Avon Reports Q4 2009

Avon Products, Inc. reported that fourth-quarter 2009 total revenue of $3.2 billion was 13% higher than that of fourth-quarter 2008, or 8% higher on a local-currency basis. Beauty sales in the fourth-quarter 2009 grew 15% driven by gains in fragrance, color cosmetics, and personal care of 11%, 27%, and 19%, respectively. On a local-currency basis, beauty sales grew 9%, as fragrance, color cosmetics, and personal care sales grew 7%, 19%, and 13%, respectively. Units sold increased 4% in the quarter, and beauty units were up 5% versus a year ago. Full-year 2009 total revenue of $10.4 billion was 3% lower than that of 2008, but up 6% on a local-currency basis as foreign exchange pressured growth by 9 percentage points. Total beauty sales were down 3% but up 7% on a local-currency basis.

"We are very pleased with Avon's performance in the fourth quarter," said Andrea Jung, chairman and CEO, Avon. "Against the backdrop of the global economic crisis, our growth strategy to leverage our smart-value product offering and representative earnings opportunity paid off to deliver robust active representative growth and beauty market share gains in the quarter. We are especially pleased that revenue growth was broad-based across our geographic portfolio. Our Western Europe and Central and Eastern Europe regions, when combined, represent 30% of fourth-quarter revenue and together grew more than 15% (17% in local currency), while Latin America delivered another quarter of double-digit growth."

Fourth-quarter 2009 gross margin of 62.7% was 30 basis points higher than that of the prior-year quarter. Strong manufacturing productivity gains, which include benefits from the company's Strategic Sourcing Initiative and strategic price increases, helped offset an estimated 140 basis points of unfavorable transaction-exchange impact on the fourth-quarter 2009 gross margin.

 "As we reflect on 2009, we believe that the growing momentum and strong finish to a very challenging year underscore the benefits of our advantaged business model and our proven ability to execute our turnaround strategies," said Jung. "Given this momentum, we enter 2010 with renewed confidence and a continuing committed focus on delivering long-term sustainable, profitable growth. In line with this, in 2010 we expect to realize further benefits and savings from our Product Line Simplification, Strategic Sourcing and restructuring initiatives, which give additional flexibility to further fuel reinvestment in top-line growth and continued product innovation.

"Overall, despite continuing economic uncertainties around the world and currency devaluation in Venezuela, our strong business fundamentals and momentum should continue. This bodes well for another year of at least mid-single digit local-currency revenue growth and operating margin improving on the way to reaching mid-teens levels by 2013."

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