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NEWS ARCHIVES 2008
NEWS ARCHIVES 2007
News > July 2008 Jul 30, 2008 Avon Products 2nd-quarter profit more than doubles Avon Products 2nd-quarter profit more than doublesDate: 2008-30-08
Chairman and Chief Executive Andrea Jung said raising product prices was helping offset the higher input costs that have hurt many cosmetic companies. As the price of oil rises, it costs more for companies to manufacture, package and distribute their products. "Rising costs are pressuring everyone in the sector," Jung said in a conference call with analysts. "We here at Avon are not immune." The New York-based seller of beauty products said quarterly profit soared to $235.6 million, or 55 cents per share, from $112.7 million, or 26 cents per share, a year ago. Revenue rose 17 percent to $2.74 billion. On average, analysts surveyed by Thomson Financial expected earnings of 47 cents per share on revenue of $2.6 billion. Wall Street estimates usually exclude one-time charges and gains. During the quarter, Avon recorded costs of $13 million, or 2 cents per share, for a business restructuring that has included job cuts and outsourcing work to countries with cheaper labor costs. Avon said savings from the plan have helped offset rising input costs. In the year-ago period, Avon recorded 14 cents in charges for the restructuring and other initiatives. Jung said the company's overall performance was the strongest since Avon launched its turnaround plan in 2005. Its shares rose $5.93, or 15.8 percent, to $43.51 in midday trading. The stock set a fresh three-year high of $44.87 earlier in the session. Expansion overseas paid off, as Avon recorded revenue growth in all markets. Sales jumped 27 percent in Latin America, and 30 percent in Central and Eastern Europe, partly because of strong demand in Russia. Strength in emerging markets and robust recruitment of salespeople, especially in Britain, helped results, Jung said. Sales in North America rose 2 percent during the second quarter, compared with a decline of 6 percent in the first quarter. Avon also increased its advertising efforts in the quarter, which helped drive sales of new and existing beauty products. The company has been working to raise its profile by featuring celebrities like Reese Witherspoon and Patrick Dempsey, who partnered with Avon on a fragrance for men. "Our brand advertising continues to pay back for us at exceptionally high levels," Jung said. Goldman Sachs analyst Andrew Sawyer, who rates the stock "Buy," said Avon's strong results in emerging markets should help ease fears that these countries are poised for a slowdown. He also said the improvement in North America shows the company's ability to weather economic challenges. Sawyer said Avon is starting to reap the benefits from its reorganizing program, which is expected to save about $430 million each year, once the company fully implements the restructuring initiatives by 2011 or 2012. |
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NEW YORK (AP) — Strong sales internationally, especially in Latin America and Eastern Europe, helped Avon Products Inc. more than double its second-quarter profit, the cosmetics company said Wednesday. Its shares surged more than 15 percent. |
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