Avon's lower profit misses expectations

Feb 8 - Avon Products Inc posted a steeper-than-expected drop in quarterly profit, weighed down by weak sales and restructuring charges.

Shares of Avon, the world's largest direct seller of cosmetics, fell 4 percent to $28.15 in premarket trade.

The company was hit by service disruptions in Brazil, weak results in Russia and a sharp drop in the number of women selling its goods in China.

Avon

Avon earned $229.5 million, or 53 cents per share, compared with a profit of $269.4 million, or 62 per share, a year earlier.

Avon said on Feb. 1 that it would record restructuring charges of about $58 million, or 9 cents per share, in the fourth quarter.

Adjusted earnings from continuing operations fell to $259 million, or 59 cents per share, from $293 million, or 68 cents per share, a year earlier. Analysts had expected a profit of 67 cents per share, according to Thomson Reuters I/B/E/S.

Revenue rose 1.3 percent to $3.18 billion, missing analysts' average target of $3.28 billion.

Results exclude Avon Japan, which used to account for less than 2 percent of sales and was sold in the fourth quarter.

North American revenue rose 1 percent, but was flat excluding currency fluctuations. Results were helped by the acquisition of jewelry company Silpada. In North America, the number of active representatives selling Avon's goods fell 7 percent and the number of items sold dropped 14 percent.

Sales in China fell 45 percent, or 47 percent in constant dollar terms. The number of items sold fell 44 percent and the number of active representatives selling Avon's goods in China plunged 68 percent.

China is a small but important growth engine for Avon. The company is overhauling its business there. Its work includes a costly internal investigation into bribery allegations that began in China.

Advertising spending fell 15 percent to $92 million, due mainly to reductions in China.

Avon does not issue earnings forecasts. The company expects revenue, in constant dollars, to rise in a mid-single digit range this year. It also expects improving operating margins, as it aims to reach a mid-teens operating margin by 2013.

Operating margin fell 1.8 percentage points to 11.2 percent in the fourth quarter.

(Reporting by Jessica Wohl, editing by Maureen Bavdek, Dave Zimmerman)