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Avon Reports Financials for Q3 2010

Posted: October 28, 2010

Avon Products, Inc. reported third-quarter 2010 total revenue of $2.7 billion, 4% higher than that of third-quarter 2009. Constant dollar sales rose 6% as foreign exchange reduced growth by 2 percentage points. Acquisitions contributed 2% to revenue growth in the quarter. Beauty sales in the third quarter of 2010 were up 3% versus the prior-year period, and increased 5% on a constant dollar basis. Active representatives grew 4%, and total units and Beauty units both rose 1%, and total price/mix rose 5%.

Andrea Jung, chairman and CEO, remarked, "Third-quarter revenues were softer than we had expected, however we maintained our commitment to strategic growth investments. The third quarter was always planned to be a heavy investment quarter, although the lower-than-expected revenues added further pressure to operating margin. We continue to expect sales growth for the full year of at least mid-single digits in constant dollars, but now expect operating margin to be roughly flat. Importantly, we remain committed to our long-term strategic growth plan as well as the achievement of our corporate objectives, which include at least mid-single digit constant dollar revenue growth and mid-teens operating margin by 2013."

Avon's Beauty sales growth of 3% included gains in fragrance of 8% and personal care of 5%, with color cosmetics flat and a 3% decline in skin care. Constant dollar growth of 5% in Beauty was driven by 12% growth in fragrances, 7% growth in personal care, and 2% growth in color cosmetics. These were partially offset by a 2% decline in skin care due to geographic mix and softness in our mid-tier Solutions brand.

Regional Results

Latin America's third-quarter 2010 revenue was up 8% year over year, or up 13% in constant dollars. On a reported basis, Brazil was up 14%, Mexico was up 18%, and Venezuela was down 24%. Constant dollar revenue growth was driven by growth of 7% in Brazil, 14% in Mexico and 52% in Venezuela. The region's Active Representatives grew 8% and units sold were up 6%.

Third-quarter revenue in North America declined 2%, or 3% in constant dollars. Silpada had a favorable impact on third-quarter revenue of 7 percentage points, which includes two months of operations. Active Representatives were down 6% largely due to fewer additions. Units sold declined 8% compared with a year ago. Silpada added 1 percentage point to both Active Representatives and unit growth in the quarter.