Avon Products (NYSE:AVP)
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Avon to Benefit From Cash Management and Tax Strategies
Effective Tax Rate Expected to Decline to 31%
NEW YORK, June 8 /PRNewswire-FirstCall/ -- As a result of implementing new
long-term cash management and tax strategies, Avon Products, Inc. (NYSE:AVP)
today raised its earnings outlook for the second quarter and full-year 2004 to
reflect a significant reduction in the company's effective tax rate.
These cash management and tax strategies are a further extension of the
company's successful Business Transformation efforts and reflect a decision to
permanently invest a larger share of foreign earnings offshore, enabled by a
new international holding company structure. When the strategies are fully
implemented some time in 2005, Avon expects its recurring effective tax rate to
be reduced from 35% to approximately 31%.
Reflecting these changes, the company raised its second quarter and full- year
2004 earnings outlooks. For the second quarter, Avon now expects to earn $.46
per share, 28% above the year-ago period, and $.03 per share higher than
earlier guidance. Full-year earnings are now projected to be $1.70 per share,
up 22% from the year-ago period, and $.05 higher than earlier expectations.
Robert J. Corti, Avon's chief financial officer, said, "With the continuing
success of our global operations--including consistently strong, sustainable
cash flow in the U.S. -- we no longer need to repatriate as much of our foreign
earnings to meet our domestic cash needs, including funding increased
dividends, share repurchase programs and debt repayment. We expect these
programs to remain unchanged. Going forward, we are able to retain a larger
portion of the funds generated overseas for investment abroad, thus lowering
our U.S. deferred income taxes and benefiting the company's overall earnings
and shareholder value."
Continuing Strength in Business Operations
Avon also said that its global business continues to perform strongly, as
expected, with second quarter sales growth projected to be up 12% in dollars
and 11% in local currencies versus prior year, driven by an expected 14%
increase in Beauty sales. Units are anticipated to grow 12% in the quarter,
following a similar volume gain in the first quarter.
Operating profit in the second quarter should increase 14%, even after
absorbing $6.2 million of pretax expense from the unexpected settlement of a
long-standing lawsuit associated with a restoration claim brought by Solow
Building Co., landlord of the company's former headquarters.
Regional Highlights
In terms of regional operating performance, U.S. second quarter sales are
tracking in the mid-single digits, with an anticipated 4% sales increase driven
by gains of 6% and 3% in Beauty sales and the number of active Representatives,
respectively. Showing improvement over recent quarters, U.S operating profit
is projected to increase in line with sales.
Avon said that Europe continues to generate exceptional results, driven in
large part by another stellar performance in Russia, the company's fastest
growing market. Europe's second quarter sales are expected to be up over 20%
in dollars and in the high teens in local currencies. Dollar operating profit
is forecast to grow over 40%.
Latin America should post a double-digit increase in dollar sales and a
mid-teens increase in local currencies, driven by an anticipated 12% gain in
units that continues the strong volume growth the region experienced in the
first quarter. Dollar operating profit should grow in line with sales.
The Asia/Pacific region is forecast to generate a high-teens sales gain (up
low-teens in local currency), with dollar operating profit growth expected to
exceed 25%. As anticipated, China continues to be a standout performer in the
region, with sales projected to grow nearly 50%.
Commenting on the outlook, Andrea Jung, Avon's chairman and chief executive
officer, said, "The underlying health of Avon's business remains extremely
strong, and we continue to make excellent progress with our strategies.
Additionally, we are pleased to extend the scope of our Business Transformation
efforts to include Avon's cash management and tax strategies, improving our
earnings power for shareholders beyond that delivered by the continuing
strength of our global operations," Ms. Jung concluded.
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 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 and Central
and Eastern Europe; the Company's ability to implement its business, cash
management and tax strategies and its Business Transformation initiatives,
including the integration of similar activities across markets to achieve
efficiencies; the Company's ability to achieve anticipated cost savings and its
profitability and growth targets; 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, Investor, Renee
Johansen, or Rob Foresti, +1-212-282-5320, all of Avon
Web site: http://www.avon.com/
http://www.avoncompany.com/
Company News On-Call: http://www.prnewswire.com/comp/079575.html