Avon’s Third Quarter Sales Jump 3%

Avon Products, Inc. announced ongoing strength in sales, operating margin and earnings in the third quarter of 2002, driven by the continuing resurgence of its U.S. business and strong local currency results in all international regions, according to executives.

Earnings in the quarter increased 9% in the third quarter of 2001 before unusual items in both periods. Avon said the earnings upside was due to higher-than-expected gains from foreign currency contracts in the quarter. The company’s full-year earnings outlook remains unchanged, due to the expected impact of less-favorable currency exchange rates in the fourth quarter.

Sales in the third quarter rose 3% to $1.45 billion, versus $1.41 billion in the year-ago period. Sales growth, excluding the impact of foreign currency translation, accelerated to 11% on top of the very strong 12% local currency increase in last year’s third quarter. Local currency sales were driven by unit growth of 13% and a 10% increase in active representatives in the quarter. All geographic regions contributed to the gains in units and representatives. Before unusual items in both periods, operating profit in the quarter increased 7% in dollars and 21% in local currencies, with all geographic regions posting double-digit local currency gains.

Commenting on the results, Andrea Jung, Avon’s chairman and chief executive officer, said, “We are very pleased with the company’s accelerating growth in local currency sales in the quarter, especially against the backdrop of ongoing currency weakness in Latin America and the difficult comparisons against very strong results in last year’s third quarter. We are also pleased with the pace of beauty sales, which grew 5% in the quarter, as we continue to focus on product innovation and consumer image initiatives.”

“The U.S. business had another outstanding quarter, with sales up 6% on top of a 7% increase last year, while operating profit climbed 17% and operating margin grew 150 basis points to a record third-quarter level. The U.S. continues to build strength-on-strength, demonstrating that our strategies are working and that we can produce solid sustainable growth in our largest and most competitive market,” Ms. Jung added.

In addition, executives said profit gains of more than 20% in Europe and Asia in the quarter more than offset a decline in Latin America, where local currency results were robust but currency translation significantly reduced dollar-denominated profits.

For the first nine months of 2002, net income rose 13% to $366.8 million and sales increased 3% to $4.33 billion, from $4.22 billion in the first nine months of 2001.