Avon posts sales, profit decline for first quarter of 2012

American cosmetics and beauty products direct selling firm Avon products has reported an 82% drop in profits to $26.5m for the first quarter of 2012, down from $143.6m in the same quarter of last year.

Sales slipped down by 2% to $2.53bn for the quarter from $2.6bn during the same period of last year, the company said.

Category basis, beauty sales dropped by 1%, while fragrance and skincare on reported basis, declined by 1%, and personal care noted a decline of 2%.

The company said that the quarter’s gross margin was 60.8%, 310 basis points lower than the previous-year period, owing to the increased cost pressures of commodities along with higher labour costs.

Negative impact from both foreign exchange and product mix also hit the gross margin for which it took corrective actions to reduce costs and improve efficiencies.

The company posted a $27m pretax restructuring cost.

Avon executive vice president and chief financial officer Kimberly Ross said that the firm’s Q1 operating performance remained challenged, and the firm was making progress towards addressing some of the operational and cost-cutting opportunities.

The beauty products firm is also facing tough competition from the US drugstores along with aggressive pricing by rivals in the Eastern Europe along with inadequate ordering systems in Brazil.