Avon Reports Sales Gains, Shifts Ad Spending

Avon Products says it has been hit hard by fluctuating world currencies, with revenue falling 13% to $2.2 billion. But in local currency, it's reporting a revenue gain of 3% -- and thanks to product launches at the lower end of the price spectrum, a 2% increase in overall beauty sales. For the quarter, net income declined 36% to $117.3 million.

The company also says it is continuing to shift its strategic spending because of the recession, tipping more ad spending toward recruiting new sales representatives, and less toward product advertising, boosting the number of active sales reps by 7%.

"We plan to leverage the inherent advantages of our direct selling business model during this time of uncertainty," says Andrea Jung, chairman and CEO, in its release. "We are offering consumers an increased assortment of 'smart value' products, which contributed to beauty unit growth of 2% in the quarter. We are also aggressively promoting our representative earnings opportunity to a wider audience. The early strength of this new recruiting effort reflects the growing relevance of the Avon earnings opportunity."

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While Jung commented that the company's "investments in brand advertising and innovation continue to pay off, even in this difficult consumer environment," the company also adds that it shifted more of its $78 million quarterly ad spend toward recruitment and less toward product ads.

Overall, beauty sales fell 12%, but gained 5% in local currency. Color cosmetics performed best -- gaining 10% -- followed by fragrance, up 9%, and personal care, up 8%. Skincare, however --an area where the company has been aggressively introducing new products -- declined, falling 4%. Avon says its launches at lower price points, including Ultra Color Rich 24K Lipstick as well its Naturals personal and hair care line, helped results.

North America was the worst-performing region, primarily because of a decline in the home category, it says. Sales declined 11%. In Latin America, revenue gained 4%; in Central & Eastern Europe, 4%, and in Asia 1% -- all in local currency basis. In Western Europe, Middle East & Africa, revenue decreased 2%.

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