Stronger dollar weighs on Avon Products in 3Q

NEW YORK — Avon Products Inc. said Thursday having 10 percent more people selling its products during the third quarter helped sales, but the stronger dollar hurt its revenue from some markets, and its profit fell 30 percent.

The cosmetics, gift and home products company earned $156.2 million, or 36 cents per share, for the period ended Sept. 30. That’s down from $222.6 million, or 52 cents per share, a year earlier.

Avon is in the midst of a restructuring that includes cutting jobs and trimming overhead.

Excluding costs related to those cuts, its profit was 42 cents per share, better than the 40 cents per share analysts polled by Thomson Reuters were expecting. Analysts typically exclude one-time costs such as restructuring.

But Avon’s shares fell 4 percent as its North American results remained sluggish.

Avon, which sells brands including Skin-So-Soft and Mark along with its namesake cosmetics, added thousands more sales people in the U.S. and abroad, who are not employees, as workers everywhere seek new sources of income during the recession.

The company focused on recruiting sellers, whom it calls “active representatives,” as well as broadening its assortment of less-expensive products, including products under $5, to drive sales. But it is cutting its in-house staff by more than a thousand.

That recruiting is helping the company increase its currency-neutral revenue, said Stifel Nicolaus analyst Mark S. Astrachan.

Growth remains strongest in emerging markets, he said. In Brazil, Avon’s largest market, its sales force grew 13 percent and sales rose 22 percent, excluding the effect of the stronger dollar. Astrachan predicted Avon’s sales will keep growing by double digits in Brazil.

Avon recorded its 10th consecutive quarter of double-digit revenue growth in Latin America, excluding the dollar’s effect.

Results were weaker in North America, where sales fell 8 percent. CFO Charles Cramb said the weakness was due to low demand for fashion and home items, which cost more than beauty products.

“We all know the economic story,” Cramb said during an investor meeting. “The economic recovery has yet to come (and) when it comes I expect it will be slow.”

BMO Capital Markets analyst Connie Maneaty said the weak sales in North America came as a surprise, though she said she expects it “to firm up over time” and recommended buying Avon shares if they show weakness.

Avon’s sales fell 4 percent, from $2.64 billion to $2.55 billion this quarter. The stronger dollar pulled down revenue 11 percentage points, as overseas sales converted back to fewer U.S. dollars. That impact could lessen because the dollar has been weakening in the fourth quarter.

CFO Cramb predicted the weaker dollar would help fourth-quarter sales in the mid-single-digit percentage range compared with a year earlier.

Shares fell $1.41, or 4.3 percent, to $31.59 during midday trading. The stock has traded between $14.40 and $35.82 over the past year.

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AP Business Writer Michelle Chapman in New York contributed to this report.