Avon Second-Quater 2011 9% Up

NEW YORK, July 28, 2011 /PRNewswire via COMTEX/ — Avon Products, Inc. (NYSE: AVP) today reported second-quarter 2011 total revenue of $2.9 billion, 9% higher than that of second-quarter 2010. Constant-dollar sales rose 2% in the second quarter as foreign exchange contributed 7% to growth. Total units declined 3% while price/mix rose 5% during the quarter. Active Representatives were flat in the quarter. The acquisition of Silpada Designs, Inc. (Silpada) contributed 150 basis points to revenue.

• Second-Quarter Revenue Up 9% Year over Year (Up 2% in Constant Dollars)
  
• Active Representatives Flat and Units Down 3%
• Beauty Sales Up 8% (Up 1% in Constant Dollars)
• Second-Quarter EPS from Continuing Ops of $0.47 versus $0.38 in the Prior Year
• Adjusted(1) EPS from Continuing Ops of $0.49 versus $0.47 in the Prior Year

Our first-half 2011 results were in line with our expectations of low-single digit constant-dollar growth and adjusted operating margins flat with a year ago, said Andrea Jung, Avon's Chairman and Chief Executive Officer. We continue to expect mid-single digit revenue growth in the second half of this year, driven by our major global field activation program around our 125th anniversary. We also continue to expect significant margin expansion in the second half, resulting from gross margin improvement and revenue leverage.

Avon's Beauty sales increased 8% year over year, or up 1% in constant dollars, in the second quarter. On a reported basis, fragrance and personal care grew 11%, color grew 8%, and skincare grew 3%. On a constant-dollar basis, fragrance and personal care grew 4%, color was flat, and skincare declined 4%.

Second-quarter 2011 gross margin of 64.4% was 100 basis points above that of the prior-year quarter. On an adjusted basis, it declined by 30 basis points as the negative impact of rising product costs was partially offset by pricing benefits and favorable foreign currency.

Selling, general and administrative expense in the quarter was flat as a percent of revenue versus second-quarter 2010 on a reported and adjusted basis as the company effectively managed overhead costs and rebalanced spending between Representative Value Proposition (RVP) and advertising.

As planned, lower advertising was offset by a higher investment in RVP during the second quarter of 2011. Within this rebalancing, advertising was $82 million for the quarter, down 16% or $15 million from a year ago. Avon invested an incremental $22 million in RVP in the second quarter of 2011 in Sales Leadership and higher incentives.

Second-quarter 2011 costs associated with the company's 2005 and 2009 restructuring programs were $12 million pre-tax, or $0.02 per share after-tax, compared with $10 million pre-tax, or $0.02 per share after-tax in the prior-year period.

Second-quarter 2011 operating profit of $317 million was up 19% compared with the year-ago quarter, and operating margin was 11.1%, up 100 basis points year over year. Adjusted operating profit was up 6%, and adjusted operating margin was 11.5%, down 30 basis points from a year ago due to the lower gross margin.

Second-quarter 2011's effective tax rate was 28.9%, compared with 33.8% in the year-ago quarter. Excluding the impact from restructuring costs, the second-quarter 2011 rate was 29.1%. Excluding the impact of Venezuelan special items and restructuring costs, the second-quarter 2010 tax rate was 29.9%.

Income from continuing operations in the second quarter of 2011 was $209 million, or $0.47 per diluted share, compared with $165 million, or $0.38 per diluted share, in the year-ago quarter. Adjusted income from continuing operations was $217 million, or $0.49 per diluted share, compared with $205 million, or $0.47 per diluted share, in the year-ago second quarter.

Net cash provided by operating activities was $88 million for the six months ended June 30, 2011, compared with $232 million in the same period of 2010. Higher net income was more than offset by higher inventory levels, a $75 million contribution to the U.S. pension plan, and a $36 million payment associated with the long-term incentive compensation plan. At quarter end, Avon's net debt was $2.2 billion, up $257 million from the year-end level.

Source: AVON Com