Under activist CEO Andrea Jung, Avon Products Inc. (NYSE: AVP) has turned itself around and is posting excellent numbers across the board and around the world. Investors interested in international stocks should still take a look at Avon which, despite being an American company, now earns slightly more than half its revenues from markets abroad. The stock opened the year trading at $33.60 and closed July 12 at $39.55, up 19% thus far this year. Not only do 2007 numbers look good compared to 2006, which was admittedly horrible, but as the reorganization efforts continue to gain traction worldwide, the numbers will only get better.
Here follows a summary of Avon's recent earnings report:
1Q 2007 total revenue grew 9% to $2.2 billion, with all 6 global divisions posting profits. Net income for 1Q TRIPLED to $150 million. The number of Avon representatives rose 4% to more than five million, making Avon the world's largest direct seller. Avon is spending $15 million to provide leadership and sales training for this potent sales channel. Operating profit rose 176%, (not a typo!) to $238 million despite continuing restructuring costs of $27 million. Thus far, FY 2007 cash flow is ahead of FY 2006 cash flow and the company repurchased $130 million of its stock during 1Q 2007. FY 2006 was marked by huge restructuring costs inlcuding inventory write offs and numerous products lines being discontinued. Most of the mess is behind Avon, a fact demonstrated by around the world increases in both revenues and profits.
North America is currently Avon's softest market, yet it posted 3% revenue increase and 5% sales volume increase. Operating profit for this region doubled. Still a huge market, North America accounts for less than half Avon's total revenues and will probably continue to lose ground, relatively speaking, as the domestic Avon Lady sales model is phased out in favor of a more comprehensive Avon.com online distribution model in which women (and men) can log on to order products.
Latin America posted 7% revenue growth for the quarter, with sales set to increase further given the 20% growth in teen population in Venezuela, Colombia and slightly lower in Brazil. Operating profit for this division increased 29%. The United Kingdom remains profitable Avon territory with a 16% revenue increase. This is impressive enough, but pales when compared to a 30% revenue increase in Turkey. Revenue in Japan was flat but the 16% revenue increase in the Philippines made up for that. The Asia-Pacific division posted a $2 million loss in 1Q 2006, but a $21 million gain in 1Q 2007.
And then there is the China division. Revenue increased 44%. Avon has come to an understanding with the Chinese government to resume its direct-selling method. Chinese Avon Ladies must register with the Chinese government but are not considered agents of a foreign business. Avon currently has over a half-million direct sales representatives in China, of which at least 168,000 are considered active. Already sales volume has increased 15% and Avon predicts large revenue and sales increases for the forseeable future as it penetrates this market. Worldwide, cosmetics, fragrances and toiletries constitute a $28 billion market, of which Avon already claims a 30% share.
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Reader Comments (Page 1 of 1)
7-30-2007 @ 7:27PM
Dona Johnston said...
According to your comment about US Avon Reps being phased out do you see a time table for this