Avon disappointed by third quarter
Only slight revenue increase despite additional investment in advertising
Avon Products has reported third quarter revenue of $2.7bn, up 4% on the same period in 2009.
Andrea Jung, chairman and ceo, commented: “Third quarter revenues were softer than we had expected, however we maintained our commitment to strategic growth investments. The third quarter was always planned to be a heavy investment quarter, although the lower-than-expected revenues added further pressure to operating margin.”
Advertising for the quarter was $115mn, up 36% from $84mn in last year’s period. This was driven by an increase in advertising in Brazil, Russia and the US.
Despite the heavy investment in advertising, North America reported a 2% decline in revenue and central and eastern Europe also reported a decline of 1%. However there was positive news from the western Europe, Middle East and Africa region with a confirmed revenue increase of 11%. This was down to the growth in Avon’s Active Representatives as well as the acquisition of Liz Earle Beauty.
Results in China were particularly disappointing as third quarter revenue decreased 30%. The region's revenues continued to be impacted by the company's transition from a hybrid selling model, where products are sold in a retail environment, to Avon’s traditional method of direct selling. China had an operating loss of $3m compared with a $3m profit in last year's third quarter.