Earnings Preview: Avon to report 3Q after job cuts

posted: 29 DAYS 22 HOURS AGO

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NEW YORK -Cosmetics company Avon Products Inc. reports third-quarter results on Thursday before the market opens. The following is a summary of key developments and analyst commentary for the period.

OVERVIEW: As the economic slump hurt discretionary spending and dampened demand for cosmetics and fragrances, Avon started to entice consumers with less-expensive products, some under $5.

The company also has been cutting costs. In July, Avon said it would trim about 1,200 jobs, or about 2.8 percent of staff worldwide, by 2013 to boost savings. The job cuts do not include Avon's sales representatives.

Last month, Avon said that its president, Elizabeth Smith, would leave the company at the end of October to seek a CEO position elsewhere.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect earnings of 40 cents per share and revenue of $2.57 billion.

ANALYST TAKE: BMO Capital Markets analyst Connie Maneaty, who rates the stock "Outperform," noted Avon has significant exposure to countries with currencies that have recently appreciated against the dollar. A weaker dollar benefits Avon in those countries, as its products become cheaper by comparison.

Avon also is exposed to emerging markets with strong growth opportunities, Maneaty added.

Maneaty said that organic sales growth accelerated in the third quarter because of growth in sales representatives who sell Avon's products. Maneaty expects representative growth of 12 percent.

"Our below-consensus estimate of 37 cents (per share) could well prove to be conservative," Maneaty wrote in a client note.

WHAT'S AHEAD: Analysts and investors will continue to watch exchange rates and Avon's sales during the fourth quarter, as the holiday season is an important time for many retailers to capture revenue.

STOCK PERFORMANCE: For the quarter ended Sept. 30, Avon shares rose 31.7 percent.

2009-10-28 14:50:09