Avon doubles operating profit in Q2

By Guy Montague-Jones

- Last updated on GMT

High sales in emerging markets and restructuring efforts bore fruit for Avon in the second quarter as operating profit doubled.

The direct selling firm reported a 17 percent increase in turnover for the three months ending June, 30 taking net sales to $2.7bn.

This increase was inflated by the weakness of the dollar against other major currencies, especially the Euro. In local currency terms, sales increased 9 percent over the quarter.

Overcoming rising input costs

Meanwhile operating profits outstripped this top line growth, rising 100 percent on last year despite the negative impact on costs of rising oil prices.

"Like our peers, we are experiencing input cost pressure in the current business environment,"​ said Avon CEO Andrea Jung.

Avon more than offset these higher input costs because of lower restructuring costs, the impact of cost saving initiatives, higher prices and revenue growth.

Best results since 2005

Jung hailed the results as the best the company has published since launching its turnaround plan in 2005.

"We achieved these results on the strength of our well-balanced geographic portfolio and the momentum of our turnaround plan," ​said Jung.

When fully implemented in 2011-2012, all the cost saving initiatives from the turnaround plan that have pulled margins down in the past few years are expected to produce annual savings of around $430m.

Regional performance

Looking at the Avon results on a regional basis Latin America and Eastern Europe were the star performers with sales rising 27 percent and 30 percent respectively.

However, North American sales continued to be sluggish in comparison to international markets. The region reported only a 2 percent growth for the second quarter.

Overall sales during the quarter benefited from a 10 percent increase in advertising spend. This expenditure supported the launch of several new color cosmetic products and helped sales in the category rise 26 percent.

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