Hair Raising Experiences for Investors?
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
"… the most important member of every heavy metal band is the hairdresser..."
Frank Zappa (American Composer: 1940 -1993)
Mr. Zappa was all about cutting to an issue's core. Whether you liked him and his music or not, you could count on his unique perspective on things. He recognized the penchant for puffed, fluffed hairdos in flamboyant bands whose hairstyles sometimes claim more attention than the music.
Considering the plethora of hairstyles in the music industry, and in society, maybe those hairdressers are that important and are using top products from major NYSE companies. For investors, it's worthwhile to research the performance of the branded consumer packaged goods entities making products for numerous categories, including Beauty and Grooming.
Avon Products Inc. (NYSE: AVP) is an international beauty company. Their "Advance Techniques" is a complete line of shampoos, conditioners and styling products. Avon reported fourth-quarter and full-year 2012 results in February.
Investors should consider that Avon's Full-Year 2012 Total Revenue was $10.7 billion. This represents a decrease of 5% - flat in constant dollars. Total Beauty sales declined 5% (increased 1% on a constant-dollar basis). Active Representatives declined 1%; units sold were flat. Full-year loss from continuing operations was $38 million, or $0.10 per share. This is in comparison to income of $526 million, or $1.20 per share, the year prior. Adjusted Non-GAAP income from continuing operations was $373 million, or $0.85 per share, compared to $719 million, or $1.64 per share.
Their North America Avon business Revenue declined 11%. This was mainly because of a decrease in Active Representatives. This was somewhat offset by higher average orders. Active Representatives are a hallmark of Avon. Investors must consider why the company, the globe's largest direct seller, has a drop-off in these reps in North America.
Reuters.com reported (Feb. 14, 2012 - Phil Wahba) that "… representatives who work on commission and are essential to selling Avon's cosmetics directly to consumers were leaving the company in greater numbers than in several years."
As I wrote in a previous post (Often Traversing an Oily Slope – Feb. 17, 2013), Avon's another company affected by government decisions in foreign jurisdictions. The devaluation of the Venezuelan bolivar is affecting Avon. Investors must research the extent of a company's business involvement outside of North America.
Avon, based on a preliminary analysis, anticipates a one time after-tax loss estimated to be approximately $50 million in the first quarter of 2013. This mainly reflects the write-down of monetary net assets and deferred tax benefits. They anticipate estimated charges of approximately $50 million associated with the historical cost in U.S. dollars of non-monetary assets, such as inventory, mainly during the first half of 2013.
A positive for stockholders is that Avon did declare a regular quarterly dividend on their common stock of $.06 per share. There were concerns their operations wouldn't produce enough money for this distribution.
Another positive for Avon is that they did have more robust earnings in the fourth quarter of 2012. They reversed some of the loss of sales reps in the quarter. The key for investors to consider is whether this is a blip, or the start of sustained momentum towards regaining marketing strength through attracting more reps in 2013. The company cut costs in the fourth quarter – always a favorite initiative for investors looking for increased profit margins.
Johnson & Johnson (NYSE: JNJ) engages in the research, development, manufacture, and sale of diverse products in the health care field; they also have their Consumer segment. In Hair Care, they have Neutrogena Skin and Hair Care Products and Rogaine products.
In January, they reported sales of $17.6 billion for the fourth quarter of 2012, an increase of 8.0% compared to the fourth quarter of 2011. Operational results increased 9.3%. Domestic sales increased 6.8%, while international sales increased 8.9%.
Worldwide sales for the full-year 2012 were $67.2 billion. This represents an increase of 3.4% versus 2011. Operational sales increased 6.1%. Domestic sales increased 3.2; international sales increased 3.5%.
Mr. Alex Gorsky, Chairman/CEO, stated, "Our results included strong growth of key products, successful new product launches, and the addition of Synthes to our family of companies. In addition, we continued to make important investments building strategic partnerships and in advancing our pipeline, positioning us well for delivering sustainable growth as we enter 2013."
The company's experiencing growth in their major products, while experiencing success with new products. Investors should consider this two-pronged approach to growth, with one prong a safety net to any slowdowns in the other. Strategic partnerships are something else to look at. It's the old "two heads are better than one" approach, companies combining resources, working to sustain growth.
I guess some heavy metal band members and others aren't forgetting Procter & Gamble (NYSE: PG) either. The company engages in the manufacture and sale of a spectrum of branded consumer packaged goods including Hair Products in the Beauty and Grooming segments (Head & Shoulders, Pantene, Hair Care Appliances).
Recently, they announced their second quarter results. They increased core earnings per share by 12% to $1.22 for the October – December quarter. Diluted net earnings per share were $1.39, an increase of 144%. Organic sales grew 3%. Net sales were $22.2 billion, an increase of 2% compared to the year ago period. All business segments increased organic sales by 2% or more versus the prior year.
This is broad-based corporate strength due to focusing on all segments. Investors should consider this; it highlights P&G's comprehensive strategy for creating growth. This contributes to increased market share and profits - if costs are contained while all of this is going on.
Chairman/President/CEO Mr. Bob McDonald said, "Global market share trends improved as we continued to implement our growth strategy and made very good progress against our productivity and cost savings goals."
Of note is Procter & Gamble's commitment to improving productivity. This contributes to them remaining competitive - as they feel the heat of the curling iron in the crowded consumers brands sector.
MichaelONTARIO has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson and Procter & Gamble. The Motley Fool owns shares of Johnson & Johnson. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!