DOW JONES NEWSWIRES
Avon Products Inc.'s (AVP) fourth-quarter net income rose 80%
amid year-earlier restructuring charges as revenue fell on the
stronger dollar and weaker volume.
Chairman and Chief Executive Andrea Jung said "it is prudent" to
assume that negative foreign-exchange and economic pressures will
continue "for the foreseeable future," leading Avon to expect that
2009 will be a "challenging year."
The largest direct seller of cosmetics has been restructuring
its operations since late 2005, cutting overhead and boosting
compensation for sellers. But it may not be able to keep pace with
consumers who are cutting back on mascara and face creams amid job
losses and gloomy economic news.
Higher-end beauty companies Estee Lauder Cos. (EL) and Elizabeth
Arden Inc. (RDEN) recently set low expectations for their
fourth-quarter results, which they will report Thursday. While
Avon's direct-selling model may give it an advantage, the company
has been raising prices at a time when buyers are looking to
save.
Meanwhile, Avon reported net income of $232.4 million, or 54
cents a share, up from $128.9 million or 30cents a share, a year
earlier. Restructuring costs were 1 cent and 34 cents,
respectively.
Net sales fell 8.8% to $2.78 billion as units sold declined
3%.
Analysts polled by Thomson Reuters expected per-share earnings
of 59 cents on revenue of $2.86 billion.
Operating margin rose to 13.3% from 7.3% on fluctuations in
foreign-exchange rates as well as a stronger product mix and price
hikes.
Beauty sales fell 7%, as the foreign-exchange impact offset
growth in all categories, particularly fragrance and skin care.
North American earnings fell 14% as revenue dropped 11% and
volume declined 6%. The company has been trying to boost overseas
sales to offset weakening domestic results, though that may be hard
to do as economic crisis continues to wallop all corners of the
Earth.
Shares closed at $19.34 Monday and there was no premarket
trading. The stock has lost half its value in the past four
months.
-By Melissa Korn and Mike Barris, Dow Jones Newswires;
201-938-5400; melissa.korn@dowjones.com
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