Avon sales suffer from a slump in US sales and a stronger dollar

By Katie Bird

- Last updated on GMT

Related tags: Currency effects, United states dollar

Weak domestic sales and a stronger US dollar have dragged down Avon’s first quarter results.

Overall sales were down 13 percent on last year’s figures but excluding currency effects sales rose 3 percent.

International sales make up over three quarters of the company’s total sales and company CEO Andrea Jung referenced steps that had been taken to minimise negative effects of currency.

“We are taking aggressive action to lessen the foreign-exchange impact throughout our value chain, the benefits of which should be stronger in the second half of 2009,”​ she said.

Sales drop, despite currency translation

However, even discounting currency effects the results from Europe, Middle East and Africa were weak with sales dropping 2 percent on the same period last year (decline of 23 percent including currency effects).

Furthermore, the company’s domestic sales suffered a decline of 11 percent, leading to a 65 percent decrease in operating profit.

Avon puts the weak US performance down to a disproportionate drop in the home care category of 24 percent.

In contrast, the Latin American and Chinese markets performed well for the company, with sales in local currency up 14 and 4 percent respectively, although in the former a stronger US dollar pulled overall figures down.

Lower restructuring costs offset ad expense

Weak sales figures in comparison to last year contributed to a drop of 36 percent in net income, exacerbated by increased advertising and promotional costs, although costs from the ongoing restructuring plans were down on last year.

Commenting on the results Jung said she sees the current economic climate as an opportunity.

“We intend to leverage our unique brand and direct-selling channel advantages in order to gain market share,”​ she said.

“We are offering consumers an increased assortment of ‘smart value’ products …we are also aggressively promoting our Representative earnings opportunity to a wider audience.”

Related topics: Business & Financial

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