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May 2, 2010
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Avon's net profit falls due to charges

By
Reuters
Published
May 2, 2010

CHICAGO (Reuters) - Avon Products Inc (AVP.N) reported on Friday 30 April that first-quarter profit fell, weighed down by charges related to Venezuela's currency devaluation and two restructuring programs, as well as by higher advertising and bribery investigation costs.



The world's top direct seller of cosmetics earned $43 million, or 10 cents per share, versus $117 million, or 27 cents per share, a year earlier.

Excluding the impact of Venezuela's currency devaluation and restructuring costs, Avon earned 33 cents per share, up from 30 cents in the year-ago period and ahead of analysts' average forecast of 32 cents, according to Thomson Reuters I/B/E/S.

The company said it paid "significant" professional fees related to its internal investigation into bribery allegations in China. Avon suspended four executives earlier this month pending the outcome of its probe.

Total revenue climbed 13.9 percent to $2.49 billion, topping analysts' expectations of $2.46 billion. Revenue rose 8 percent on a constant-dollar basis.

The number of active representatives selling the company's goods rose 6 percent and increased everywhere except in China.

Advertising spending rose 23 percent to $96 million as the company increased efforts to attract more representatives.

Revenue fell 31 percent in China, Avon's smallest region, as it moves toward using more direct selling there after selling items through beauty boutiques.

In Latin America, its largest market, revenue rose 14 percent in constant-dollar terms. Operating profit in Latin America was flat due to the negative impact of issues related to Venezuela being designated as a highly inflationary economy and the devaluation of its currency.

The company had previously said that Venezuela's currency issues would cut into earnings and that it would take a charge of 1 cent per share related to its two restructuring programs.

(Reporting by Jessica Wohl, editing by Gerald E. McCormick)

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