DOW JONES NEWSWIRES
Avon Products Inc.'s (AVP) fourth-quarter earnings fell 15% as
currency fluctuations weighed on revenue growth and higher product
costs hurt margins.
The results missed analysts' estimates, sending shares down 3.5%
at $28.33 in premarket trading. Shares of Avon, a direct seller of
beauty products, are down about 17% since October when
third-quarter results also fell short of Wall Street
expectations.
Chairman and Chief Executive Andrea Jung said that as 2010 was
ending the company "continued to experience disappointing sales
results which were negatively impacted by service disruptions in
Brazil and weak performance in Russia." Avon is "aggressively
addressing execution challenges" that damped its performance in the
second half of last year, she added.
Avon is among the many U.S. companies that have been relying on
growth abroad to offset recent softness in North America, though
competition from Procter & Gamble Co. (PG) and other
household-product companies is heating up. Avon has identified
China as a priority growth market and also has been making
acquisitions that complement its direct beauty business.
Avon reported a profit of $229.5 million, or 53 cents a share,
down from $269.4 million, or 62 cents a share, a year earlier.
Excluding restructuring-related costs, earnings from continuing
operations fell to 59 cents from 68 cents a share.
Revenue increased 1.2% to $3.18 billion, but excluding currency
fluctuations was up 5%. Acquisitions contributed about 3 percentage
points of growth.
Analysts polled by Thomson Reuters most recently forecast
earnings of 67 cents a share on revenue of $3.28 billion.
Gross margin fell to 61.8% from 62.7% on higher product costs
and adverse product mix. Volume declined 2%.
In Latin America, its largest business, sales excluding currency
impacts rose 11% as profit declined 19% on weaker margins and
higher labor and distribution costs. In North America, revenue was
flat excluding currency impacts though earnings improved by 19% on
stronger margins and lower advertising expenses.
On a local-currency basis, beauty sales grew 2%, including
increases of 9% in fragrance sales, 1% in color cosmetics, 6% in
personal-care sales, though skin-care sales declined 10%.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481;
Tess.Stynes@dowjones.com