Corporate Press Releases

Avon Expects Record Fourth Quarter Earnings Of $1.03-$1.04 Per Share, Up Nearly 30%

Sales Forecast to Grow 13% in Dollars; Beauty Sales to be up 16%

Operating Profit Expected to Increase Over 20%

Dec 8, 2003

Avon Products, Inc. (NYSE: AVP) today raised guidance for the fourth quarter and full-year 2003 and confirmed its preliminary outlook for 2004.

The company said that it now expects earnings in the quarter to be $1.03- $1.04 per share, with the upside driven by a gain of approximately $.05 per share from a tax settlement which the company expects to finalize later this month. In the fourth quarter of 2002, Avon reported earnings of $.80 per share.

Dollar-denominated sales are forecast to grow 13%, which would be the largest sales increase since 1994. Excluding the impact of foreign exchange, sales should be up in the high single digits.

The sales gain is being driven by a 16% increase in the sale of beauty products and growth in active Representatives of about 9%. Units should increase 3-4% versus the record 16% unit growth in last year's fourth quarter.

Avon said operating profit in the quarter should advance by more than 20%.

Gross margin should expand approximately 150 basis points, and operating margin should expand approximately 130 basis points.

The company said that all international regions should finish the year with strong performances in the quarter, in line with its previous expectations. Sales and operating profit in Europe are forecast to increase at least 25% and 40%, respectively. In Latin America, sales should grow in the mid-teens, and operating profit should be up approximately 20%. Asia is on track to generate a mid-teen sales increase and an operating profit advance of more than 20%.

In the U.S., sales are forecast to be up in the low-to-mid single digits, somewhat lower than earlier projections due to unfilled demand for certain holiday non-beauty products and weaker promotions on existing fragrance brands. U.S. beauty sales should increase 4%, on top of a 14% gain in last year's fourth quarter. The number of active Representatives should be up 3%. As expected, Mark, the company's new brand for young women, is forecast to contribute 1% to overall U.S. sales growth in the quarter. U.S. operating profit is forecast to be down slightly due to a greater than anticipated product mix shift that is negatively impacting gross margin and distribution expense.

For the full year, Avon said it now expects earnings in the range of $2.72 per share, compared with full-year 2002 earnings per share of $2.22, which included a net charge of $36.3 million pretax ($25.2 million after tax, or $.10 per share) related to the company's Business Transformation initiatives.

Avon also said that cash flow from operations in 2003 continues to be strong, and that the company is on track to achieve its full-year target of operating cash flow in the range of $650 million.

Commenting on the fourth quarter, the full-year and 2004, Andrea Jung, Avon's chairman and chief executive officer, said, "We're expecting Avon to achieve record sales and earnings in the fourth quarter, and we're pleased that 2003 will be Avon's fourth consecutive year of outstanding performance.

"Looking to 2004, we have a strong platform for continuing growth," she added. "Our international operations should continue to post strong double- digit local currency sales gains, and we expect that the U.S. will resume healthy sales growth in the mid-single digits, with stronger growth in the first half as it moves beyond the short-term challenges experienced this year.

"Overall, we estimate local currency sales growth in the range of 10% next year, with a negative currency impact of 3-4% versus the neutral impact we've experienced in 2003," Ms. Jung said. "Earnings in 2004 are projected to increase 10-12% on the base of our newly revised full-year 2003 earnings expectation.

"We also expect that our Business Transformation initiatives will gain further traction in 2004 throughout our global operations. We anticipate exceeding our 2004 goal of a 100 basis-point improvement in operating margin, and continue to target operating margin in the range of 16.5%, after approximately 80 basis points of incremental strategic investments," Ms. Jung noted.

Avon is scheduled to report financial results for the fourth quarter and full-year 2003 on February 3, 2004.

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 brand names 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 on the results of the Company's foreign operations and the cost of sourcing foreign products, 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.

SOURCE: Avon Products, Inc.

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

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