Avon profits miss expectations on economic turmoil

By Simon Pitman

- Last updated on GMT

Related tags: Percent, North america

Avon has reported a strong rise in its third quarter profits, but poor North American sales spell missed market expectations.

Having announced strong sales growth in its preliminary financial report for the quarter, the company revealed that net profit had increased from $139.1m for the corresponding quarter last year, to $222.6m for the current quarter.

Although this figure represented an increase of 60 percent compared to last year, the figure did not match up to Wall Street analysts' expectations.

A dip in sales in the company’s North American regions, brought about by the credit crunch and lower consumer spending, sent shares tumbling by more than 20 percent in early trading today.

North American outlook weak

Further to the results, the company also warned that sales results in North America could deteriorate still further, as the economic and retail landscape continues to remain weak.

Pushed by the developing markets, sales grew by 13 percent to reach $2.6bn, counteracting a fall of 3 percent for sales in North America – a performance that is expected to worsen in the region during the fourth quarter.

Likewise, the recent strength of the US dollar against other world currencies is also expected to impact results for the final quarter.

Latin America is shining star

However, things are looking far rosier in Latin America, where year-on-year sales results were up 25 percent and 13 percent in local currencies, led by gains of 30 percent and 40 percent in Brazil and Venezuela, respectively.

In Central and Eastern Europe, third quarter revenues rose 17 percent in real terms and 5 percent in local currency, whereas in Western Europe, Middle East and Africa, the figure was up 8 percent and 6 percent in local currencies.

The company said that the current situation in the North American market and the forecast for the fourth quarter is likely to impact its operating margins, which means it has lowered expectations from 14 to 13 percent.

Related topics: Business & Financial

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