AVP- Embedded Expectations Analysis - 2019 03 29
Avon Products, Inc. (AVP:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with an 18.6x Uniform P/E. At these levels, the market is pricing in somewhat muted expectations for the firm, and management has concerns about their training and recruitment programs, e-commerce capabilities, marketing campaigns, and new store and product launches.Specifically, management may lack confidence in their training and recruitment programs, and may be exaggerating their ability to drive ambassador retention, increase e-commerce usage, and scale bundle sales. In addition, they may be overstating their e-commerce capabilities, ability to build talent, and social media presence. Moreover, they may lack confidence in their ability to improve campaign management and direct selling, and may be concerned about the quality of their marketing plan. Furthermore, they may be exaggerating the benefit of mall beauty bars on their brand reception and customer experience, and may be concerned about new product launches and their ability to innovate. Finally, they may be downplaying concerns about lower than expected cash conversion and representative experience investments, and may lack confidence in their ability to sustain average order size and salesperson earnings growth.
Avon Products is a manufacturer and marketer of beauty and related products. The company's product categories are Beauty and Fashion and Home. Beauty consists of skincare, fragrance and color (cosmetics). Fashion and Home consists of fashion jewelry, watches, apparel, footwear, accessories, gift and decorative products, housewares, entertainment and leisure products, children's products and nutritional products. The company's business is conducted primarily in one channel, direct selling. The company's reportable segments are based on geographic operations in four regions: Europe, Middle East & Africa; South Latin America; North Latin America; and Asia Pacific.
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