NEW YORK — Avon Products Inc. has turned a corner.
The direct seller of beauty products ended the first year of its multiyear restructuring effort on solid ground, delivering a 9 percent increase in revenue in its fourth quarter.
"We feel very good about the progress we've made and the actions we'll take in 2007 and beyond to continue to aggressively transform the cost base of this company," chairman and chief executive officer Andrea Jung said during a conference call Tuesday. "We think the turnaround plan is the right one, and that we're taking the right actions."
A hefty increase in advertising spending fueled revenue growth of 9 percent in the quarter ended Dec. 31, to $2.62 billion from $2.4 billion in the year-ago period. Net income remained flat at $184.1 million, or 41 cents a diluted share, from $183.2 million, or 40 cents a share. Operating profit dipped 5 percent, to $282.4 million from $297.4 million, hampered by about $44 million in net costs tied to the restructuring program.
For the year, net income slid 44 percent, to $477.6 million, or $1.06 a diluted share, from $847.6 million, or $1.81 a share, on revenue that gained 8 percent, to $8.76 billion from $8.15 billion in the year-ago period.
Avon ramped up its advertising spending during the quarter by 95 percent, to $89 million, which fueled beauty sales by 11 percent. Highlights in the category included the Derek Jeter Driven fragrance, which contributed $10 million in sales during the quarter, according to Avon.
Last year, Avon increased its advertising spending by 83 percent over the prior year, to $249 million, outpacing original plans to increase levels by 50 percent.
Credit Suisse analyst Filippe Goossens noted, anecdotally, that during a recent visit to Argentina, he saw Avon ads at bus stops in markets outside Buenos Aires, indicating stepped-up efforts to expand the business. "Avon will have to keep advertising at the levels we're seeing right now because it's in a very competitive environment," said Goossens, adding that innovation, execution of the restructuring program and accelerated ad spending would remain critical for Avon.
Throughout 2006, Avon announced a string of restructuring initiatives, including "delayering" top management ranks, reducing stockkeeping units through the Product Line Simplification program and streamlining the U.S. distribution network.Jung said these actions resulted in slightly more than $100 million in benefits last year, the bulk of them associated with the delayering program that the company completed midyear.
For the year, restructuring costs totaled $229 million, compared with $56 million in 2005.
Avon continues to project the overall effort will cost approximately $500 million, but will produce annual savings of more than $300 million by 2009.
By region, North American fourth-quarter revenue gained 4 percent, to $749.9 million. Beauty growth of 2 percent was positive for the first time in eight quarters, and the number of active sales representatives rose 1 percent, the first increase in nine quarters.
Revenue in Latin America increased 13 percent, to $770.2 million, bolstered by Brazil, which ended 2006 with more than $1 billion in revenue, making it Avon's second-largest market behind North America. Revenue in Western Europe, the Middle East and Africa increased 10 percent, to $355.9 million, and in central and Eastern Europe gained 17 percent, to $456.6 million, fueled by double-digit growth in fragrance and cosmetics. Asia Pacific revenue decreased 2 percent, to $222.8 million, dragged down by Japan's 13 percent decline. Revenue in China surged 28 percent, to $67.2 million, as Avon continued to expand its direct-selling business there. At yearend, China had more than 350,000 licensed sales promoters registered with the government. In the quarter, unit sales increased 23 percent and China reduced its operating loss to $2.9 million from $7 million in the year-ago period. Avon relaunched its direct-selling effort in China in March and was followed by competitors Mary Kay and Nu Skin.
"Our position is, we have a really good start," said Jung. "We have not seen any impact from new entries….It's a cumbersome market and it takes a lot of time."
The company said it would describe upcoming product innovations at an investor meeting scheduled for Feb. 15, but Jung noted that a major relaunch of color cosmetics was slated for the second quarter. L'Artisan Parfumeur Unveils Skin Care NEW YORK — Organic skin care is in for L'Artisan Parfumeur.
