What: It was a rocky month for Avon Products (NYSE:AVP), but the troubled beauty products maker finished up 12.4% last month, according to S&P Global Market Intelligence, overcoming a weak earnings report to post gains. As the chart below shows, it was a volatile month for the stock.
So what: Shares of the beauty products company tumbled 19% after reporting its 16th straight quarter of declining sales. Revenue fell 20%, though it was up 3% adjusting for foreign currency exchange and the divestiture of Liz Earle.
Bottom-line figures were equally discouraging as it reported a loss from continuing operations of $0.04, or breakeven after adjustments. Operating margin also fell 480 points to 3.9%. One positive sign in the quarter was a 2% increase in Active Representatives, showing that the company has been able to recruit new salespeople. Europe, Middle East, & Africa was also a bright spot as sales in constant dollars increased 6%.
Avon announced in December a plan to sell 80.1% of its North American business to Cerberus Capital Management, and in January released a transformation plan that includes a goal of $350 million in cost-cutting.
Now what: Avon shares have fallen by more than 90% since the recession as the business has unraveled. However, the volatile stock has gained 50% since the earnings report came out on optimism for the turnaround and as the broad market recovers.
Avon got a cash injection from Cerberus on March 1 when the private equity company agreed to invest $435 million in convertible preferred stock as part of a new strategic partnership between the two companies. While increased liquidity will help the company stay afloat, it does nothing to improve its underlying business model. With a net loss of more than $1 billion last year, Avon appears to be a long way from a turnaround. I'd stay away unless the transformation plan begins to show some traction.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.