Corporate Press Releases

Avon Expects Fourth Quarter and Full-Year E.P.S. To Exceed Prior Guidance by $.01 Per Share

For 2003 Company Targets Accelerating Local Currency Sales Growth, Significant Margin Expansion and Double-Digit E.P.S. Growth

Dec 10, 2002

Avon Products, Inc. (NYSE: AVP) today said that it expects to exceed its previous earnings guidance for the fourth quarter and full-year 2002 by $.01 per share, primarily due to stronger-than-expected operating results in the U.S. and Europe.

The company said it expects earnings in the quarter to be $.79 per share, compared with $.74 per share in 2001, excluding unusual items. Including unusual items, reported earnings in last year's fourth quarter were $.46 per share.

Avon said sales in the fourth quarter are forecast to increase 4-5%. Excluding the impact of foreign currency exchange, sales should be up 12-13%, representing the highest quarterly growth rate of the year, driven by accelerating unit growth of 14% and a 10% gain in active Representatives, with all geographic regions contributing solid increases. Sales of beauty products are expected to grow 8-9% in the quarter, or about twice the rate of overall sales, driven by a double-digit increase in the U.S., and reflecting Avon's strategy to focus resources on its beauty business.

Operating profit in the fourth quarter is expected to be up double digits in local currencies and high-single digits in dollars. Gross margin is forecast to improve by 70 basis points, while operating margin should increase 80 basis points, enabling Avon to achieve its full-year target of a 50 basis-point expansion.

Avon also said cash flow from operations continues to be strong and the company is on track to generate its previously stated target of $500-550 million in cash flow for the full year, even after contributing $80 million to its employee pension plans in the third quarter.

Commenting on the outlook for the fourth quarter, Andrea Jung, Avon's chairman and chief executive officer, said, "We are very pleased that 2002 is ending on such a strong note, especially in light of the continuing economic challenges in some markets that we have faced all year. Growth in local currency sales, units and active Representatives got progressively stronger during the year and the momentum has continued in the fourth quarter, demonstrating Avon's ability to deliver superior growth on a sustained basis, even in difficult economic times.

"Once again, the U.S. is delivering outstanding results, with sales in the fourth quarter expected to be up 5-6%, and operating profit up approximately 12%. Sales in the U.S. in the quarter are being driven by 12% growth in beauty products, a 9% increase in units and a 4% gain in active Representatives. This consistent, stand-out performance comes on top of the 9% sales growth in last year's period, which was the highest fourth-quarter growth rate in the U.S. in over a decade," Ms. Jung said.

Ms. Jung also said international operations are expected to post solid profit growth in the quarter, with double-digit gains in Europe and Asia more than offsetting an estimated 10% profit decline in Latin America.

"Europe continues to produce excellent results, with sales forecast to climb in the range of 25% and operating profits more than 30% in the fourth quarter," she said. "In addition, Asia is on track to deliver a nearly 20% profit increase, and Latin America, while strong in local currency terms, continues to be significantly affected by currency translation."

For full-year 2002, Avon said earnings per share should increase 11% to $2.31, before unusual items, which would be $.01 ahead of the company's previously stated target of $2.30 per share.

In 2001, Avon's earnings were $2.09 per share, before unusual items. Unusual items in the year reduced reported earnings by $.24 per share to $1.85 per share.

Avon is scheduled to report financial results for the fourth quarter and full-year 2002 on February 4, 2003.

  Avon today also provided preliminary guidance on its outlook for 2003.

The company said it is targeting local currency sales growth to be above the 10% level expected for full-year 2002, with strong year-over-year growth in all geographic regions. Sales should once again be driven by robust gains in units and active Representatives, as well as accelerated growth in beauty product sales. Avon expects the currency translation impact in 2003 to be comparable to the 7% drag on this year's dollar-denominated sales growth.

Avon said it is forecasting significant year-over-year improvement in gross and operating margin in each quarter of 2003, as the benefits of its Business Transformation initiatives accelerate. The company expects to deliver its previously stated target of a 100 basis-point expansion in operating margin in 2003, on top of the 50 basis-point improvement forecast for this year.

Avon said it is once again targeting double-digit earnings-per-share growth in 2003, indicating earnings of $2.54 per share, on top of $2.31 per share before unusual items in 2002. That would make 2003 the fourth consecutive year of double-digit growth in earnings before unusual items.

Cash flow for 2003 is forecast to be strong again and to be within the company's stated goal of $600-800 million annually, aided by further improvements in inventory days.

"Looking ahead, we are very confident in the future of our business. The momentum that has been building all year should continue into 2003, with all regions -- including Latin America -- contributing to overall solid growth in operating profit," said Ms. Jung. "Our top-line growth strategies are clearly working, which, combined with the accelerating benefits of our Business Transformation initiatives, should result in another year of breakthrough progress for Avon," she said.

Avon is the world's leading direct seller of beauty and related products, with approximately $6.0 billion in annual revenues. Avon markets to women in 143 countries through 3.5 million independent sales Representatives. Avon product lines include such recognizable brand names as Avon Color, Anew, Skin-So-Soft, Advance Techniques Hair Care, beComing 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

  Cautionary Statement under the Private Securities Litigation Reform Act of

Statements in this release, which 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 important factors, which may cause the actual results of 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 important factors include, among others, the following: general economic and business conditions in the Company's markets including economic and political uncertainties in Latin America; the Company's ability to implement its business strategy and its Business Transformation initiatives including "clustering" of its markets; the Company's ability to achieve anticipated cost savings and profitability targets; the impact of substantial currency exchange fluctuations in the Company's principal foreign markets and the success of the Company's foreign currency hedging strategies; the impact of possible pension funding obligations on the Company's cash flow; and the effect of legal and regulatory proceedings and restrictions imposed on the Company or its operations by foreign governments. Additional information identifying such important factors is contained in the Company's Form 10-K/A report for the year ended December 31, 2001, filed with the S.E.C. The Company undertakes no obligation to update any such forward-looking statements.


SOURCE: Avon Products, Inc.

CONTACT: Media - Brian Martin, +1-212-282-5103, or Victor Beaudet,
+1-212-282-5344, Investors - Renee Johansen or Rob Foresti, +1-212-282-5320,
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