The Parisian fragrance marketer has entered the skin care category with Jatamansi, a three-item range named for the Himalayan nar plant, an extract of which is used as a key ingredient in the treatment line.The Jatamansi line, which has been launched in France and the U.K., will be rolled out to the U.S. starting next month. There are also plans to launch an eau de toilette based on the collection in the summer. A 250-ml. Jatamansi eau de toilette spray will be priced at $140.
The skin care formulations have been certified as organic by France's Eco Cert, an inspection and certification body that requires a minimum of 95 percent of ingredients to be obtained "by transformation processes that respect the environment."
Also, at least 95 percent of plant ingredients found in the Jatamansi treatment items are said to be organically grown and they make up nearly 30 percent of the finished product — two more Eco Cert criteria — according to François Duquesne, president of L'Artisan Parfumeur U.S.
"We're jumping into a totally different category," Duquesne said of the skin care venture. "It's a holistic approach," he said of the line, which is positioned as an aromatherapeutic, moisturizing assortment focused on skin renewal.
"When you have a network of 30 stores worldwide, you have a critical mass that allows you to offer the customer a larger assortment," Duquesne said. The Jatamansi trio includes a 200-ml. body cream, $125; a 250-ml. body oil, $95, and a 250-ml. body milk, $75. The nar plant, which grows at an altitude of about 10,000 feet, is prized for what are thought to be healing and relaxing properties. The Jatamansi products also employ extracts of rose and jojoba.
Sales of the line in the U.S. could range from $250,000 to $500,000 in the first year, according to industry sources.
Jatamansi will first reach L'Artisan's five stores in the U.S., including four in New York, in March. Plans call for the skin care line to subsequently be rolled out to L'Artisan's wholesale distribution network, which includes about 100 doors, such as Barneys New York, Bergdorf Goodman, Neiman Marcus and Fred Segal. Duquesne said he can envision eventually as many as six items, principally body care products, in the perfumer's skin care range.
L'Artisan opened its fourth location in Manhattan on the Upper West Side. The 350-square-foot boutique, which opened at 222 Columbus Avenue and 70th Street just after Thanksgiving, is said to be exceeding its business plan of $500,000 in first-year sales.Duquesne said he believes the New York City market could support five or six L'Artisan stores. In addition to the newest shop in the Upper West Side, there are locations in SoHo, inside Henri Bendel and on Madison Avenue at 82nd Street in New York, as well as inside Fred Segal in Santa Monica, Calif. — Matthew W. Evans
Ruby & Millie: Cosmetics Cubed LONDON — Ruby & Millie has gone vertical.
The British beauty brand — whose founders, Ruby Hammer and Millie Kendall, were appointed Members of the Order of the British Empire by Queen Elizabeth II — will introduce cubic cosmetics compacts in April.
Each compact features two layers of product and one compartment for brushes, all stacked on top of each other. Lip Spa Kit, for example, has three brushes packed in its bottom layer; three shades of lip gloss in its middle tray and three lip treatment items in the top compartment. The similarly organized Bronzing Kit includes a brush, two highlighters and a bronzer.
Prices have not yet been confirmed, but each kit is likely to retail for about 14 pounds, or $27.40 at current exchange. — Brid Costello
Rodial's Nip-and-Tuck LONDON — Skin care brand Rodial here will add Tummy Tuck, a product meant to help flatten the stomach area.
The lotion includes Rodial's key ingredient — pomegranate ellagic tannins, said to firm, tone and repair skin, while increasing collagen production. In addition, peptides purportedly boost cell metabolism; fig extract breaks down fat cells and microfibers give a tightening effect. A 100-ml. pump bottle of Tummy Tuck will retail for 100 pounds, or $197 at current exchange. It will bow in the U.S. and U.K. at the end of April. Industry sources estimate it will generate 500,000 pounds, or $983,965, at retail from April through December.
A reformulated version of the brand's Body Sculpture slimming and anticellulite gel will also bow in April. Maria Hatzistefanis, Rodial's founder and managing director, said she hopes to increase the brand's international presence. "We are ready to move to the next level," she said, adding Rodial's packaging has recently been tweaked. "We're looking to European markets with a view to boosting business dramatically."Hatzistefanis added she plans to increase Rodial's door count in the U.S. to 40 by the end of 2008, up from nine today.
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