that's still happening and hasn't improved, by the way, over the last number of years.

Now to -- back to business, price/mix, so I think this is something, I think, that we set out last year. And you see really a consistent improvement, and we will continue to improve that. I don't really want to give any real guidance or looking forward as we're trying to balance obviously the 5 different levers that we have to drive price/mix. And that is about driving innovation at higher prices; driving mix to higher products, optimizing our promotions, but not without losing the entry points that are so important in some of our markets.

So as we're getting better on this, I think this is an engine that we will continue to drive, we'll continue to get better at. I think the sort of numbers we want to talk about, I think, is -- this is a pretty high level. Not many companies are getting price/mix at this sort of level. But without giving any further guidance, we're happy with where we're going. And it's an ongoing balancing act, but I think, also Gustavo, in terms of giving guidance is, I think, a difficult thing to do at this stage.

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Stephanie Marie Schiller Wissink, Jefferies LLC, Research Division - Equity Analyst [4]

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Okay. And then if I could...

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Gustavo Arnal, Avon Products, Inc. - Executive VP & CFO [5]

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No. I think that what...

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Stephanie Marie Schiller Wissink, Jefferies LLC, Research Division - Equity Analyst [6]

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Go ahead. I'm sorry.

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Gustavo Arnal, Avon Products, Inc. - Executive VP & CFO [7]

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We are completing the 2020 budget process as we go, as we speak. Clearly, it will be up to the combined company to provide guidance on 2020. We're not in a position to do that now. What it's important, just reinforcing what Jan said, is we, as a management team, see price/mix as a key enabler to drive an inflection point on the financial health of the company and to drive rep productivity. It will have some trade-offs, as we're having some trade-offs on units, et cetera, but it will be reasonable to expect positive price/mix next year, perhaps not to the levels of 2019, given that this was the first year we started with the program and there was some catch-up needed.

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Operator [8]

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(Operator Instructions) There are no more questions at this time. I would like to turn the conference back over to management for closing remarks.

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Jan Zijderveld, Avon Products, Inc. - CEO & Director [9]

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Yes, great. Again, thanks, everyone, for calling in and listening on the call. I think to sum it up, I think we're proud of the progress we're making. We're building, I think, really a healthier, more sustainable and profitable business. That's really at the heart of what we're trying to do with all the value creation levers that we've got. We've got many calls lined up, so we look forward to further discussions on the follow-up calls. And, again, thank you for your support and calling in this morning. And enjoy the rest of your day. Bye-bye.

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Operator [10]

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This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.