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Avon Says Fourth Quarter EPS Target Is Achievable, Despite External Pressures

Continued Strong Results Expected in U.S., Europe;

PRNewswire
Dec 7, 2001

$80-$90 Million Charge for Business Transformation Slated for Fourth Quarter

Avon Targets Double-Digit EPS Growth in 2002

NEW YORK, Dec. 7 /PRNewswire/ -- Avon Products, Inc. (NYSE: AVP) today said that its previously stated targets for sales and earnings growth in the fourth quarter are achievable, although Latin American economies are weaker than expected.

Avon said it still expects to earn the consensus estimate of $.74 per share in the quarter, excluding a restructuring charge of approximately $80-$90 million pretax, or $.24-$.27 per share, for costs to accelerate the company's business transformation initiatives that were previewed for investors in May. In the fourth quarter of 2000, Avon reported earnings of $.67 per share, excluding unusual items.

The company said that sales in the quarter should increase in the mid-single digits in dollar terms, as expected. Excluding the effects of foreign currency exchange, sales growth should be in the high single digits, driven by solid gains in units and the number of active Representatives across all geographic regions.

Avon said that, excluding unusual items in both periods, it expects operating margin to expand by at least 50 basis points and operating profit to increase at a high single-digit rate even after approximately $10 million in incremental spending on consumer initiatives in the quarter. Excluding the impact of foreign currency exchange, operating profit should increase in the mid-teens range versus the year-ago period.

Commenting on the expected results for the quarter, Andrea Jung, chairman and chief executive officer, said, "The U.S. business continues to deliver a standout performance with strong momentum going into the important holiday season, even in the face of weaker consumer confidence and a recessionary economy. U.S. sales are trending significantly above our recent expectations, at about 8-9%, and operating profits are expected to be up in the same range," Ms. Jung said.

"International operations also are performing well overall, with increases in local currency sales and operating profits expected to be in the double-digit range. Europe continues its strong growth track, as it has all year, with dollar-denominated sales expected to be up in the mid teens, and operating profit advancing at almost twice the rate of sales. In Asia, trends are in line with expectations, with sales and profits up slightly in dollar terms. In Latin America, however, results in Mexico and Argentina are tracking below our recent expectations due to weaker economic conditions in those markets," Ms. Jung said.

"In this unusually challenging environment, we are taking aggressive measures to tighten expense controls in order to achieve our goals. Actions are underway to significantly impact corporate spending at every level, including consideration of a plan to use stock options for a portion of senior executive cash bonuses. And, we are looking at other opportunities as well, to offset the impact of weaker Latin economies on our operational results in the quarter," Ms. Jung added.

"In addition, we are moving rapidly into the implementation phase of the business transformation initiatives we outlined for investors last May, and we expect to see benefits from the fourth quarter restructuring charge beginning next year. Cost savings should accelerate thereafter, as we transform our operating processes, reengineer our global supply chain, and streamline our organization structure," she said. Ms. Jung also indicated that additional restructuring charges are under consideration for 2002, related to Avon's transformation strategies.

"Business transformation, plus the underlying strength of our business fundamentals, should enable Avon to deliver double-digit growth in earnings per share and local currency sales next year, although we expect this very uncertain external environment to continue," she said. "This would be in line with our stated long-term financial targets, and would make 2002 our third consecutive year of solid earnings increases, after making substantial investments to drive top-line growth.

"Business transformation also gives us further confidence that we will achieve at least a 50 basis point improvement in operating margin in 2002, with the opportunity for significantly higher margin expansion beyond next year as we ramp up additional transformation initiatives. Moreover, the savings we expect to generate will enable us to invest further in consumer growth strategies in 2002, on top of the $130 million incremental investment over the past two years," Ms. Jung said.

Ms. Jung will discuss the outlook for the quarter and full year on a conference call today with investors at 10:00 a.m. (New York time). The call will be webcast live on the investor section of avon.com.

Avon is the world's leading direct seller of beauty and related products, with $5.7 billion in annual revenues. Avon markets to women in 139 countries through 3.4 million independent sales Representatives. Avon product lines include such recognizable brands as 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 award-winning web site http://www.avon.com/ .

Cautionary Statement under the Private Securities Litigation Reform Act of 1995

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 the potential impact of the September 11 attacks on consumer confidence; the Company's ability to implement its business strategy; 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 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 report for the year ended December 31, 2000, filed with the S.E.C. The Company undertakes no obligation to update any such forward-looking statements.

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SOURCE: Avon Products, Inc.

Contact: media, Victor Beaudet, +1-212-282-5344, or investors,
Carol Murray-Negron, or Renee Johansen, +1-212-282-5320, all of Avon Products,
Inc.

Website: http://www.avon.com/

Company News On-Call: http://www.prnewswire.com/gh/cnoc/comp/079575.html

 
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Joyelle Rowe
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Corporate Communications
+1(914) 935-1884
joyelle.rowe@avon.com

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