Beauty and related products maker Avon Products, Inc. (AVP) reported Thursday a rise in fourth-quarter profit, helped by a 13% growth in revenues. Revenues were up 8% on a local currency basis. Looking ahead, the company sees at least mid-single digit local-currency revenue growth and improved operating margin in 2010.
For the fourth quarter, net income attributable to the company increased to $269.4 million or $0.62 per share from $232.4 million or $0.54 per share in the previous year. On average, 15 analysts polled by Thomson Reuters expected the company to earn $0.68 per share for the quarter. Analysts' estimates typically exclude special items.
New York-based company noted that results for the quarter included costs associated with its 2005 and 2009 restructuring programs totaling $34 million pretax or $0.06 per share. Prior-year period included costs of $7 million or $0.01 per share related to the company's 2005 restructuring program.
For the third quarter, net income attributable to the Avon was $156.2 million or $0.36 per share, compared to $222.6 million or $0.52 per share in the year-ago quarter.
Total revenues for the fourth quarter grew 13% to $3.18 billion from $2.81 billion in the same quarter last year and increased 8% on local currency basis. Twelve analysts estimated revenues of $3.16 billion for the quarter.
According to the company, Active Representatives grew 11% with growth in all regions. Beauty sales for the quarter increased 15%, helped by gains in fragrance, color cosmetics, and personal care of 11%, 27%, and 19%, respectively. On a local-currency basis, Beauty sales grew 9%.
Region-wise, revenue grew 29% in Latin America and was up 14% on a local-currency basis. The company noted that the region's Active Representatives grew 10% and units sold increased by 3%. In North America, revenues for the quarter declined 7% and was down 9% on a local-currency basis. Active Representatives increased 3% from the year-ago quarter and units sold were 7% lower from the prior year.
In Central and Eastern Europe, fourth-quarter revenue increased 12% and was up 20% on a local-currency basis. Active Representatives grew 15% and units sold increased 11% during the quarter. In Western Europe, Middle East & Africa, revenue improved 20% and grew 12% in local currency. The region's Active Representatives grew 17% and units sold increased 19%.
In Asia Pacific, fourth-quarter revenue grew 13% and was up 4% in local currency. Active Representatives grew 4% and units sold increased 7% from the preceding year. Fourth-quarter revenues in China declined 8% and had no impact from foreign exchange. Active Representatives rose 31%.
Andrea Jung, chairman and chief executive officer said, "Against the backdrop of the global economic crisis, our growth strategy to leverage our smart-value product offering and Representative earnings opportunity paid off to deliver robust Active Representative growth and beauty market share gains in the quarter."
For the immediately preceding third quarter, total revenue edged down 4% to $2.55 billion from $2.64 billion last year, but rose 7% on a local-currency basis, as foreign exchange pressured growth by 11 percentage points.
Gross margin for the fourth quarter improved 30 basis points to 62.7% from the preceding year.
Operating profit for the quarter increased 10% to $408.4 million from $372.1 million in the comparable quarter a year ago. Operating margin was 12.8%, compared with 13.3% in the same quarter last year.
For the full year, net income attributable to the company declined to $625.8 million or $1.45 per share from $875.3 million or $2.03 per share in the previous year. Annual revenues decreased 3% to $10.38 billion from $10.69 billion a year ago.
"Overall, despite continuing economic uncertainties around the world and currency devaluation in Venezuela, our strong business fundamentals and momentum should continue. This bodes well for another year of at least mid-single digit local-currency revenue growth and operating margin improving on the way to reaching mid-teens levels by 2013," added Jung.
Avon reaffirmed that its 2005 and 2009 restructuring programs, as well as its Product Line Simplification Program or PLS and Strategic Sourcing Initiative or SSI are on track and expects to achieve $350 million and $75 million respectively in annual savings in fiscal 2010, from initiatives associated with the restructuring programs. In addition, beginning in 2010, the company expects to achieve annual benefits in excess of $200 million from its PLS program and in excess of $250 million from SSI.
Among others in the industry, Estee Lauder Companies Inc. (EL), last week, reported second-quarter net earnings of $256.2 million as compared with $158 million in the prior-year period. On a per share basis, earnings increased 59.8% to $1.28 from $0.80 in the year-earlier period. Net sales for the period was up 10.8% at $2.26 billion from $2.04 billion in the second quarter of fiscal 2009.
AVP is currently trading at $31.17, down $1.43 or 4.36% on a volume of 1.81 million shares on the NYSE. For the past 52 weeks, the shares have been trading in a range of $14.40-$36.39.
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