Avon (NYSE: AVP ) isn't just your mother's makeup company anymore. The direct seller of cosmetics, accessories, and select home products has branched out and is gaining traction in China and launching a new line targeted at a younger customer demographic.
Avon reported impressive third-quarter results today that showcase both the brand's staying power and its opportunities for growth. Sales grew 11% to $1.61 billion, marking the highest quarterly sales growth rate in close to nine years. Earnings expanded 17% to $0.56 a share from the prior period's $0.48 a share, including charges.
Across all regions, Avon's sales were strong, but its international operations are really a focus here. Quarterly revenues grew 15% and operating profits were up 19% for the company's business in Europe, Latin America, and the Pacific Rim. Through the first nine months of the year, its international sales are up 13%, to nearly $3 billion, while sales here at home rose just 3% to $1.5 billion.
The Pacific Rim is Avon's smallest international market at the moment, generating $650 million through the first three quarters and $224 million in the third. However, expect those sales to keep growing as the company's offerings gain more fans in China. Quarterly sales grew 30% in that populous country.
To spur growth in the U.S., Avon launched a new line called "Mark" in August. It's targeted at younger customers than your old-school Avon buyer, complete with hip and slightly provocative television ads. (One young woman tells us, for instance, that she "met Mark" in the bathroom.)
The ads also highlight the moneymaking possibilities from selling Mark cosmetics, with mentions of tuition being paid and the like. Since its August introduction, Avon says it already has 16,000 sales representatives and that the line helped boost U.S. sales by a percentage point this quarter.
Avon's betting on the growth spurt to continue. It raised its 2003 earnings target to $2.65-$2.70 a share from its earlier forecast of $2.60-$2.65. The company also expects that it can generate earnings growth of 10%-12% for 2004 off its newly updated projections.