Avon’s profits fall despite sales increase

By Katie Nichol

- Last updated on GMT

Related tags: Percent, United states, Revenue, Europe, China

Direct-seller Avon has reported a 14 percent increase in first quarter revenue aided by double digit sales growth in the company’s strongest markets; Europe and Latin America.

The cosmetics company reported that total revenue came in at $2.5bn (€ 1.89bn), with sales in its Beauty segment also up 14 percent. Gains in all categories were seen, most notably in color cosmetics and fragrance (23 percent and 21 percent respectively).

“We are pleased with the continued top-line momentum across most of our regions in the quarter…this is the second quarter in a row where Latin America and our two European segments, which comprise approximately 70 percent of our sales, grew constant-dollar sales at a rate of 15 percent,”​ said Avon chairman and CEO Andrea Jung.

Revenue down in China and North America

Breaking the sales down by markets, a strong performance was seen in Central & Eastern Europe, with sales in this market increasing 28 percent. Likewise, revenue jumped 23 percent in the Western Europe, Middle East and Africa market, as well as in Latin America.

In the Asia-Pacific region, revenue increased 10 percent compared to the first quarter of last year, and strong growth in the Philippines offset continued weakness in Japan, the company said.

While first-quarter revenue in North America was down 2 percent, partly due to weakness in the non-beauty business, China was the hardest-hit market, with a 31 percent drop.

In China, revenue from both Beauty Boutiques and direct selling declined significantly, reflecting ‘the fundamental challenges in the company's hybrid business model and complex evolution towards direct selling', said Avon.

Profits drop on Venezuelan currency devaluation and restructuring

Net income was $43m for the first quarter, compared with $117m the previous year due to the impact of Venezuelan special items and restructuring costs, the company said.

After adjusting for the impact of these costs, net income was $144m compared with $127m in 2009.

Avon is not the only player in the cosmetics and personal care market to be hit by the currency devaluation, with both Colgate-Palmolive and Kimberley-Clarke feeling the effects.

Kimberley-Clarke’s first-quarter earnings fell 5.7 percent and Colgate-Palmolive’s dropped 30 percent, with the company saying earlier this year that it expected the impact of the Venezuelan currency devaluation to cost in the region of $275m.

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