Avon Reaffirms Third Quarter and Full-Year Earnings Outlook
08 September 2004 - 10:30PM
PR Newswire (US)
Avon Reaffirms Third Quarter and Full-Year Earnings Outlook Third
Quarter Earnings Forecast to Increase 21% to $.34 Per Share;
Full-Year Earnings Expected to Be Up 24% to $1.72 Per Share NEW
YORK, Sept. 8 /PRNewswire-FirstCall/ -- Avon Products, Inc.
(NYSE:AVP) today reaffirmed its earnings outlook for the third
quarter and full-year 2004, with earnings in the third quarter 2004
expected to increase 21% to $.34 per share, and full-year earnings
projected to be up 24% to $1.72 per share. Both forecasts are
consistent with the company's earlier guidance on July 28, and
include the previously announced benefits from its tax and cash
management strategies resulting in projected effective tax rates in
the range of 31%, as expected, in the third quarter and full-year.
For the third quarter, Avon said that sales should increase 11% in
both dollars and local currencies, driven by a projected 13% gain
in sales of Beauty products, as well as expected 10% growth in the
number of active Representatives and 14% unit volume growth. The
company also said that operating profit in the third quarter is
forecast to increase in the range of 20% versus prior-year,
including incremental consumer and strategic investments of $10
million. Operating margin is expected to expand in the range of 100
basis points, attributed to net benefits from the company's
Business Transformation initiatives as well as operating leverage.
Commenting on the outlook, Andrea Jung, Avon's chairman and chief
executive officer, said, "On a consolidated basis, our business in
the third quarter is demonstrating continued double-digit strength
across every key performance metric. Our international regions are
each expected to generate double-digit gains in local currency
sales, units and active Representatives. Operating profit should be
up strongly as well, and overall, international operations should
post operating margin expansion of over 200 basis points in the
third quarter. This robust strength in our international business
portfolio is fully offsetting softness in the U.S., where
lower-than-expected consumer response to recent brochure offers is
impacting results. "Looking ahead, on a full-year basis, we remain
very comfortable with our earlier earnings estimate of $1.72 per
share, reflecting the continued broad- based strength of our
international operations, as well as anticipated improvement in our
U.S. business in the fourth quarter. The power of our global
portfolio, coupled with the financial flexibility provided by our
Business Transformation initiatives, position us well to achieve
our 2004 earnings target," she said. Third Quarter Regional Outlook
Avon said that U.S. sales in the third quarter are expected to be
flattish versus the strong 7% growth in the prior-year period. This
reflects weaker-than-expected Beauty sales due to underperformance
of recent color promotions in advance of the late September
category re-launch and soft sales of a Cellusculpt line extension.
Sales in the quarter also reflect softness in children's apparel
and toys. Lower-than-expected consumer activity is negatively
impacting Representative ordering, with average active
Representatives anticipated to grow 1-2% in the quarter. U.S.
operating profit in the third quarter is forecast to be 5-to-10%
lower year-over-year, below previous expectations, primarily due to
the lower rate of third quarter sales growth. The Europe region is
again generating exceptional results in the third quarter, driven
by continuing high growth rates in the markets of Central and
Eastern Europe, where sales are projected to increase over 40%.
Russia is once more turning in an outstanding performance, with
sales trending up over 70%. The U.K. is contributing substantially
to the region's growth due in part to tremendous consumer response
to the recent launch of the first of three fragrances in the Today,
Tomorrow, Always collection. Overall, Europe's third quarter sales
should grow in the range of 30% in dollars and over 20% in local
currencies, and dollar-denominated operating profit is forecast to
increase more than 50%, better than expected. In Latin America,
broad-based strength should lead to higher-than-anticipated results
in the quarter. Dollar-based sales are now forecast to grow in the
mid-single digits, and local-currency sales should increase in the
low-teens. Mexico, Avon's second largest market, is expecting an
approximate 13% increase in local-currency sales, including an
extremely positive response to the new fourth quarter fragrance.
The region's dollar operating profit is expected to increase in the
range of 15%, exceeding earlier expectations, with significant
operating margin expansion of approximately 200 basis points. The
Asia/Pacific region is also exceeding earlier projections in the
quarter. Both dollar and local-currency sales are projected to grow
in the low-teens driven by continued significant growth in China --
where sales in the quarter are projected to climb 30% -- and strong
performance in the markets of Southeast Asia. The region's dollar
operating profit is expected to climb in the range of 25%.
Commenting on the fourth quarter outlook, Ms. Jung said, "We are
extremely pleased with the ongoing strength of our international
markets and expect the momentum to continue for the balance of the
year. "In the U.S., we have robust fourth quarter plans in place,
including unprecedented advertising support for three major Beauty
introductions. Early trends on our re-launched color cosmetics
products, backed by advertising featuring Salma Hayek, are
encouraging. Additionally, the U.S. is set to introduce a new,
enhanced brochure as well as a men's catalog. U.S. Representative
morale is also very high, following a successful series of
motivational events across the country in August. With extremely
positive field response to fourth quarter marketing plans, we
anticipate that growth in active U.S. Representatives will return
to the 2-3% range. "Overall, we are confident that the strength of
our fourth quarter U.S. initiatives and continuing standout results
in our international operations will enable us to deliver our fifth
consecutive year of exceptional performance," Ms. Jung said. Avon
management is scheduled to speak tomorrow, September 9, at 1:30
p.m. Eastern time, at the Prudential Back to School Conference. A
live webcast of those remarks will be available at
http://www.avoninvestor.com/. 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 For Purposes of
the "Safe Harbor" 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 Pacific and Central and
Eastern Europe; the Company's ability to implement its business,
cash management and tax strategies and its Business Transformation
initiatives; the Company's ability to achieve anticipated cost
savings and its profitability and growth targets, particularly in
its largest markets; 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, or Investors; Renee Johansen, or Rob
Foresti, +1-212-282-5320, all of Avon Products Web site:
http://www.avon.com/ http://www.avoncompany.com/
http://www.avoninvestor.com/ Company News On-Call:
http://www.prnewswire.com/comp/079575.html
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