Avon 2014 Annual Report Download - page 5

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As I reflect on our performance in 2014 and look forward to 2015, there are two factors that slow
our progress.
First, our geographic portfolio indexes heavily to emerging markets. The strengthening of the U.S. dollar
against key currencies—particularly in the fourth quarter of 2014 and into 2015—significantly impacted
our performance, and is masking our progress. We’re taking the necessary actions to offset as much
of the currency impact as possible as we anticipate these difficult trends to continue in 2015. However,
over the longer-term, our emerging market portfolio will play to our advantage, particularly in some of the
larger Beauty markets, including Brazil, Russia and Mexico. Avon has weathered emerging-market cycles
before, and I’m confident we’ll do so again.
The second factor is the pace of the North America turnaround, which is slower than anticipated. The U.S.
business is on track to be profitable in 2015, driven by good progress in some key areas. This includes
a substantial reduction to SG&A costs to get our cost base in line with the current size of the business.
We also saw major improvement in commercial marketing in the areas of product mix, pricing, and
merchandising execution. As a result, we continue to improve average order, an important indicator of
Representative earnings opportunity.
The area where our U.S. business remains challenged is our Active Representative trends. We have
not yet been able to sufficiently improve the Representative experience to retain new Representatives
at the level we expect. Moving into 2015, the U.S. team has re-allocated resources to continue
improving the Representative experience with a focus on the recruiting and retention processes and
leadership advancement.
Looking back at 2014, much of our work was foundational. We put the right talent in place in our key
markets. We improved execution against Avon’s core processes. We improved our cost structure to
better align with our current business. Heading into 2015, I’m confident we will continue to see improved
performance as we focus on growing Active Representatives, building our brand relevance, and
improving consumer access.
Looking ahead to the future, I see great potential for Avon as we tap into the power of our brand and the
value of our business model. Women selling beauty products to their social circles is as relevant today
as it was 100 years ago. We have a tremendous opportunity to innovate within our business model as we
take the essence of Avon and adapt to build a sustainable, profitable business.
Thank you,
Sheri McCoy
Chief Executive Officer
March 2015