Avon 2013 Annual Report Download - page 51

North America – 2013 Compared to 2012
%/Point Change
2013 2012 US$ Constant $
Total revenue $1,458.2 $1,751.1 (17)% (16)%
Operating loss (60.1) (4.7) * *
CTI restructuring 12.5 30.5
Adjusted operating (loss) profit $ (47.6) $ 25.8 * *
Operating margin (4.1)% (.3)% (3.8) (3.9)
CTI restructuring .9 1.7
Adjusted operating margin (3.3)% 1.5% (4.8) (4.7)
Change in Active Representatives (15)%
Change in units sold (17)%
* Calculation not meaningful
Amounts in the table above may not necessarily sum due to rounding.
In the second quarter of 2013, Silpada was classified within discontinued operations. See Note 3, Discontinued Operations on pages F-15
through F-17 of our 2013 Annual Report for more information. Accordingly, the amounts for North America exclude the results of Silpada
for all periods presented.
Total revenue decreased 17% compared to the prior-year period, or 16% on a Constant $ basis, primarily due to a decrease in Active
Representatives. Active Representatives were negatively impacted by recruitment challenges. Sales from Beauty products declined 19%, on
both a reported and Constant $ basis, driven primarily by skincare. Sales from Fashion & Home products declined 14%, or 13% on a
Constant $ basis.
In the second half of 2013, revenue in Canada was adversely impacted due to significant field disruptions as a result of the piloting of the
SMT technology platform and associated business process changes initiated in the second quarter of 2013. See “Global and other expenses”
in this MD&A for more information on SMT.
Operating margin benefited by .8 points as compared to the prior-year period from lower CTI restructuring. Adjusted operating margin
declined 4.8 points, or 4.7 points on a Constant $ basis, primarily as a result of:
• a decline of 4.3 points due to the net impact of declining revenue with respect to our fixed expenses, partially offset by lower expenses
primarily resulting from our cost savings initiatives, mainly reductions in headcount that were primarily associated with the $400M Cost
Savings Initiative, and reduced field spending;
• a decline of .9 points with respect to transportation expenses, due to the net impact of declining revenue and increased costs per unit as a
result of lower volume;
• a decline of .6 points due to lower gross margin caused primarily by .7 points from unfavorable supply chain costs, partially as a result of
.3 points that benefited the prior-year period for out-of-period adjustments associated with vendor liabilities, and the impact of lower unit
volume that was partially offset by productivity initiatives; and
• a benefit of .6 points from lower net brochure costs impacted by initiatives to reduce the cost of our brochures and the number of
brochures printed as a result of lower Representative count.
We continue to expect weak financial results within North America as we address continued deterioration in the business. We are focused
on restoring field health, improving our brochure and creating a sustainable cost base which may include additional restructuring actions.
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