Tags: AVP | Avon | stocks | investing | cosmetics

Avon Charges Ahead in International Markets

Monday, 23 May 2011 02:27 PM

When the Avon lady comes knocking at the door, she'd better speak good Portuguese. Or Spanish. Or even Russian. Cosmetics giant Avon Products (AVP) is increasing its revenue these days, with sales outside of the United States really driving business.

The company reports first quarter 2011 total revenue of $2.6 billion, 7 percent higher than that of first-quarter 2010 and in line with company targets. Net income jumped 238 percent to $143.6 million, thanks to stronger sales and restructuring.

"We are pleased with the early progress against our commitment to return the business to mid-single digit revenue growth," says Avon's Chairman and Chief Executive Officer Andrea Jung in an earnings statement. "We are squarely focused on restoring growth in Brazil and Russia in the second half, and ensuring execution in gross margin improvement and cost control."

Revenue in Latin America, which includes Mexico, was up 16 percent during the quarter while North American revenue was down 2 percent.

Central and Eastern European sales were flat although Russia was up 3 percent, while Western Europe, Middle East & Africa's first-quarter revenue increased 16 percent and Asia Pacific, which includes China, reported a first quarter revenue decline of 6 percent.

Analysts are pleased with the company's results, but some wonder if the company can keep the momentum going. Zacks Investment Research has assigned a short-term hold rating, although the long-term recommendation is currently underperform.

Restructure, then compete

Avon is currently in the middle of a multi-year restructuring program designed to accelerate investments toward growth opportunities, streamline manufacturing operations, and improve cost effectiveness and efficiency in general. Restructuring should save the company $430 million a year when fully implemented by 2012.

After that, keep an eye on the competitors. “Avon faces competition from various products and product lines both domestically and internationally," Zacks says.

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When the Avon lady comes knocking at the door, she'd better speak good Portuguese. Or Spanish. Or even Russian. Cosmetics giant Avon Products (AVP) is increasing its revenue these days, with sales outside of the United States really driving business. The company reports...
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2011-27-23
 

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