European performance boosts Avon profit

Related tags Cent Profit Revenue Avon products

Avon Products has attributed its fourth quarter earning and sale
growth figures to the company's success in Europe. Sales in the EU
rose 30 per cent to €440 million and operating profit rose by 50
per cent. Strong international sales for the quarter were offset
however by a weaker performance in the US.

"We're encouraged by Avon's performance as we finished the year, and are especially pleased with the robust performance of our international operations in the closing quarter that helped to offset temporary factors in the U.S. non-beauty segment,"​ said Avon's CEO Andrea Jung.

Fourth quarter sales for the direct-selling company grew 14 per cent to €1.67 billion, up from €1.47 billion in the year-ago period. Operating profit in the quarter increased 24 per cent to €310 million and net income in the quarter rose 35 per cent to €208 million.

Beauty sales advanced a record 18 per cent on the strength of the success of Anew Clinical Wrinkle and Line Corrector - contributing a 30 per cent gain in skincare - and by the launch of the fragrance Treselle, which drove mid-teens sales growth in fragrance.

Excluding the impact of currency translation, sales increased 18 per cent in Europe. The number of active representatives grew 14 per cent, and units rose by 9 per cent. The markets of Central and Eastern Europe drove the region's performance with sales and operating profits - up 40 per cent and 60 per cent respectively - due largely to Avon's fastest growing market in Russia.

However in the US sales in the quarter were negatively effected by unfulfilled demand for certain holiday non-beauty products and a decline in fragrance sales. The number of active representatives increased 3 per cent and units rose by only 1per cent. Mark, the company's new brand for young women, contributed just 1 per cent to overall US sales growth in the quarter.

US operating profit declined 4 per cent due to increased consumer and strategic investments, including the launch of Mark, as well as a greater-than-anticipated shift in product mix that impacted gross margin and distribution expense.

Commenting on the outlook for 2004, Jung said that Avon continues to forecast earnings growth of 10-12 per cent on top of 2003 earnings. The company claims that local currency sales should increase 10 per cent with little or no currency impact, and in line with the company's long-term sales target.

"Full year US sales are expected to return to a mid-single-digit growth rate, with operating profit forecast to be up 8-10 per cent. First quarter US sales are tracking to a healthy 6-8 per cent increase, and US operating profit is projected to decline due to planned margin investment in inventory clearance,"​ claimed Jung.

Avon​ is a leading direct seller of beauty and related products to women around the world through 4.4 million independent sales Representatives. Avon product lines include Avon Color, Anew, Skin-So-Soft, Avon Solutions, Advance Techniques Hair Care, Avon Naturals, Mark, and Avon Wellness. Avon also markets an extensive line of fashion jewelry and apparel.

Related topics Business & Financial Fragrance

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