Avon 2011 Annual Report Download - page 3

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2011 Annual Report
To Our Shareholders:
I am writing you at a time of momentous change for your company.
After 12 years as Avon’s CEO, I believe that the time is right to recruit
a new CEO to lead the company’s next chapter. As Avon’s Chairman,
I am committed to ensuring a successful management transition,
maintaining our strong relationships with approximately 6.4 million
active independent Representatives worldwide, and working with
the new CEO in supporting the company’s strategic direction and
brand positioning.
On a personal note, it has been a true privilege leading Avon as CEO since 1999,
as we have grown the company from a decentralized group of local operating
entities to a globally managed business with global brands and a global operating
model. During this time, revenues more than doubled to $11.3 billion, the number of
Representatives also doubled and we expanded our reach to women in more than
100 markets around the world.
Looking to the future, a new CEO will provide a fresh lens and additional operational
capabilities to manage a company of Avon’s increasing size and scale. With the
Beauty and Direct Selling industries growing, coupled with our broad geographic
footprint, Avon continues to have signifi cant growth opportunities.
To capitalize on these opportunities, however, we will need to address the near-term
challenges which have slowed the company’s recent revenue growth.
In 2011, revenues were up 4% or 1% in constant dollars,* compared with the
mid-single digit constant-dollar growth we have seen on average over the past fi ve
years. At the same time, Avon posted approximately $1.2 billion adjusted operating
profi t* and generated over $650 million in cash from operating activities. In line
with this, we declared a $0.92 dividend in 2011 and stated our commitment to
maintain this dividend in 2012.
MOVING FORWARD
Looking ahead to 2012, we are moving forward with urgency to get the company
back on a growth track as quickly as we can. In line with this, we have undertaken a
full long-range operational and fi nancial review of the business, evaluating all external
and internal factors that are impacting our performance. While we’re delaying any
major, long-term strategic decisions until a new CEO is on board, we are taking
immediate actions to reignite direct-selling momentum; cut costs; strengthen cash
fl ow; and improve overall operating and management effectiveness.
* Constant dollars and adjusted operating profi t are non-GAAP measures described under “Non-GAAP Financial Measures” in the MD&A.
For a reconciliation of adjusted operating profi t, see “Results of Continuing Operations – Consolidated” in the MD&A.