Corporate Press Releases

Avon Reaffirms Third Quarter and Full-Year Earnings Outlook

Strong Sales Growth Continues

Dollar Sales Forecast to Increase in 12% Range; Local Currency Sales Expected to Be Up About 11%

U.S. Sales Forecast to Resume Solid Mid-Single-Digit Growth Rate

Sep 3, 2003

Avon Products, Inc. (NYSE: AVP) today reaffirmed its earnings outlook for the third quarter and full-year, and said that the company remains on track for its fourth consecutive year of meeting or exceeding its financial targets.

Avon said it expects earnings in the third quarter of 2003 to be in the range of $.53-$.54 per share, which is consistent with the guidance provided by the company on July 23. The expected earnings range for the quarter includes expenses of more than $6 million, or about one-and-a-half cents per share, relating to the redemption of a convertible bond issue in July.

In the third quarter of 2002, Avon reported earnings of $.38 per share, including a net charge of $36.3 million pretax ($25.2 million after-tax, or $.10 per share) relating to the company's Business Transformation initiatives.

For the full-year 2003, Avon said that earnings are continuing to track to the previously announced target of $2.60-$2.65 per share.

For the third quarter, the company said sales are expected to increase approximately 12%, with dollar-denominated sales growing at a slightly higher rate than local currency sales, which should be up about 11%. The overall sales growth is being driven by healthy gains in sales of beauty products, along with expected double-digit growth in the number of active Representatives and mid-single-digit growth in units, up from the 2% unit gain in the second quarter.

Operating profit in the third quarter is forecast to increase at a double- digit rate versus the prior-year quarter's operating profit, excluding the prior-year net charge. Operating margin in the current-year quarter is expected to be in line with the margin in the comparable period a year ago, again excluding the net charge, even after a substantial increase in strategic investments in support of consumer growth initiatives, including the launch of Mark, the company's new beauty brand for young women between the ages of 16-24. Avon said it expects that the third-quarter level of strategic investment as a percent of net sales will be the highest of any quarter this year.

Commenting on the outlook, Andrea Jung, Avon's chairman and chief executive officer, said, "We're very pleased with how the third quarter is shaping up, and we believe that this will be Avon's strongest quarter of sales growth since the fourth quarter of 1994. The U.S., our largest market, is returning to healthy mid-single-digit sales growth, and we're also benefiting from favorable currency tailwinds in key markets.

"Our third quarter expectations give us continuing confidence that our strategies to accelerate top-line growth and generate the expected benefits from Business Transformation are working," she added. "Assuming that foreign currencies remain at or near their current levels, we are confident that Avon will achieve its full-year earnings target of $2.60-$2.65 per share."

Avon said that in the U.S., sales in the third quarter should resume growing at a solid mid-single-digit growth rate. U.S. operating profit is projected to be about level with the prior-year period due mainly to the launch of Mark and higher year-over-year pension expense.

The company said that Europe continues to generate exceptional results, with third-quarter sales expected to be up in the range of 25% in dollars and in the mid-to-high teens in local currencies. Operating profit in the region is forecast to be up well over 50% in dollar terms, due largely to the accelerating impact of Business Transformation.

In Asia, sales and operating profit in both dollars and local currencies in the third quarter should be up in the mid-to-high single digits, driven by the continuing recovery in Japan and the return of the company's business in China to more normalized growth rates following the second-quarter impact of SARS.

The company said that third-quarter sales in Latin America are expected to increase in the low-to-mid teens in dollar terms and in the mid-teens in local currencies, with strength in major markets such as Mexico, Argentina, and Venezuela offsetting a slower-than-expected recovery in Brazil. Operating profit should be up in the double digits, making this the region's second consecutive quarter of double-digit growth in dollar-denominated operating profit.

Avon management will review its strategies and financial performance today at the Prudential Securities Back to School Conference at 9:45 a.m. New York time. The conference will be webcast live, and instructions for accessing the webcast can be found on the Avon Investor website, The company expects to report financial results for the third quarter on October 28, 2003.

Avon is the world's leading direct seller of beauty and related products, with $6.2 billion in annual revenues. Avon markets to women in 143 countries through 3.9 million independent sales Representatives. Avon product lines include such recognizable brands as Avon Color, Anew, Skin-So-Soft, Advance Techniques Hair Care, Mark, 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 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 factors, which may cause the actual results, levels of activity, performance or achievement 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 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 strategies and its Business Transformation initiatives, including the integration of similar activities across markets to achieve efficiencies; the Company's ability to achieve anticipated cost savings and its profitability and growth targets; the impact of substantial currency fluctuations in the Company's principal foreign markets and the success of the Company's foreign currency hedging and risk management strategies; the impact of possible pension funding obligations and increased pension expense on the Company's cash flow and results of operations; the effect of legal, regulatory and tax proceedings, as well as restrictions imposed on the Company, its operations or its Representatives by foreign governments; the Company's ability to successfully identify new business opportunities; the Company's access to financing; and the Company's ability to attract and retain key executives. Additional information identifying such factors is contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2002, filed with the SEC. The Company undertakes no obligation to update any such forward- looking statements.

                            September 3, 2003

  (in millions)

                                    Three Months Ended September 30, 2002

                                     Total        Operating     Operating
                                    Revenue        Profit        Margin

   As Reported                     $1,463.4        $154.7         10.6%

   Special Charge                        --          43.6          3.0%

   Reversal of 2001 Charge               --          (7.3)        -0.5%

   Adjusted                        $1,463.4        $191.0         13.1%

   This supplemental schedule provides adjusted non-GAAP financial
   information and a quantitative reconciliation of the differences between
   the non-GAAP financial measures with the financial measures calculated
   and presented in accordance with GAAP.

   This information is provided to assist in investors' understanding of the
   Company's results of operations.  Results are adjusted to exclude a
   special charge of $43.6 million recorded in the third quarter of 2002,
   primarily for severance costs related to the Company's Business
   Transformation initiatives. Also excluded is a benefit of $7.3 million,
   primarily related to severance costs, from an adjustment to the special
   charge for Business Transformation initiatives recorded in the fourth
   quarter of 2001. These items are unusual in nature and materially impact
   the comparability of the Company's results of operations.  The adjusted
   information is intended to be more indicative of the ongoing operations
   of Avon's core direct selling business.

SOURCE: Avon Products, Inc.

CONTACT: Media - Victor Beaudet, +1-212-282-5344, or Investors - Renee
Johansen or Rob Foresti, +1-212-282-5320, all of Avon Products, Inc.

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