Oriflame's sales force expands boosting turnover

Sales for the Swedish direct selling cosmetics company increased by 22 per cent to €341.6 m in the fourth quarter ending 31 December 2007. The company cited an increase in the sales force, a favourable product mix and price increases in all regions as reasons behind the positive sales figure. Operating profit before restructuring costs rose 32 per cent to €56.7m with an operating margin of 16.6 per cent. However, taking into account the restructuring costs of €14.0m incurred during the quarter, operating profit fell by 0.75 per cent to €42.7m. Total restructuring costs are predicted to reach €30-35m spread over two years with the majority (€25.8m) falling in 2007. The costs relate to the opening of a distribution centre in Warsaw that will serve as the group's main warehouse. Colour cosmetics and fragrances showed record growth ​ The colour cosmetics category was particularly successful enjoying 25 per cent growth over the year, according to the company. Successful launches of Wonderlash Mascara and Powershine Lipstick by the company's colour range Oriflame Beauty stimulated growth in the category. The fragrance category grew by 29 per cent over the year and the male fragrance Ascendent was the best seller of the fourth quarter. Furthermore the company's anti-ageing range, Ecollagen - launched early in 2007 - contributed to 22 percent growth in the skin care segment. A strong Latin American market ​ The Latin American market enjoyed particularly strong sales growth of 44 per cent driven by an increased sales force and productivity. The company highlighted Colombia and Peru as particularly strong in terms of sales growth. The Asian market continued to perform well with particularly strong growth in Thailand, Sri Lanka and India. Oriflame cited a focus on sales and recruitment in these markets as a reason behind the region's growth, stating that many new leaders in the countries are taking more responsibility for the training and recruitment of the sales force. Sales in Western Europe and Africa increased 14 per cent and the region benefited from increased operating margins due to higher prices and lower selling costs. In terms of future predictions, Oriflame aims to reach an operating margin of 15 per cent in 2009 and achieve local currency sales growth of 10 per cent per year. The company expects to improve operating margins in 2008 despite the exchange rate environment.