Avon Profit Nearly Triples as Turnaround Efforts Gain Traction

AP Avon profit nearly triples as turnaround efforts gain traction.

Avon Products

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[AVP  Loading...      ()   ] said first-quarter profit nearly tripled, as the direct seller of beauty products shows results from its turnaround efforts.

Its shares rose 3% in premarket trading.

Avon said Tuesday that it earned $150 million, or 34 cents a share, in the three months ended March 31, up from $56.2 million, or 12 cents a share, in the year-ago period.

Revenue rose 9% to $2.19 billion from $2.0 billion in the year-ago period. Analysts surveyed by Thomson Financial expected revenue of $2.13 billion.

"We are pleased with the strength and geographic balance of our first-quarter performance," Andrea Jung, chairman and CEO, said in a statement. "While still in the midst of our multi-year turnaround, we are making good progress against all points of our plan."

Avon shares rose $1.19 to $40.99 in premarket trading - above its 52-week intraday high of $42.39.

Jung announced in November 2005 a multiyear restructuring plan after the company's global sales sagged. The plan involved steep job cuts, the elimination of management layers to better react to market trends, and the realignment of manufacturing centers and outsourcing work to countries where labor costs are cheaper.

In the first quarter, the number of active representatives rose 4%, and the number of products sold increased 4% compared with the year-ago quarter.

Sales of beauty products recorded a third-consecutive quarter of double-digit growth, increasing 10% led by personal care, which was up 17%.

Avon said it increased advertising by 80% to $71 million in the quarter to fund the launch of "Hello Tomorrow," its first global brand campaign, as well as new product introductions such as Anew Alternative Intensive Eye Cream and Avon Color Ultra Color Rich Lipstick.

"We continue to significantly elevate our investment levels against both our brand and our channel," said Jung in a statement, "and we are seeing strong paybacks as a result. Fueling these investments are savings from the many restructuring initiatives that we have undertaken and that continue to be an ongoing part of our turnaround program."

In the North America region, first-quarter revenue rose 3% from the prior-year period, with growth in all markets. In Latin America, first-quarter revenue grew 7%. Western Europe, the Middle East and Africa again had solid revenue growth, which was up 17%, due to continued strength in Turkey, where revenue increased more than 30%, and the U.K., where revenue increased in the high teens.

In Central and Eastern Europe, revenue rose 17%, helped by continued strong growth in fragrances and color cosmetics, and by Russia, where revenue expanded over 30%.

Asia-Pacific revenue increased 5% led by high-teens revenue growth in the Philippines. Revenue in Japan was approximately unchanged from the prior year.

Meanwhile, revenue in China grew 44%, reflecting further expansion of thecompany's direct-selling business, which contributed over one half of the region's revenues in the quarter.