Avon profit falls on restructuring costs

NEW YORK - Avon Products Inc., a direct seller of beauty products, said Tuesday its fourth-quarter profit fell 30 percent on restructuring costs and other charges, but the results still beat Wall Street forecasts. The company also offered an upbeat outlook.

Its shares rose 5 percent, or $1.80, to $37.81.

Earnings dropped to $128.9 million, or 30 cents per share, in the last three months of 2007 compared with $184.1 million, or 41 cents, a year earlier.

The company said restructuring costs and charges related to simplifying its product line lowered earnings by 34 cents per share in the latest period, compared with just 13 cents in the 2006 period.

Quarterly sales improved 18 percent to $3.08 billion on strong results across all regions.

Analysts polled by Thomson Financial predicted net income of 28 cents per share on revenue of $2.92 billion. The earnings estimates typically exclude one-time items.

The company predicted mid-single-digit revenue growth in 2008.

Avon unveiled a multiyear restructuring plan in November 2005 after its global sales sagged. The plan involved steep job cuts, elimination of management layers to speed reaction to market trends and shifting manufacturing centers and outsourcing work to countries with cheaper labor costs. On Jan. 8, Avon said it expects to save about $430 million a year once all its actions are completed by 2011-2012, with these savings projected to reach $300 million in 2009.

The company also reiterated that it expects total costs for the restructuring plan to reach around $530 million. The company has taken about $444 million of those costs through the fourth quarter of 2007 and will take the rest by the end of 2009.

"This quarter's results reflect the momentum we are gaining in our turnaround plan," Andrea Jung, chairman and CEO of Avon, said in a statement. Jung cited a 16 percent increase in beauty sales and a 10 percent gain in the number of active representatives.

For the year ended Dec. 31, the company's net income totaled $530.7 million, or $1.21 per share, compared with $477.6 million, or $1.06, in the previous year. Total revenue reached $9.94 billion, compared with $8.76 billion in the previous year.

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