Avon unlikely to achieve 2011’s financial targets

Published: 28-Oct-2011

Third quarter revenue increases 6%

Avon Products Inc no longer expects to achieve its target revenue growth and operating margin improvement for full year 2011, following the announcement of its third quarter financial results. Revenue in the third quarter totalled $2.8bn, 6% up on the same quarter of 2010, while units declined 5%. Income from continuing operations was $165m, or $0.38 per diluted share, down on the year ago quarter’s $167m/$0.38 per diluted share. The number of active representatives in the quarter remained flat.

Avon’s beauty business outperformed the company as a whole, enjoying a sales rise of 8% year on year with gains in all categories, especially fragrance, which grew 12%.

Regionally, Latin America saw the greatest sales growth (11%), with Western Europe up 9% and Central & Eastern up 7%, and Asia Pacific sales up 1%. Third quarter revenue in North America, in contrast, slid 7%.

“The results of the quarter reflect a challenging ERP [enterprise resource planning] implementation in Brazil which caused greater disruptions than we anticipated. This significantly impacted our top and bottom line results,” commented Avon chairman and ceo Andrea Jung. “In addition, consumer uncertainty amidst a volatile macroeconomic environment across several of our markets further pressured revenue growth.

“Given the current operating environment, the company no longer expects to achieve the stated targets of mid single digit revenue growth and 50-70 basis points of operating margin improvement in 2011. In light of the changing landscape, we are assessing our long range business plan and are targeting an operational and financial update at an investor meeting in the first quarter of 2012.”

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