Avon Products Inc.'s (AVP) third-quarter earnings rose 7% on
prior-year charges as the beauty-products company reported stronger
sales and margins.
However, Chairman and Chief Executive Andrea Jung said
lower-than-expected revenue in the latest quarter "added further
pressure to operating margin."
The personal-care sector has seen a number of deals recently,
with the U.K.'s Daily Mail newspaper earlier this month reporting
talk that Avon may become a takeover target.
Avon, which has seen sales improve this year, has been making
some acquisitions of its own to complement its core direct
beauty-sales business, such as its March purchase of U.K.
skincare-product maker Liz Earle Beauty and its planned acquisition
of Silpada Designs, a closely held direct seller of sterling-silver
jewelry.
Avon reported a profit of $166.7 million, or 38 cents a share,
up from $156.2 million, or 36 cents a share, a year earlier.
Excluding Venezuela impacts and restructuring costs, earnings fell
to 41 cents from 42 cents.
Revenue increased 4% to $2.7 billion with about half the amount
from acquisitions, and was up 6% excluding currency
fluctuations.
Analysts polled by Thomson Reuters most recently forecast
earnings of 47 cents on revenue of $2.69 billion.
Gross margin rose to 64.4% from 62.7%. But that was offset by
advertising expenses jumping 36%, driven by increases in Brazil,
Russia and the U.S.
Volume grew 1%, including 8% in the North America and 6% in
Latin America, its largest market.
In China, where sales have been slumping in recent quarters,
volume dropped 28%. Avon has identified China as its priority
growth market and has been transitioning to a direct-selling model
there from a hybrid model that also includes retail.
At Avon's beauty-sales business, by far its largest segment,
global revenue improved 3%, and rose 5% on a constant-currency
basis.
Shares closed Wednesday at $32.86 and were inactive
premarket.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481;
Tess.Stynes@dowjones.com