Avon Reaffirms Outlook for Second Quarter and Full Year
Sales Growth Accelerating
Jun 5, 2002
Particular Strength in U.S. and Europe
NEW YORK, June 5 /PRNewswire-FirstCall/ -- Avon Products, Inc. (NYSE: AVP) today reaffirmed earnings per share expectations for the second quarter and full-year 2002, citing accelerating sales growth as well as particular strength continuing in its U.S. and European operations.
The company said it remains comfortable with the consensus estimate for earnings per share of $.63 in the second quarter, versus $.57 per share it reported in the same period last year. For full-year 2002, Avon said it is on track to achieve its previously stated target of double-digit earnings growth, or $2.30 per share, on top of the $2.09 per share reported in 2001, before unusual items.
Avon said sales in the second quarter are expected to be up approximately 4%, representing a sequential increase from the 2% growth in the first quarter, despite a somewhat greater impact from foreign currency translation. Excluding currency exchange, sales should increase 10-11% in the second quarter, versus 8% growth in the first quarter.
Operating profit in the quarter is expected to advance mid single digits in dollars and double digits in local currencies.
Operating margin should increase further from last year's record second quarter level. Healthy operating margin gains in the U.S., Europe and Asia should offset a decline in Latin America. Latin America continues to be impacted by weak results in Argentina that are in line with the company's previous expectations. Avon said the impact of Argentina on the company's earnings in the quarter should be mitigated by gains from the translation of U.S. dollar denominated assets in Latin America.
Excluding results in Argentina, Avon said expected sales growth in the quarter would be a very strong 7-8% and operating profits would be up at a double-digit rate.
The U.S., Avon's largest market, continues to generate excellent results, with sales in the second quarter forecast to be up 6-7%, on top of 6% growth last year. The U.S. also is expected to post a record second quarter operating margin.
All international regions are expected to generate double-digit increases in local currency sales, driven by solid unit growth, demonstrating the underlying strength of Avon's global direct selling operations. Europe's results should be particularly robust again, on top of strong double-digit gains last year.
Commenting on the outlook, Andrea Jung, Avon's chairman and chief executive officer, said, "We are very pleased that the positive momentum in our global operations is continuing, and that we are on track to deliver our third consecutive year of double-digit earnings growth.
"The U.S. is building strength-on-strength and should have another excellent quarter, indicating that our strategies to enhance Avon's image and strengthen our direct selling channel are working," Ms. Jung said. "And our international operations -- particularly Europe -- should post impressive local currency results, despite economic challenges in some markets," she said.
"In addition, our Business Transformation initiatives are on track to help us achieve our goal of a 50 basis-point improvement in operating margin this year, followed by accelerating margin expansion of 100 basis points per year in 2003 and 2004," Ms. Jung said. "Moreover, Business Transformation is freeing up resources to be reinvested for future growth, including our recently announced plan to build a new state-of-the-art research and development facility," she said.
Avon is scheduled to report second quarter financial results on July 19. REGIONAL OUTLOOK FOR SECOND QUARTER
Sales in the U.S. in the second quarter are expected to increase 6-7%, on top of the 6% sales gain recorded in the second quarter of 2001. Sales are being driven by unit growth in the mid single-digits and a 2-3% increase in the number of active Representatives, on top of very strong 4% Representative growth last year. Operating profit in the U.S. is expected to grow at a low teens rate, and operating margin is forecast to expand in the range of 100 basis points to over 21.5% -- a record second quarter level.
In Europe, local currency sales are forecast to be up in the high teens, supported by an increase in units of over 20%. Operating profit in local currencies is expected to increase in the range of 20%. The positive performance in Europe is the result of continuing rapid growth in the markets of Central and Eastern Europe, particularly Russia where local currency sales and units are expected to nearly double versus prior year.
Avon said Latin America is forecast to increase local currency sales in the double digits, driven by mid single-digit unit growth. Most markets in the region are generating double-digit local currency sales gains, with particular strength in Brazil, and very solid growth in Mexico. In Argentina, local currency sales are expected to advance slightly, reflecting a double- digit increase in orders due to growth in active Representatives. Local currency operating profit in Latin America is expected to be up slightly, primarily reflecting a substantial decline in Argentina.
In Asia, local currency sales growth in the quarter should accelerate to a double-digit rate, versus 6% growth in the first quarter, supported by double- digit unit growth, with nearly all major markets contributing. The region's local currency operating profit is expected to be up in the low teens. Avon said that sales in China are expected to increase in the quarter by more than 35%, and that China's operating margin is now approaching 15%.
Avon is the world's leading direct seller of beauty and related products, with $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 such 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 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; 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, 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: Victor Beaudet, +1-212-282-5344, or Investors: Renee
Johansen, +1-212-282-5320, both of Avon Products, Inc.
Web site: http://www.avon.com/
Company News On-Call: http://www.prnewswire.com/comp/079575.html
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