Avon’s Fourth Quarter Sales Up 6%, Driven By U.S. and Europe

Avon Products, Inc., New York, NY, reported record sales for the fourth quarter and full-year 2001, and earnings per share that were in line with expectations, despite economic challenges and difficult comparisons against strong 2000 results, according to executives.

Earnings per share, before a special charge ($97.4 million pretax), rose 10% in the fourth quarter. Sales increased 6% to $1.74 billion, up from $1.65 billion a year before. This includes the impact of foreign currency translation. Including the charge, net income was $110.3 million.

“We are very pleased with Avon’s performance, especially against the backdrop of weak consumer spending in the U.S. and difficult economic conditions in parts of Latin America,” commented Andrea Jung, chairman and chief executive officer.

Ms. Jung also indicated this was the eighth consecutive quarter in which Avon met or exceeded expectations. “Avon’s 2001 performance, on top of a very strong 2000, is demonstrating the resiliency and power of our direct-selling business model, even in uncertain times,” she said. “And our ability to produce strong cash flow was clearly evident, with a record $755 million of cash from operations generated for the year,” Ms. Jung noted.

The U.S. delivered outstanding performance in the quarter, with a 10% sales gain. This was the highest fourth quarter growth rate in the U.S. in over a decade, according to executives. International operations, led by Europe, also posted solid results

For the full year, Avon reported earnings per share were up 11% from 2000. Sales rose 5% to $5.95 billion with the impact of foreign currency translation. There was also a10% increase in active representatives. Including unusual items, net income for the year was $430 million.

“We are looking for high single-digit earnings growth in the first half, with double-digit growth in the second half. We feel we can successfully manage currency translation risk in Argentina and we are assuming that a reasonable level of economic activity is restored there during the year,” Ms. Jung predicted.

“We expect the benefits of business transformation as well as expense reductions to help drive an operating margin improvement of at least 50 basis points in 2002 and significantly more in 2003,” Ms. Jung added.