Avon reaffirms quarterly outlook

Avon says it is on track to deliver strong quarterly growth,
although the US market is likely to prove the exception to regional
growth in view of the tough conditions there.

The world's leading direct sales cosmetic company said that revenue should increase by 8 per cent for the first quarter in dollar terms, while the continuing weakness of the dollar will mean that revenues will rise by 5 per cent in local currencies.

The projected performance is down on the figures for the same quarter in 2004, when growth proved to be exceptional. During the first quarter if 2004 sales grew by 19 per cent to reach $1.75 billion. At the time the company said that sales had been driven by double-digit volume growth and 23 per cent growth in sales of Beauty products.

Likewise sales in local currencies for the corresponding quarter in 2004 were 14 per cent higher, accelerating from 9 per cent growth in the fourth quarter of 2003.

Avon said that operating profit is expected to advance in the range of 10 per cent in the quarter, compared with growth of 40 per cent last year. However, the big jump in last year's figures was attributable to a one off payment of $18 million to reposition the company's beComing brand.

On a regional basis Avon said that US revenue is projected to decline mid-single digits and operating profit is forecast to be down in the mid-teens versus the prior year, in line with prior guidance. This is in line with projections made at the end of the year, but the company is equally expecting the US market to start picking up again in 2006.

Internationally, Latin America's revenue is projected to increase at a double-digit rate and operating profit is forecast to grow in line with or slightly ahead of revenue, reflecting a strong performance in both the Brazil and Argentina markets.

Europe's revenue and operating profit are expected to increase in the ranges of 20 per cent and 25 per cent, respectively, against the extraordinary growth posted last year of 38 per cent in revenue and 84 per cent in operating profit. Growth in this region is continuing to focus on the central and eastern European markets.

The Asia Pacific region's revenue is projected to advance at a double-digit rate, with operating profit expected to improve more than 15 per cent.

Andrea Jung, Avon's​ chairman and chief executive officer, said, "Looking ahead, on a full-year basis, we remain very comfortable with our earlier earnings-per-share projection in the range of $1.95-$2.00. This outlook reflects our previously announced US repositioning, strength in our international portfolio and continued opportunities associated with the next generation of Business Transformation."

Jung added that earnings for the quarter are expected to rise by 13 per cent to reach $0.35.

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