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Avon Reports $2.8 Billion in Q3 2011 Revenue Despite Challenges

Posted: October 27, 2011

Avon Products, Inc. reported third-quarter 2011 total revenue of $2.8 billion, 6% higher than that of third-quarter 2010. Constant-dollar sales rose 1% in the third quarter as foreign exchange contributed 5% to growth. Total units declined 5%, while price/mix rose 6% during the quarter, and active representatives were flat in the quarter.

"The results of the quarter reflect a challenging Enterprise Resource Planning (ERP) implementation in Brazil, which caused greater disruptions than we anticipated,"  said Andrea Jung, Avon's chairman and CEO. "This significantly impacted our top and bottom line results. In addition, consumer uncertainty amidst a volatile macroeconomic environment across several of our markets further pressured revenue growth. Given the current operating environment, the company no longer expects to achieve the stated targets of mid-single digit revenue growth and 50 to 70 basis points of operating margin improvement in 2011. In light of the changing landscape, we are assessing our long-range business plan and are targeting an operational and financial update at an investor meeting in the first quarter of 2012."

Avon's beauty sales increased 8% year over year, with gains in all categories; fragrance, color, personal care and skin care grew 12%, 9%, 6%, and 2%, respectively. Constant-dollar growth of 3% in beauty was driven by gains of 9% in fragrance, 4% in color, and 2% in personal care. Skin care was down 3% in constant dollars in the quarter.

Latin America's third-quarter 2011 revenue was up 11% year over year, or up 6% in constant dollars, as the region's results were pressured by disruptions in Brazil associated with the ERP implementation. Brazil was up 5%, or down 3% in constant dollars. Strong growth continued in other large markets within Latin America. Mexico was up 17%, or 12% in constant dollars, driven by balanced growth in active representatives and average order. Venezuela was up 22% on both a reported and constant-dollar basis. The region's active representatives grew 3% and units sold were down 4%.

Third-quarter revenue in North America was down 7% year over year, or down 8% in constant dollars. As the company exited the quarter, the region started to see positive average order growth from recent product portfolio enhancements of giftables and smart value offerings. Silpada Designs, Inc. favorably impacted revenue by 3 points due to the inclusion of one additional month in the quarter versus last year. Active representatives were down 9% and units sold declined 8% compared with a year ago.