Avon net rises sharply on Latin America strength

AP News
Posted: May 03, 2011 7:25 PM
Avon net rises sharply on Latin America strength

Raising prices and selling more products in Latin America, its largest market, helped cosmetics seller Avon Products Inc. more than triple its first-quarter profit, the company said Tuesday.

Avon's net income and revenue beat expectations, and the company's stock rose more than 4 percent.

Investors were reassured that two large markets for Avon showed signs of recovery after struggling for several quarters, although Avon said work remains.

"We are squarely focused on restoring growth in Brazil and Russia in the second half," CEO Andrea Jung said.

Revenue also rose fast in other areas, particularly Turkey and South Africa, and Citi Investment Research analyst Wendy Nicholson said the year is off to a strong start.

All told, more than 80 percent of Avon's quarterly revenue came from outside the U.S. and Canada. But its North America revenue _ excluding Mexico _ fell 2 percent for the quarter. The company said it would have fallen 10 percent if Avon hadn't bought jewelry direct seller Silpada.

Avon, based in New York, makes more than 40 percent of its revenue in Latin America, where a 16 percent sales increase helped the company's total revenue rise 7 percent to $2.63 billion, beating analysts' average expectation for $2.59 billion. Mexico and Venezuela were particularly strong in Latin America, helped by growth in independent sellers.

Excluding the effect of a weaker dollar, Avon's total revenue rose 4 percent.

Its net income was $143.6 million, or 33 cents per share, for the quarter that ended March 31, up from $42.5 million, or 10 cents per share, a year earlier.

Excluding discontinued operations and one-time items, Avon said it earned 37 cents per share. Analysts expected earnings of 32 cents per share, according to FactSet.

Avon's shares rose $1.34, or 4.5 percent, to close at $30.91 Tuesday. The stock has traded between $25 and $36.20 over the past 52 weeks.