Avon sales climb as strong Latin America sales counteract a weak US market

By Simon Pitman

- Last updated on GMT

Related tags: Percent increase, United states

Avon has reported strong sales growth and a big jump in profits as the Latin American markets power on, with particularly strong growth in Mexico and Venezuela.

Sales for the first quarter grew by 7 percent to reach $2.6bn, which represented a constant dollar increase of 4 percent when taking in to account the positive impact of foreign currencies against a weak US currency.

The company said the sales figure was achieved despite the fact that unit sales fell by 1 percent, a figure that was counterbalanced by the fact that the price/mix ratio added 5 percent on to the sales.

Net income for the period increased by 238 percent to $143.6m, a figure that was boosted by the higher sales revenues, lower taxes and lower restructuring chagres.

Operating margin sees big leap

CEO Andrea Jung said the sales growth had met targets earlier than expected and also stressed the fact that the operating margin expansion had increased by 50 – 70 basis points during the period.

“We are squarely focused on restoring growth in Brazil and Russia in the second half, and ensuring execution in gross margin improvement and cost control,”​ said Jung.

The results were highlighted by an 8 percent growing in beauty sales, which translated into a 10 percent growth for fragrances, a 7 percent increase for skin care, 6 percent increase for color cosmetics and an 8 percent rise in personal care.

Latin America powers ahead

On a regional basis sales increased in Latin America by 16 percent to $1.13bn, making it more than double the size of the next biggest market, North America.

The results there showed that sales in the all-important Brazil market rose by 11 percent, while in Mexico sales were up 23 percent and in Venezuela sales grew by 34 percent.

In the US there was a far different story, with sales falling 2 percent to $512.3m, despite the fact that the acquisition of the Silpada business added about 8 percent to the revenue total. The fact that unit sales slipped by a total of 14 percent highlighted the company's problems in this market.

Central and Eastern Europe market flat

In Central & Eastern Europe, first quarter sales were flat at $411.6m, reflected what the company termed ‘continued macroeconomic pressures in the region’, combined with a fall in the number of sales representatives.

In Western Europe, Middle East and Africa, sales grew by 16 percent to $346.3m, reflecting a big increase in the number of sales representatives there, together with the acquisition of UK cosmetics business Liz Earle Beauty.

In the Asia Pacific region sales declined by 6 percent to $227.3m, a figure that reflects the fact that sales in China fell by 35 percent due to the fact that the company is switching from a hybrid business model to purely direct sales.

Related topics: Business & Financial

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