Avon Products, Inc. (NYSE:AVP) reported that fourth-quarter 2007 total revenue grew 17% year over year (9% in local currency) to $3.1 billion. All six operating regions contributed to the company's revenue growth. Sales of Beauty products rose 20% and Active Representatives increased 11%. Units sold were up 8% versus the prior-year quarter.
Net income in the fourth quarter 2007 was $129 million compared with $184 million in the year-ago quarter. Earnings per share were $.30 versus $.41 per share in the prior-year quarter, or 27% lower. The fourth quarter 2007 results were significantly impacted by costs to implement the company's restructuring program (of which the final initiatives have been
announced) as well as the final charges for its Product Line Simplification (PLS) program. Combined, these reduced EPS by $.34 per share versus $.13 per share in 2006.
Andrea Jung, chairman and CEO, commented, "This quarter's results reflect the momentum we are gaining in our turnaround plan. The 17% revenue increase -- including the 20% growth in Beauty sales -- reflects the benefits of the significantly increased investment we've made in advertising over the last two years. I am also pleased with the 11% increase in Active Representatives that was driven by our investments in the Representative Value Proposition, such as growing our Sales Leadership program, increasing sales campaign frequency and improving commissions and incentives to our Representatives. Our results also reflect the strength of our diverse geographic portfolio, which is highly advantaged particularly in developing and emerging economies where we enjoy leading market positions."
Fourth-quarter operating profit of $225 million decreased 21% from 2006's level of $282 million, while operating margin was 7.3%, versus 10.8% in the prior-year quarter. As previously announced, fourth-quarter 2007 operating profit included costs associated with the company's restructuring and PLS programs of $205 million, versus $85 million in the prior-year period. The 2007 fourth-quarter costs included $101 million of costs to implement restructuring and $104 million of costs associated with PLS. The 2006 fourth- quarter costs included $44 million of costs to implement restructuring and $42 million of costs associated with PLS.
On January 8, 2008,
Fourth-quarter 2007's results included $108 million in advertising expense, a 21% increase over prior year, to support the launch of new products, such as Anew Ultimate Age Repair Night Cream and Elixir and the Christian LaCroix fragrances, as well as Representative recruitment advertising. Additionally, 2007's fourth quarter included an incremental $39 million of costs for initiatives to improve
The quarter's effective tax rate of 34.2% compared with 2006's rate of 30.4%. The 2007 rate was unfavorably impacted by the geographic mix of restructuring and PLS costs. The prior-year's rate benefitted from the closure of tax years and audit settlements.
Fourth-Quarter Regional Highlights
On broad-based strength, Latin America's fourth-quarter revenue rose 28% year over year (17% in local currency), with the markets of
increased 3% versus the 2006 quarter as profit on higher revenue was somewhat offset by costs associated with PLS, as well as increased advertising and RVP spending in the region.
Western Europe, Middle East & Africa achieved revenue growth of 22% (10% in local currency), due to continued strength in
In Central & Eastern Europe, fourth-quarter revenue rose 22% (11% in local currency).
Asia-Pacific revenue increased 8% (decreased 2% in local currency), with the