Strong year at Avon takes foreign exchange hit in Q4

Avon has announced full year 2008 revenue up 8% to $10.7bn with full-year earnings per share up 69% to $2.04, but Q4 revenue was 9% lower at $2.8bn. The company says the impact of the substantial shift in many foreign currency exchange rates more than offset local currency growth of 2% year on year in Q4.

Beauty sales were up 10% for the full year (7% in local currency) but 7% lower year on year in Q4 due to the impact of foreign exchange. The company also decreased its advertising spend in Q4.

Q4 revenue in Latin America was 5% lower year on year as foreign exchange declines more than offset 11% local currency revenue growth. Regional growth here was driven by a 15% increase in Brazil, a 29% increase in Venezuela and an 11% increase in Mexico, which on a reported basis were -9%, 29% and -8% respectively.

Revenue for Q4 in Asia Pacific was down 6% year on year due to foreign exchanges. In China, Q4 revenue was up 27% (17% in local currency) and operating profit more than doubled to $19m.

Andrea Jung, Avon’s chairman and ceo commented: “After nine months of strong sales performance, the significant negative impact of foreign exchange and the depressed economy hurt our fourth quarter performance. It is prudent to assume these pressures will continue for the foreseeable future and we therefore anticipate that 2009 will be a challenging year. While we cannot control movement in foreign currency, our focus, as always, will be on building and managing our business for the long-term, and continuously driving our costs lower as part of our constant turnaround mentality.

“We believe our model is well suited to create income opportunities in these difficult economic times, as we have during past challenges. In terms of our cost structure, we intend to take significant additional steps to transform our value chain, as well as to aggressively reduce non-strategic spending in the current year.”