NEW YORK — Salma Hayek will be the new face of color cosmetics and fragrances at Avon Products Inc., beginning in the third quarter.
That development came Tuesday, as Avon reported it had delivered a 35.4 percent gain in its fourth-quarter earnings, boosted by a surge in beauty sales, ongoing strength in international operations and favorable foreign exchange rates.
Andrea Jung, Avon’s chairman and chief executive officer, said Hayek’s participation will be a key component in Avon’s overall strategy of renewing what she calls “our flagship category” of color and fragrance.
Jung said that Avon will apply the same level of commitment in innovation and investment that had been put into the skin care business, which chalked up a 33 percent sales increase last quarter. Avon has been a pacesetter in the skin care category during the past decade, beginning with Anew in 1992. The three categories — color, treatment and fragrance — do roughly $1 billion in sales, each.
A new push will be made behind Avon Color in the second half and a new fragrance strategy will be revealed, she said.
The length of Hayek’s contract is two years with an option to renew in the third. It calls for her to participate in advertising and promotion of cosmetics and fragrance on a global basis. “She is originally Mexican, but her appeal transcends all demographics,” Jung said, adding that Hayek is “an ideal spokeswoman” for women generally and women of all ethnic backgrounds, a key consideration for a global company.
Jung added that Hayek also will be involved in the work of Avon’s foundation, which will put more attention on the problem of domestic violence, one of the top concerns of women.
Meanwhile, the financial results beat Wall Street’s expectations, pushing shares of Avon’s stock up $3.31, or 5.35 percent, from the prior close to $65.31 on the New York Stock Exchange.
Reflecting its confidence in its long-term growth perspectives, Avon also revealed a 33 percent increase in the dividend and a proposal for a 2-for-1 stock split. The new annual dividend will be $1.12, up from 84 cents. The proposed stock split will be the third 2-for-1 split since 1996. Previous splits occurred in August 1998 and May 1996.For the three months ended Dec. 31, the beauty company reported earnings that rose to $261.3 million, or $1.09 a diluted share, from $193 million, or 80 cents per share, in the same period last year. Earnings exceeded earlier guidance of $1.03 to $1.04 a share. Results were also 5 cents ahead of average analysts’ forecasts.
Sales for the quarter climbed 13.8 percent to $2.11 billion from $1.85 billion in the year-ago period. Excluding the impact of foreign exchange, sales rose 9 percent.
“So we’ve got a great year behind us. I think we’ve got a great year ahead of us and plenty of momentum to carry us through,” said Andrea Jung, Avon’s chairman and chief executive, in a morning conference call. “I stay very committed to the fact that we have a continuing standout growth story here at Avon in term of growth, revenues and profit earnings.”
Driving revenue growth was beauty sales, which were up 18 percent in the quarter, outpacing total revenue growth. Beauty sales continue to make up a larger percentage of the firm’s revenue portfolio, accounting for 63 percent of overall sales.
Within the beauty segment, skin care sales were up due largely to the ongoing success of key 2003 product launches including Anew Clinical and Cellu-sculpt. Color generated a 16 percent sales advance while the fragrance category grew 14 percent.
Geographically, U.S. sales in the quarter rose 2 percent. Results were hurt by low demand for certain holiday nonbeauty products as well as a decline in fragrance sales. The number of active representatives at yearend was 39,000, a 55 percent increase. According to the company, leadership representatives now make up 52 percent of representatives, and contribute 48 percent of sales. Mark, the firm’s new brand for young women, contributed more than 1 percent to overall U.S. sales in the quarter.
On the international front, European sales increased 30 percent while operating profit skyrocketed 50 percent. Excluding the impact of currency translation, sales increased 18 percent. In Latin America, sales increased 16 percent, and 12 percent in local currencies. Sales in the Pacific region increased 17 percent, and 9 percent when excluding the impact of foreign currency exchange.Management said it is seeing healthy sales in the U.S. so far this year, noting it expects U.S. sales to increase 6 to 8 percent in the first quarter.
Specifically, Avon said it expects earnings in 2004 to grow 10 to 12 percent, implying earnings of $3.06 to $3.11 a share, which is ahead of the consensus estimate of $3.04. The company said it also expects 10 percent sales growth in local currencies.
For the first quarter, Avon expects earnings of 50 cents, versus 42 cents reported last year, which is in line with consensus estimates. It also forecast local currency sales growth of 19 percent.
Jung cited the success and acceleration of its business transformation strategy, which is delivering better efficiencies, for the improved picture.
For the year-end period, Avon grew its profits by 24.4 percent to $664.8 million, or $2.78 a share, from $534.6 million, or $2.22, in the prior year, while sales advanced 10.4 percent to $6.88 billion from $6.23 billion.
Maybelline-Garnier Taps Fondu
NEW YORK — Karen Fondu has been named president of Maybelline-Garnier U.S. She had been general manager of the L’Oréal division since February 2001. Fondu joined L’Oréal 24 years ago in L’Oréal’s Retail division and over the years has been named to positions of increasing responsibility. Also, she was instrumental in assimilating Maybelline into the L’Oréal organization when the Memphis-based brand was acquired in 1996. “Karen Fondu has been a major contributor to the continuous success of Maybelline over the past eight years,” noted Joseph Campinell, president of the Consumer Products Group of L’Oréal USA. “Her passion for the business and her ability to drive it forward is unparalleled.”
Buyer Said Found for Jane
NEW YORK — Estée Lauder’s Jane Cosmetics brand could be in the hands of a new owner as early as this week, according to industry sources. The new parent is expected to be a junior fashion company, not a cosmetics firm. A senior marketing executive at a mass beauty company that had briefly looked into buying the teen brand said Estée Lauder has been shopping Jane around for nearly a year.Last week Estée Lauder went public with its intent to sell Jane and had written the struggling line off its books taking a $30.6 million charge in the second quarter. Meanwhile, the brand is operating as usual.
On Tuesday afternoon, an Estée Lauder spokeswoman said the company had no comment at this time.
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