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U.S. Outlook For Avon is Weak

November 22, 2005

Executives at Avon Products, Inc. said they expect a 5% drop in U.S. sales for the fourth quarter of 2004. In 2005, U.S. sales are expected to decline slightly, with U.S. sales and profit growth to resume in 2006. The company blamed restrained consumer spending. In addition, growth in active U.S. representatives is expected to fall slightly compared to last year’s fourth quarter.
However, the company was optimistic about its overall per-share profit, with an expected rise of at least 10% a year from 2005-2007. Avon plans to phase out certain categories from its lineup, including toys, but will introduce other items, such as plus-size intimate apparel. Avon will also promote “beauty on a budget”—items that cost less than $10 to entice shoppers.
The company forecast local currency sales to rise 10% a year from 2005-2007 due to expansion abroad.

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