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May 3, 2011
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Avon quartelry profit rises

By
Reuters
Published
May 3, 2011

May 3 - Avon Products Inc's quarterly profit beat Wall Street expectations as the weak dollar and acquisitions helped sales and cost cuts improved its profit margin.

Avon
Avon's global ambassador, actress Reese Witherspoon, attends the 10th annual Avon Foundation Awards Gala

Strength in Western Europe and Brazil helped offset a 32 percent drop in revenue in China for the world's largest direct seller of cosmetics.

Avon is moving to a sales model in China focused on representatives selling directly to customers, like most of the company's other operations, from a hybrid that include retail shops.

Its first-quarter operating margin rose to 9.9 percent, excluding items, from 9.6 percent a year ago.

Avon said in February it expected margins to fall in the first half of the year as it dealt with higher costs for transportation, labor and materials.

The largest direct-seller of cosmetics earned $143.6 million, or 33 cents per share, compared with a profit of $42.5 million, or 10 cents per share, a year earlier.

Excluding one-time items, earnings rose to 37 cents. analysts on average forecast 31 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 7.3 percent to $2.63 billion. Sales were up 4 percent excluding the impact of currency fluctuations.

Avon is shaking up its structure to help improve business in markets such as Latin America, its largest unit with more than 42 percent of sales last year. In February, it set plans to cut six business units down to two, one focused on developed markets and one focused on developing ones.

It previously said that North America would likely remain "in transition" this year, and should show signs of stabilization by the end of 2011.

Sales in North America fell 2 percent as volume fell 14 percent.

Avon has also been spending tens of millions of dollars on an internal bribery investigation that began in China.

Avon, which does not give earnings forecasts, said in February that it expects revenue to rise in a mid-single digit range this year.

Its shares were up 84 cents, or 2.8 percent, at $30.41 in premarket trading.

(Reporting by Brad Dorfman; Editing by Derek Caney)

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