Avon Products Inc. experienced a strong first-quarter performance in Latin America, which offset a sales decline in North America — and propelled double-digit gains in overall sales and profits, the direct selling giant reported Tuesday.
Profits were up 23.1 percent during the quarter ended March 31 to $184.7 million, from $150 million in the year-ago period, on total revenues that rose 14.2 percent to $2.5 billion from $2.19 billion a year ago.
Earnings per diluted share were 43 cents, up 26 percent, from 34 cents a share a year ago, just short of Wall Street analysts' expectations of 44 cents for the current quarter.
Sales in Latin America, the firm's biggest global market, jumped 32 percent to $864.3 million. In North America, however, sales were down by 6 percent to $593.6 million. In China — a smaller market overall for Avon — there was also considerable growth of 29 percent in the quarter, to $87.8 million.
"We're off to a good start to the year," Andrea Jung, chairman and chief executive officer of Avon, told analysts during a conference call Tuesday morning. "Beauty growth is on track."
Sales of beauty products, including cosmetics, fragrances, skin care items and toiletries, were up by 17 percent to $1.78 billion. Individually, fragrance sales were up 20 percent, thanks to celebrity and designer lines, according to Jung. And color cosmetics were up by 15 percent — as was personal care — while skin care sales increased by 13 percent.
The firm's Beauty Plus and Beyond Beauty businesses, which include jewelry, watches, apparel, accessories, home products and gift and decorative items, generated some $698.1 million in quarterly revenues.
Jung said she believes Avon is well balanced geographically and is confident that the firm's multiyear restructuring strategy can yield margins of about 14 percent, a level last seen in 2005.
Avon expects annualized savings of about $430 million once its restructuring strategy, a plan started in 2005 and expected to run through 2011 or 2012, is fully implemented — and savings are projected to reach $270 million this year, on $469 million in plan costs recorded through the first quarter.
First-quarter operating profit came in at $296 million, a 24.4 percent rise from $238 million in the prior year. Operating margin was 11.8 percent compared with 10.9 percent in the prior-year quarter. First-quarter operating profits included costs associated with the company's restructuring program of $26 million, the firm noted."I believe our successful [first quarter] performance [was] the result of our combined strength against each of these four dimensions: geographic leverage, active representative growth, beauty gains and margin improvement," Jung told analysts, noting that overall active representative growth came in at 14 percent. Jung also pointed to "exceptional" sales in Brazil, where revenues leapt by 60 percent.
In Central and Eastern Europe, sales were up by 17 percent to $421.6 million; in Western Europe, the Middle East and Africa, sales also rose by 17 percent to $317 million, and in Asia-Pacific, sales were up 9 percent to $217.4 million.
In North America, however, where sales slid, Jung pointed to one bright spot — a 2 percent increase in active representatives. Also, investment in its representative program "helped to mitigate the impact of a 30 percent year-over-year rise in gas prices," said Jung.
"Even during this challenging cycle in North America we continue to strategically invest in this business so that we are well positioned with the macroenvironment shift. We sustained advertising investment in the brand during this quarter and also continue to invest in a full range of [representative] initiatives."
The firm's quarterly advertising expenditure came in at $82 million, a 14 percent increase from the same period a year ago.
"Looking ahead to the second quarter, we expect the degree of decline in overall revenues for [North America] will be less than in the first quarter," Jung added. "Most importantly, we believe that the strong momentum we're seeing in developing and emerging markets will continue to more than offset weakness in North America and drive another year of sustainable growth on the top line for the total company."
— Matthew W. Evans
Inter Parfums, Gap Expand Deal
Inter Parfums Inc. has expanded its relationship with Gap Inc. beyond North America. The two firms have signed a four-year licensing agreement for international distribution of personal care products in Gap and Banana Republic stores, and specialty and department stores outside the U.S., including duty free stores.
Jean Madar, chairman and chief executive officer of Inter Parfums, stated, "We agree with our business partners at Gap Inc. that expanding the distribution of Gap and Banana Republic personal care products beyond North America and outside Gap and Banana Republic stores makes good business sense. We test marketed certain products at select European retailers and the results to date have been extremely encouraging."Inter Parfums has developed an assortment of fragrance, home fragrance, bath and body, and grooming products under both the Gap and Banana Republics license.
From overseeing America’s fastest-growing speciality retailers to codifying cool, WWD talked to the women who are leading the way for the future of beauty. Check out our Instagram Stories to see how these women built today and are creating tomorrow. (📸: @hannah_khymych) #wwdbeauty
For @laperlalingerie's spring 2018 show, the brand chose to host their event at @thevenetianmacao. With Chinese megastars @bingbing_fan and @hubing in attendance, La Perla debuted a rock ‘n’ roll-inspired collection. The show marked the start of Sands Macao Fashion Week, which runs from October 19 to 24 — the city’s first such event. Pictured here are models backstage with glimmering eyes. #wwdfashion (📷: Cheuk-Yin To)
Trending for spring 2018: top stitch design. Gone are the days of stitch just for seams — designers are using the once-minimal detail to create strong decorative elements. (📷: Paola Testa; Styled by @andrew_shang) #wwdfashion
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)