Avon reaffirms 2003 outlook

Avon Products, a world leader in direct selling of beauty and related products, today said it expects sales and earnings per share in the second quarter and full-year 2003 to increase in line with preliminary estimates provided on April 25. Avon also said that if foreign exchange rates remain at or near their current levels, full-year earnings could exceed its stated target of $2.55 per share.

The company said it expects earnings in the second quarter to increase at a mid-single-digit rate over last year's second quarter earnings of $0.64 per share. The company said earnings in the prior-year period included unusually high gains from currency hedging strategies that will not repeat in this year's second quarter.

The company also added that sales growth in the second quarter should be in line with the first quarter, when sales were up 7 per cent in dollars and 12 per cent in local currencies versus prior year results. Operating profit in the quarter is expected to increase approximately 15 per cent.

Avon attributed overall sales growth to being driven by sales of beauty products, which are expected to increase 11-13 per cent, including a double-digit increase in the US. It feels it is also a reflection of its successful new product launches and continuing commitment to invest significant resources to support its brand-building strategies. Also driving sales is an expected double-digit increase in the number of active representatives in the quarter.

Commenting on the outlook, Andrea Jung, Avon's chairman and chief executive officer, said: "The underlying health of Avon's business has never been stronger. That, combined with strengthening local currencies in some of our key markets, gives us confidence that 2003 will be another excellent year for the company​".

Jung explained that Europe continues to generate exceptional results, with second-quarter sales expected to be up over 30 per cent in dollars and over 20 per cent in local currencies, and dollar operating profits are forecast to increase in the 40 per cent range. Latin America should post a low-single-digit increase in dollar sales and a 15-20 per cent increase in local currencies, while dollar operating profits should grow double-digits. "Latin America's dollar-denominated sales and profit growth this quarter should be the strongest since 2001,"​ added Jung.

"In Asia, sales in dollars and local currencies should be up in the low- to mid-single digits in the quarter, and dollar operating profits should grow at a higher rate than sales, driven by a continuing rebound in Japan and despite the anticipated impact of SARS in China and Taiwan,"​ Jung continued.

In the US sales are forecast to be up in the range of 3 per cent, as previously expected. Sales growth there is said to be driven by beauty products, which are tracking up 10 per cent, and representative growth, expected to be up a healthy 3 per cent. "Operating profit should be flat in the US, reflecting significantly higher strategic investments in the quarter versus last year, including beauty advertising and support for the launch this summer of our new Mark brand for young women,"​ said Jung.

Commenting on the full-year 2003 outlook, Jung stated that the company was: "very pleased with where we stand at this point in the year and we look for another year of double-digit growth in local-currency sales as well as earnings per share. We are comfortable that we can at least achieve our earnings target of $2.55 per share and we are encouraged by the improving foreign currency picture, which could result in some upside for earnings if currencies remain at or near their present levels for the rest of the year."​