Avon Products, Inc. reported first quarter 2011 total revenue of $2.6 billion, 7% higher than that of first-quarter 2010, with constant dollar sales rising 4% as foreign exchange contributed 3% to growth. However, total units declined 1%, while price/mix rose 5% during the quarter, and the company’s active representatives declined 1%, while acquisitions contributed approximately 2% to the quarter’s revenue growth.
”We are pleased with the early progress against our commitment to return the business to mid-single digit revenue growth and deliver 50–70 basis points of operating margin expansion in 2011,” said Andrea Jung, Avon’s chairman and CEO. “We are squarely focused on restoring growth in Brazil and Russia in the second half, and ensuring execution in gross margin improvement and cost control."
Avon’s beauty sales increased 8% year over year, with gains in all categories during the first quarter of 2011: 10% growth in fragrance, 6% in color, 7% in skin care and 8% in personal care. Constant dollar growth of 4% was driven by gains of 6% in fragrance, 2% in color, 4% in skin care and 5% in personal care.
By region, Avon saw its first quarter 2011 revenue in Latin America grow 16% year over year, or up 11% in constant dollars, with strong growth in most large markets. Brazil was up 11%, or 2% in constant dollars, as progress made in service recovery throughout the quarter was not yet reflected in top-line results. Mexico was up 23%, or 16% in constant dollars, primarily driven by growth in active representatives, and Venezuela was up 39% on both a reported and constant-dollar basis. That country’s active representatives grew 4% and units sold were up 6%.
In North America, the quarter’s revenue was down 2% in both reported and constant dollars. The acquisition of Silpada Designs, Inc. had a favorable impact on first quarter revenue of approximately 8 percentage points, contributing 2 percentage points to active representatives and 1 percentage point to unit growth during the quarter. Overall, however, active representatives were down 6%, and units sold declined 14% compared with a year ago.
For Central and Eastern Europe, revenue was flat year over year, or down 1% in constant dollars, reflecting continued macroeconomic pressures in this region and a decline in active representatives. Russia was up 3% on a reported basis and up 1% in constant dollars, but the country’s active representatives were down 4% and units sold were down 1%.
Western Europe, the Middle East and Africa’s first quarter revenue increased 16% versus the prior year, or up 15% in constant dollars, driven by an increase in active representatives. Also, the acquisition of Liz Earle Beauty Co. Limited had a favorable impact on first quarter revenue of approximately 4 percentage points. On a reported basis, U.K. revenue was flat, Turkey rose 14% and South Africa rose 63%. In constant dollars, revenue growth was down 1% in the U.K., up 18% in Turkey and up 49% in South Africa. The region’s active representatives grew 10% year over year and units sold increased 7%.
Finally, Asia-Pacific, which now includes business in China, reported a first quarter revenue decline of 6% year over year, or 12% in constant dollars. Revenues in the Philippines rose 7%, or 2% in constant dollars while China declined 32%, or 35% in constant dollars, reflecting the continued transition away from a hybrid model to one focused on direct selling. The region’s active representatives declined 14% and units sold decreased by 11%, primarily reflecting double-digit declines in both indicators in China.