Despite Avon Products' (NYSE:AVP) successful year, some investors decided its story was an ugly one today. Shares in the cosmetics company -- best known for the "Avon lady," who peddles products to friends and neighbors -- took a beating today after the company gave some downbeat indications.
Not so long ago, Avon seemed to have loveliness down pat. However, for now, the company said that it is repositioning its U.S. business, where it has experienced a substantial slowdown, in particular connected to its floundering Beyond Beauty toys and gifts category. (It said that U.S. sales will fall 5% in 2005, due in part to the Beyond Beauty difficulties, although it still anticipates that overall sales will grow 10%.)
To that end, the company plans to reposition this less-than-successful segment. Although the company predicted that given such trends, U.S. business won't improve until 2006, suggesting a possibly tough year ahead, maybe it bodes investors well to remember that Avon's international sales have been growing like gangbusters.
In the long run, Avon said that its fourth-quarter earnings will be $0.61 per share, as opposed to analysts' expectation for $0.60 per share. It left its fiscal 2005 guidance at $1.77 per share. So really, despite the negativity surrounding the stock, it seems that not that much has changed at all.
Meanwhile, investors haven't had anything to complain about from department-store rival Estee Lauder (NYSE:EL), which recently reported a promising quarter, while Revlon (NYSE:REV) (best known for discount fare) has continued to struggle with the ugly stepsister syndrome. Of course, Avon also directly competes with a well-known private venture that also specializes in selling makeup out of the home, Mary Kay.
Was it such a bad day for Avon? Investors might wonder if Avon's pressures here at home have to do with more than just a toys-and-beauty line gone astray. I, for one, wonder about who is hosting the Avon lady these days -- after all, with exponentially more women working in the U.S. than they did when the Avon lady first hit the scene, it seems surprising that Avon remains such a strong force in cosmetics.
Today's rather steep decline in stock price seems a little bit of an overreaction, given the fact that things haven't really changed, other than U.S. negativity. Long-term investors will likely consider today's stock movements as fleeting as yesterday's tired lipstick.
Is Avon a splurge? Look for tips on cutting corners and saving pennies on the Living Below Your Means discussion board.
Alyce Lomax does not own shares of any of the companies mentioned.
