After a tough end to 2010, Avon Products Inc. regained its footing in the first quarter with profits increasing more than threefold.
For the three months ended March 31, net income attributable to Avon was $143.6 million, or 33 cents a diluted share, compared with $42.5 million, or 10 cents a share, in the prior-year period. Adjusted profits of 37 cents a share topped Wall Street estimates by 6 cents.
Total revenue gained 7.5 percent to $2.63 billion, from $2.45 billion a year earlier, boosted by a weak dollar and acquisitions. Revenue in constant dollars increased 4 percent, while total units dipped 1 percent. The number of active representatives declined 1 percent. Gross margin rose 210 basis points to 63.9 percent of sales.
Avon’s pricing mix rose 5 percent, which includes sales of premium-priced products and price increases taken during the quarter.
In fact, price increases helped improve operating profit in certain regions, namely Central and Eastern Europe, where it was up 12 percent, and Western Europe, the Middle East and Africa, up 54 percent.
Beauty sales in the quarter gained 8 percent with gains across all categories: fragrance rose 10 percent; color cosmetics, 6 percent; skin care, 7 percent, and personal care, 8 percent.
The company also outlined plans to reignite sales in Russia and Brazil, two of its key growth markets.
“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,” said Andrea Jung, Avon’s chairman and chief executive officer.
Revenue in Latin America grew 11 percent in constant dollars, while Brazil gained 2 percent. In Central and Eastern Europe, revenue declined 1 percent in constant dollars, with Russia up 1 percent. The North American market remained challenged, with revenue down 2 percent. Revenue in Asia Pacific declined 12 percent, as Avon suffered lower sales as it transitioned to a pure direct selling model in China.
In February — shortly after the company reported that poor performances in Russia and Brazil dragged down fourth-quarter profits — Avon made sweeping changes to its management structure. The firm reorganized its six commercial business units into two major business groups: the Developed Market Group and the Developing Market Group.
Stifel Nicolaus analyst Mark Astrachan wrote in a research note Tuesday, “Overall, while Avon remains a show-me story, we believe the better than anticipated first-quarter result will be favorably received by investors as a step in the right direction, particularly given negative sentiment. Additionally, while there remains work left to do — for example, stem continued sales declines in China and North America — we believe the quarterly result indicates bearish investor expectations regarding share losses for the direct selling industry are unfounded in the near term. As a result, we continue to anticipate an acceleration in sales growth through 2011, led by improving performances in Brazil and Russia.”
During the quarter, Avon continued to shift spending away from advertising and toward its Representative Value Position initiatives. As part of this “rebalancing,” advertising was $82 million for the quarter, down 15 percent from a year ago, particularly as it has halted advertising in China until the direct selling model is fully up and running. Avon invested an incremental $30 million in RVP, or initiatives designed to make selling more streamlined for representatives.
Shares finished the day at $30.91, up $1.34, or 4.5 percent.
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye