Avon Products (NYSE:AVP)
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Avon Reaffirms Third Quarter and Full-Year Earnings Outlook
Third Quarter Earnings Forecast to Increase 21% to $.34 Per Share; Full-Year
Earnings Expected to Be Up 24% to $1.72 Per Share
NEW YORK, Sept. 8 /PRNewswire-FirstCall/ -- Avon Products, Inc. (NYSE:AVP)
today reaffirmed its earnings outlook for the third quarter and full-year 2004,
with earnings in the third quarter 2004 expected to increase 21% to $.34 per
share, and full-year earnings projected to be up 24% to $1.72 per share. Both
forecasts are consistent with the company's earlier guidance on July 28, and
include the previously announced benefits from its tax and cash management
strategies resulting in projected effective tax rates in the range of 31%, as
expected, in the third quarter and full-year.
For the third quarter, Avon said that sales should increase 11% in both dollars
and local currencies, driven by a projected 13% gain in sales of Beauty
products, as well as expected 10% growth in the number of active
Representatives and 14% unit volume growth.
The company also said that operating profit in the third quarter is forecast to
increase in the range of 20% versus prior-year, including incremental consumer
and strategic investments of $10 million. Operating margin is expected to
expand in the range of 100 basis points, attributed to net benefits from the
company's Business Transformation initiatives as well as operating leverage.
Commenting on the outlook, Andrea Jung, Avon's chairman and chief executive
officer, said, "On a consolidated basis, our business in the third quarter is
demonstrating continued double-digit strength across every key performance
metric. Our international regions are each expected to generate double-digit
gains in local currency sales, units and active Representatives. Operating
profit should be up strongly as well, and overall, international operations
should post operating margin expansion of over 200 basis points in the third
quarter. This robust strength in our international business portfolio is fully
offsetting softness in the U.S., where lower-than-expected consumer response to
recent brochure offers is impacting results.
"Looking ahead, on a full-year basis, we remain very comfortable with our
earlier earnings estimate of $1.72 per share, reflecting the continued broad-
based strength of our international operations, as well as anticipated
improvement in our U.S. business in the fourth quarter. The power of our
global portfolio, coupled with the financial flexibility provided by our
Business Transformation initiatives, position us well to achieve our 2004
earnings target," she said.
Third Quarter Regional Outlook
Avon said that U.S. sales in the third quarter are expected to be flattish
versus the strong 7% growth in the prior-year period. This reflects
weaker-than-expected Beauty sales due to underperformance of recent color
promotions in advance of the late September category re-launch and soft sales
of a Cellusculpt line extension. Sales in the quarter also reflect softness in
children's apparel and toys. Lower-than-expected consumer activity is
negatively impacting Representative ordering, with average active
Representatives anticipated to grow 1-2% in the quarter. U.S. operating profit
in the third quarter is forecast to be 5-to-10% lower year-over-year, below
previous expectations, primarily due to the lower rate of third quarter sales
growth.
The Europe region is again generating exceptional results in the third quarter,
driven by continuing high growth rates in the markets of Central and Eastern
Europe, where sales are projected to increase over 40%. Russia is once more
turning in an outstanding performance, with sales trending up over 70%. The
U.K. is contributing substantially to the region's growth due in part to
tremendous consumer response to the recent launch of the first of three
fragrances in the Today, Tomorrow, Always collection. Overall, Europe's third
quarter sales should grow in the range of 30% in dollars and over 20% in local
currencies, and dollar-denominated operating profit is forecast to increase
more than 50%, better than expected.
In Latin America, broad-based strength should lead to higher-than-anticipated
results in the quarter. Dollar-based sales are now forecast to grow in the
mid-single digits, and local-currency sales should increase in the low-teens.
Mexico, Avon's second largest market, is expecting an approximate 13% increase
in local-currency sales, including an extremely positive response to the new
fourth quarter fragrance. The region's dollar operating profit is expected to
increase in the range of 15%, exceeding earlier expectations, with significant
operating margin expansion of approximately 200 basis points.
The Asia/Pacific region is also exceeding earlier projections in the quarter.
Both dollar and local-currency sales are projected to grow in the low-teens
driven by continued significant growth in China -- where sales in the quarter
are projected to climb 30% -- and strong performance in the markets of
Southeast Asia. The region's dollar operating profit is expected to climb in
the range of 25%.
Commenting on the fourth quarter outlook, Ms. Jung said, "We are extremely
pleased with the ongoing strength of our international markets and expect the
momentum to continue for the balance of the year.
"In the U.S., we have robust fourth quarter plans in place, including
unprecedented advertising support for three major Beauty introductions. Early
trends on our re-launched color cosmetics products, backed by advertising
featuring Salma Hayek, are encouraging. Additionally, the U.S. is set to
introduce a new, enhanced brochure as well as a men's catalog. U.S.
Representative morale is also very high, following a successful series of
motivational events across the country in August. With extremely positive
field response to fourth quarter marketing plans, we anticipate that growth in
active U.S. Representatives will return to the 2-3% range.
"Overall, we are confident that the strength of our fourth quarter U.S.
initiatives and continuing standout results in our international operations
will enable us to deliver our fifth consecutive year of exceptional
performance," Ms. Jung said.
Avon management is scheduled to speak tomorrow, September 9, at 1:30 p.m.
Eastern time, at the Prudential Back to School Conference. A live webcast of
those remarks will be available at http://www.avoninvestor.com/.
Avon is the world's leading direct seller of beauty and related products, with
$6.8 billion in annual revenues. Avon markets to women around the world
through 4.4 million independent sales Representatives. Avon product lines
include such recognizable brand names as 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.
More information about Avon and its products can be found on the company's web
site http://www.avoncompany.com/.
Cautionary Statement For Purposes of the "Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995
Statements in this release that are not historical facts or information are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are based on
management's reasonable current assumptions and expectations. Such
forward-looking statements involve risks, uncertainties and other factors,
which may cause the actual results, levels of activity, performance or
achievement of Avon Products, Inc. ("Avon" or the "Company") to be materially
different from any future results expressed or implied by such forward-looking
statements, and there can be no assurance that actual results will not differ
materially from management's expectations. Such factors include, among others,
the following: general economic and business conditions in the Company's
markets, including social, economic and political uncertainties in Latin
America, Asia Pacific and Central and Eastern Europe; the Company's ability to
implement its business, cash management and tax strategies and its Business
Transformation initiatives; the Company's ability to achieve anticipated cost
savings and its profitability and growth targets, particularly in its largest
markets; the impact of substantial currency fluctuations on the results of the
Company's foreign operations and the cost of sourcing foreign products and the
success of the Company's foreign currency hedging and risk management
strategies; the Company's ability to implement its information systems
initiatives; the impact of possible pension funding obligations and increased
pension expense on the Company's cash flow and results of operations; the
effect of legal, regulatory and tax proceedings, as well as restrictions
imposed on the Company, its operations or its Representatives by foreign
governments; the Company's ability to successfully identify new business
opportunities; the Company's access to financing; and the Company's ability to
attract and retain key executives. Additional information identifying such
factors is contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003, filed with the SEC. The Company undertakes no
obligation to update any such forward-looking statements.
DATASOURCE: Avon Products, Inc.
CONTACT: Media, Victor Beaudet, +1-212-282-5344, or Investors; Renee
Johansen, or Rob Foresti, +1-212-282-5320, all of Avon Products
Web site: http://www.avon.com/
http://www.avoncompany.com/
http://www.avoninvestor.com/
Company News On-Call: http://www.prnewswire.com/comp/079575.html