Avon 2015 Annual Report Download - page 51

2015 Compared to 2014
Revenue
Total revenue in 2015 compared to 2014 declined 19% compared to the prior-year period, due to unfavorable foreign exchange. Constant
$ revenue increased 2%. Constant $ revenue was negatively impacted by approximately 2 points due to taxes in Brazil from the combined
impact of the recognition of VAT credits in 2014 which did not recur in 2015 along with a new IPI tax on cosmetics which went into effect
in May 2015. Constant $ revenue was also negatively impacted by approximately 1 point as a result of the sale of Liz Earle which was
completed in July 2015. Our Constant $ revenue benefited from growth in markets experiencing relatively high inflation (Venezuela and
Argentina), which contributed approximately 2 points to our Constant $ revenue growth. Our Constant $ revenue also benefited from
growth in Europe, Middle East & Africa, most significantly Eastern Europe (Russia and Ukraine), and to a lesser extent, South Africa and
underlying growth in Brazil. Constant $ revenue benefited from higher average order and a 1% increase in Active Representatives. The
increase in Active Representatives was primarily due to growth in Europe, Middle East & Africa, most significantly Russia, which was primarily
due to sustained momentum in recruitment and retention, partially offset by markets experiencing relatively high inflation (Venezuela and
Argentina). The net impact of price and mix increased 4%, driven by increases in all regions. The net impact of price and mix was primarily
positively impacted by markets experiencing relatively high inflation (Venezuela and Argentina), as these markets benefited from the
inflationary impact on pricing. Units sold decreased 2%, primarily due to declines in units sold in Brazil and Venezuela, partially offset by an
increase in units sold in Russia. See “Segment Review” in this MD&A for additional information related to changes in revenue by segment
and “Segment Review – Latin America” in this MD&A for a further discussion of the tax benefits in Brazil.
On a category basis, our net sales and associated growth rates were as follows:
Years ended December 31 %/Point Change
2015 2014 US$ Constant $
Beauty:
Skincare $1,791.2 $2,281.0 (21)% –%
Fragrance 1,632.8 1,966.3 (17) 7
Color 1,078.1 1,365.1 (21) 1
Total Beauty 4,502.1 5,612.4 (20) 3
Fashion & Home:
Fashion 907.8 1,040.4 (13) 6
Home 666.6 819.7 (19) 4
Total Fashion & Home 1,574.4 1,860.1 (15) 5
Net sales $6,076.5 $7,472.5 (19) 3
Operating Margin
Operating margin and Adjusted operating margin decreased 300 basis points and 360 basis points, respectively, compared to 2014. The
decrease in Adjusted operating margin includes the benefits associated with the restructuring actions taken during 2015 and the $400M
Cost Savings Initiative, primarily reductions in headcount, as well as other cost reductions. The decrease in operating margin and Adjusted
operating margin are discussed further below in “Gross Margin,” “Selling, General and Administrative Expenses” and “Impairment of
Goodwill and Intangible Assets.”
Gross Margin
Gross margin and Adjusted gross margin decreased 40 basis points and 150 basis points, respectively, compared to 2014. The gross margin
comparison was impacted by a lower negative impact of the devaluation of the Venezuelan currency in conjunction with highly inflationary
accounting, as approximately $29 was recognized in the current-year period as compared to approximately $121 in the prior-year period,
primarily associated with adjustments to reflect certain non-monetary assets at their net realizable value. See “Segment Review – Latin
America” in this MD&A for a further discussion of our Venezuela operations.
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