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Avon Products, Inc. reported fourth quarter 2008 total revenue of $2.8 billion, 9% lower than 2007's fourth quarter. Total revenue grew 8% (5% in local currency), to a record $10.7 billion. Fourth-quarter operating profit was $372 million, up 66%, from $225 million in the prior-year quarter, and full-year 2008 operating profit was $1.3 billion, up 53% from 2007's level. The company's fourth-quarter operating margin rose to 13.3%, 600 basis points above 7.3% in the year-ago quarter. Full-year 2008 operating margin was 12.5%, 370 basis points above 2007's 8.8%.
Active representatives grew 4% and 7% year over year in the fourth quarter and full year 2008, respectively. Beauty sales in the fourth quarter 2008 were 7% lower versus the prior-year period as the impact of foreign exchange more than offset a local-currency increase of 4%—which was driven by growth in all categories, particularly fragrance and skin care. For the full year, beauty sales rose 10%.
"After nine months of strong sales performance, the significant negative impact of foreign exchange and the depressed economy hurt our fourth-quarter revenue performance," said Andrea Jung, chairman and CEO, Avon. "It is prudent to assume these pressures will continue for the foreseeable future, and we therefore anticipate that 2009 will be a challenging year. While we cannot control movements in foreign currency, our focus, as always, will be on building and managing our business for the long term, and continuously driving our costs lower as part of our constant turnaround mentality.
"In terms of our cost structure, we intend to take significant additional steps to transform our value chain, as well as to aggressively reduce non-strategic spending in the current year. Our success with cost transformation as part of our turnaround has proven our ability to move swiftly and boldly to address key opportunities. We are fortunate to be facing these challenging times from a position of financial strength."
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