Argentina’s Woes Won’t Hurt Avon

Despite an estimated 5 cent per share hit from Argentina’s currency devaluation and economic crisis, global cosmetics retailer Avon Products reaffirmed Tuesday that it expects to achieve double-digit earnings growth in fiscal 2002.

Avon said its expects the impact to be offset by continued strength in currencies in other markets and savings from its business restructuring.

“Overall, we feel good about the state of our business, and assuming that significant currency weakness does not spread to other Latin markets, we continue to target double-digit earnings growth in 2002,” said chairman and CEO Andrea Jung in a company statement.

Even if the Argentine peso devalues to 2 to the dollar, Ms. Jung said, it appears other Latin currencies will be stronger in 2002 than the rates Avon has already assumed in its business plan. Ms. Jung added that Argentina represents about 5% of Avon sales and the company calculates that U.S. sales grew 10% in the fourth quarter of 2001.

Avon has also factored in benefits from “aggressive” expense-saving measures, said Ms. Jung, adding the company will record a charge in the fourth quarter primarily for severance costs and facilities consolidation.

Analysts surveyed by Thomson Financial/First Call are forecasting 2002 earnings of $2.31, on average, an 11% increase over 2001 estimates of $2.09 per share.