Avon Expects Record Fourth Quarter Earnings Of $1.03-$1.04 Per Share, Up Nearly 30%
December 08 2003 - 7:41AM
PR Newswire (US)
Avon Expects Record Fourth Quarter Earnings Of $1.03-$1.04 Per
Share, Up Nearly 30% Sales Forecast to Grow 13% in Dollars; Beauty
Sales to be up 16% NEW YORK, Dec. 8 /PRNewswire-FirstCall/ -- Avon
Products, Inc. today raised guidance for the fourth quarter and
full-year 2003 and confirmed its preliminary outlook for 2004. The
company said that it now expects earnings in the quarter to be
$1.03- $1.04 per share, with the upside driven by a gain of
approximately $.05 per share from a tax settlement which the
company expects to finalize later this month. In the fourth quarter
of 2002, Avon reported earnings of $.80 per share.
Dollar-denominated sales are forecast to grow 13%, which would be
the largest sales increase since 1994. Excluding the impact of
foreign exchange, sales should be up in the high single digits. The
sales gain is being driven by a 16% increase in the sale of beauty
products and growth in active Representatives of about 9%. Units
should increase 3-4% versus the record 16% unit growth in last
year's fourth quarter. Avon said operating profit in the quarter
should advance by more than 20%. Gross margin should expand
approximately 150 basis points, and operating margin should expand
approximately 130 basis points. The company said that all
international regions should finish the year with strong
performances in the quarter, in line with its previous
expectations. Sales and operating profit in Europe are forecast to
increase at least 25% and 40%, respectively. In Latin America,
sales should grow in the mid-teens, and operating profit should be
up approximately 20%. Asia is on track to generate a mid-teen sales
increase and an operating profit advance of more than 20%. In the
U.S., sales are forecast to be up in the low-to-mid single digits,
somewhat lower than earlier projections due to unfilled demand for
certain holiday non-beauty products and weaker promotions on
existing fragrance brands. U.S. beauty sales should increase 4%, on
top of a 14% gain in last year's fourth quarter. The number of
active Representatives should be up 3%. As expected, Mark, the
company's new brand for young women, is forecast to contribute 1%
to overall U.S. sales growth in the quarter. U.S. operating profit
is forecast to be down slightly due to a greater than anticipated
product mix shift that is negatively impacting gross margin and
distribution expense. For the full year, Avon said it now expects
earnings in the range of $2.72 per share, compared with full-year
2002 earnings per share of $2.22, which included a net charge of
$36.3 million pretax ($25.2 million after tax, or $.10 per share)
related to the company's Business Transformation initiatives. Avon
also said that cash flow from operations in 2003 continues to be
strong, and that the company is on track to achieve its full-year
target of operating cash flow in the range of $650 million.
Commenting on the fourth quarter, the full-year and 2004, Andrea
Jung, Avon's chairman and chief executive officer, said, "We're
expecting Avon to achieve record sales and earnings in the fourth
quarter, and we're pleased that 2003 will be Avon's fourth
consecutive year of outstanding performance. "Looking to 2004, we
have a strong platform for continuing growth," she added. "Our
international operations should continue to post strong double-
digit local currency sales gains, and we expect that the U.S. will
resume healthy sales growth in the mid-single digits, with stronger
growth in the first half as it moves beyond the short-term
challenges experienced this year. "Overall, we estimate local
currency sales growth in the range of 10% next year, with a
negative currency impact of 3-4% versus the neutral impact we've
experienced in 2003," Ms. Jung said. "Earnings in 2004 are
projected to increase 10-12% on the base of our newly revised
full-year 2003 earnings expectation. "We also expect that our
Business Transformation initiatives will gain further traction in
2004 throughout our global operations. We anticipate exceeding our
2004 goal of a 100 basis-point improvement in operating margin, and
continue to target operating margin in the range of 16.5%, after
approximately 80 basis points of incremental strategic
investments," Ms. Jung noted. Avon is scheduled to report financial
results for the fourth quarter and full-year 2003 on February 3,
2004. Avon is the world's leading direct seller of beauty and
related products, with $6.2 billion in annual revenues. Avon
markets to women in 143 countries through 3.9 million independent
sales Representatives. Avon product lines include such recognizable
brand names as Avon Color, Anew, Skin-So-Soft, Advance Techniques
Hair Care, Mark, beComing and Avon Wellness. Avon also markets an
extensive line of fashion jewelry and apparel. More information
about Avon and its products can be found on the company's web site
http://www.avon.com/. Cautionary Statement under the Private
Securities Litigation Reform Act of 1995: Statements in this
release, which are not historical facts or information, are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements are based on management's reasonable current assumptions
and expectations. Such forward- looking statements involve risks,
uncertainties and other factors, which may cause the actual
results, levels of activity, performance or achievement of the
Company to be materially different from any future results
expressed or implied by such forward-looking statements, and there
can be no assurance that actual results will not differ materially
from management's expectations. Such factors include, among others,
the following: general economic and business conditions in the
Company's markets, including economic and political uncertainties
in Latin America; the Company's ability to implement its business
strategies and its Business Transformation initiatives, including
the integration of similar activities across markets to achieve
efficiencies; the Company's ability to achieve anticipated cost
savings and its profitability and growth targets; the impact of
substantial currency fluctuations on the results of the Company's
foreign operations and the cost of sourcing foreign products, and
the success of the Company's foreign currency hedging and risk
management strategies; the impact of possible pension funding
obligations and increased pension expense on the Company's cash
flow and results of operations; the effect of legal, regulatory and
tax proceedings, as well as restrictions imposed on the Company,
its operations or its Representatives by foreign governments; the
Company's ability to successfully identify new business
opportunities; the Company's access to financing; and the Company's
ability to attract and retain key executives. Additional
information identifying such factors is contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 2002,
filed with the SEC. The Company undertakes no obligation to update
any such forward-looking statements. DATASOURCE: Avon Products,
Inc. CONTACT: Media: Victor Beaudet, +1-212-282-5344, Investors:
Renee Johansen, or Rob Foresti, both at +1-212-282-5320, all of
Avon Products Web site: http://www.avon.com/ Company News On-Call:
http://www.prnewswire.com/comp/079575.html
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