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Avon sales up but results dragged down by strong US dollar

By Katie Bird , 29-Oct-2009
Last updated the 29-Oct-2009 at 18:18 GMT

A strong US dollar offset the effect of sales increases for direct seller Avon leaving the profits down significantly on last year’s figures.

Sales in local currencies were up 7 percent for the cosmetics and beauty direct seller, but an 11 percent negative currency effect led to total revenue for the third quarter of $2.5bn, down 4 percent on last year.

Net income came in at $1.56bn, in comparison to $2.23bn for the same period last year, a drop of 30 percent. Although, this is partly due to lower sales, it was also exacerbated by high costs from the company’s ongoing restructuring plan.

Latin America, which is the largest market for the US-based company, brought in the best results out of all the company’s regions, with revenues increasing 5 percent to reach $1.11bn.

Two other winners in local currencies were Central and Eastern Europe and the company’s Western Europe region that covers Middle East and Africa, where revenues increased 7 percent (not accounting for currency effects) to reach $314.1m and $298.2m respectively.

China’s boutiques struggle

Asia Pacific recorded a 2 percent increase in local currencies to each $222.6m, but giant in the region China was far from positive.

Sales in China amounted to $67.3m, which is 11 percent less than the same period last year in local currencies. This, the company said, is due to the company's struggling Beauty Boutiques retail arm where sales dropped 40 percent.

The hybrid model of boutiques and direct selling was implemented only in China and it seems the direct selling model will win out in the region.

North America suffered a drop of 8 percent in sales, which the company put down to a double digit decline in the non beauty categories fashion and home, as well as lower consumer spending.

Commenting on the results CEO Andrea Jung said the company was pleased with the results considering the current economic environment.

“Our broad-based strength is proof that our strategies to focus on representative recruiting and Avon’s ‘smart value’ products are working,” she added.

It was the company’s color cosmetics products that pulled in the best results for this quarter, with sales growing 17 percent in local currencies worldwide, and 4 percent in US dollars.

Color cosmetics was the only one out of the four beauty segments (fragrance, skin care and personal care) to grow sales in US dollars.

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