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Avon's Retail Brand Launch Will No Longer Include Sears

Significant Shift in Sears' Business Strategy Cited

PRNewswire
Jul 10, 2001

                         Avon to Receive Payment;
           No Change to Company's Aggregate 2001-02 EPS Outlook

NEW YORK, July 10 /PRNewswire/ -- Avon Products, Inc. (NYSE: AVP) and Sears, Roebuck and Co. (NYSE: S) jointly announced today that, due to a significant shift in Sears' business strategy that will include de-emphasizing cosmetics, Avon will not proceed with the launch of its new retail brand, beComing, in 125 Sears stores this fall.

Avon and Sears have reached a mutually satisfactory agreement, under which Sears will compensate Avon for Sears' shift in strategy. Terms of the agreement were not disclosed; however, Avon said it is receiving a payment today and it anticipates no change in the outlook for its aggregate earnings for 2001-2002 as a result of the cancelled launch with Sears.

Avon previously announced plans to launch beComing in approximately 200 J.C. Penney and Sears stores in the U.S. in September, utilizing an innovative "store-within-a-store" concept, called Avon Centers, that will focus on women's lifestyle needs.

Avon's launch in 75 Penney's stores is proceeding as planned and it is exploring adding other retail partners to the beComing venture in the U.S. and internationally.

Sears very recently notified Avon that its re-evaluation of its business strategy includes plans to de-emphasize cosmetics. While Sears will continue to offer selected fragrances, bath and body products, gift sets and candles, this represents a significant strategic shift, since cosmetics was an area Sears intended to expand when the two companies agreed to join forces on the beComing launch a year ago.

"Avon has developed a very exciting new concept for cosmetics marketing," commented Alan J. Lacy, chairman and chief executive officer of Sears. "However, Sears now sees a diminished role for cosmetics in the future positioning of its full-line stores. We fully understand that this is inconsistent with Avon's desired position for its new brand and agree that it is no longer appropriate to move forward together on this initiative."

Andrea Jung, Avon's chief executive officer, said, "We are disappointed that Sears has made a change in its approach at this late stage and won't be part of the beComing venture. At the same time, we appreciate the fact that they informed us of their intentions before any Avon Centers had been installed or any product had been shipped to Sears stores."

"We have always viewed retail as a long-term strategy for Avon," Ms. Jung said. "We are as committed as ever to our retail initiative, which has the potential to reach millions of new consumers who do not shop through our primary direct selling channel. We are very excited about our partnership with J.C. Penney and we're right on schedule for the launch of beComing in Penney stores in the weeks ahead," she said.

Ms. Jung also indicated that Avon's second quarter and full year financial results are on track, as expected. "Our core direct selling business is the strongest it's been in years. We're continuing to see momentum building and we anticipate further acceleration of sales growth in the second half of the year, to a solid double-digit growth rate in local currencies. Sales are benefiting from robust beauty growth and the highly successful launch of our new Health and Well Being business in 15 countries this year," she said.

Ms. Jung will host a conference call for investors and analysts today at 9:00 am New York time to provide an update on Avon's retail initiative. The call will be webcast live on the Investor section of Avon's website, http://www.avon.com/. The company is scheduled to release second quarter financial results on Thursday, July 19.

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, Avon Color, Skin-So-Soft and Advance Techniques Hair Care. Avon also markets an extensive line of fashion jewelry, apparel, gifts and collectibles. More information about Avon and its products can be found on the company's award-winning website http://www.avon.com/.

Sears, Roebuck and Co. is a leading U.S. retailer of apparel, home and automotive products and services, with annual revenue of more than $40 billion. The company serves families throughout the country through approximately 860 department stores, more than 2,100 specialized retail locations, and a variety of online offerings accessible through the company's Web site, http://www.sears.com/.

Avon's 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; 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. and Sears, Roebuck and Co.

Contact: Media - Brian T. Martin of Avon Products, Inc., 212-282-5103;
or Janice R. Drummond of Sears, Roebuck and Co., 847-286-8316; Investor -
Carol Murray-Negron and Renee Johansen, 212-282-5320, both of Avon Products,
Inc.; or Richard Westenberger of Sears, Roebuck and Co., 847-286-1468

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

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

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

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