Avon Products Inc.'s (AVP) second-quarter profit plunged 65% as
restructuring costs, weak sales in North America and
foreign-exchange fluctuations all hit the direct seller of
cosmetics.
Chairman and Chief Executive Andrea Jung, noting that currency
changes had continued to "significantly pressure" profit, said Avon
is taking "aggressive steps" to help offset that impact. She
expects benefits to be evident in the second half of the year.
The beauty-products industry continues to take a hit as
consumers curb spending, despite signs that inventory reductions by
U.S. retailers are easing. Avon, giving details of a restructuring
plan announced in February, said last week it would realign its
global supply chain and streamline operations in key locations to
generate annual savings of $200 million.
Avon posted earnings of $82.9 million, or 19 cents a share, down
from $235.6 million, or 55 cents a share, a year earlier.
Restructuring costs reduced earnings by 19 cents, as announced last
week.
Net sales fell 9.8% to $2.45 billion, but rose 5% on a
local-currency basis.
The latest expectation of analysts polled by Thomson Reuters was
for earnings, excluding items, of 34 cents a share on revenue of
$2.43 billion.
Operating margins slumped to 7.4% from 13.4% amid the
restructuring and currency impacts.
North American revenue dropped 10%, or 8% in local currency, on
a 6% decline in sales volume. Sales were better in the rest of the
world, with Latin America reporting a 15% jump on a local-currency
basis as volume up 5%. China volume surged 32%.
Shares closed Wednesday at $29.74 and were inactive premarket.
The stock is up 24% this year.
-By Mike Barris, Dow Jones Newswires; 212-416-2330;
mike.barris@dowjones.com;