UPDATE 1-Avon slashes dividend as profit plunges

Nov 1 (Reuters) - Avon Products Inc slashed its dividend by nearly 74 percent on Thursday, while also announcing measures to cut costs by at least $400 million within three years and reporting a steep plunge in third-quarter earnings.

Avon reported a net profit of $31.6 million, or 7 cents per share, on revenue of $2.55 billion, compared with $164.2 million, or 38 cents per share, on revenue of $2.76 billion a year earlier.

The company said it had suffered because of higher product costs and unfavorable exchange rates.

Excluding items such as an impairment charge for its disappointing China results, Avon reported a profit of 17 cents a share, below the analysts' average estimate of 22 cents, according to Thomson Reuters I/B/E/S.

Avon Chief Executive Officer Sheri McCoy, who took the helm in April, called the results ``disappointing'' and said the company's focus was on ``stabilizing'' the business.

The company, known for brands like Skin-So-Soft and Avon Color, lowered its quarterly dividend to 6 cents per share from 23 cents to give itself more flexibility.

There were some bright spots. Companywide, Avon sold 1 percent more items, and the number of sales representatives fell 1 percent, a more modest drop than in recent quarters.

Excluding the impact of currency fluctuations, sales were higher in Brazil, Avon's top market, and the company signed more sales ``reps.''

But elsewhere, the company's deep problems continued. In North America, sales fell 8 percent, and in Russia, the company faced another reduction in the size of its sales force.