Avon avoids recession impact with Q2 growth

Avon has reported a year on year total revenue growth of 17%, to $2.7bn, in the second quarter of 2008. Sales of beauty products were up 19%, with increases in all categories, and units sold rose 5% versus the same period in 2007.

The company also saw its operating profit double to $375m from $187m. Its operating margin rose to 13.7% from 8.0% and net income increased from $113m, in the year-ago quarter, to $236.

“The second quarter performance is the best that we have delivered since launching our turnaround in late 2005,” Andrea Jung, chairman and ceo, Avon, commented.

“Our results this quarter contributed strongly to a six-month operating margin of 12.8%. With this solid year-to-date performance and the timing of our expected 2008 savings and benefits from strategic initiatives weighted to the second half of the year, we are well on our way to achieving our 2008 operating margin target. The target is to deliver a full-year 2008 operating margin that approaches 2005’s level of approximately 14%.”

However, Jung admits that Avon has not been immune from the effects of today’s economic climate. “Like our peers we are experiencing input cost pressures in the current business environment,” she said. “The savings and benefits from our strategic initiatives, our ongoing ability to capture strategic price increases, and the leverage from our revenue growth are helping to offset these cost pressures.”