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The global beauty company, Avon Products Inc. (AVP - Analyst Report) once again posted strong results for the second consecutive quarter. The company’s adjusted earnings of 29 cents per share for the second quarter of 2013 surged over 38% from the year-ago quarter’s earnings of 21 cents. Additionally, the company’s earnings surpassed the Zacks Consensus Estimate of 26 cents per share.

Moreover, on a reported basis, the company’s earnings came at 19 cents per share compared with 16 cents in the year-ago comparable quarter.

Total revenue for the quarter declined 2% year over year to $2,508.9 million compared with $2,558.2 million a year ago. However, on a constant currency basis, total revenue grew 2% year over year primarily driven by an increase in average order. Further, total revenue missed the Zacks Consensus Estimate of $2,573.0 million. During the quarter, the company registered an increase of 2% in price/mix, while active representatives and total units remained almost flat.

Avon, which competes with Inter Parfums Inc. (IPAR - Snapshot Report), Nu Skin Enterprises Inc. (NUS - Snapshot Report) and Coty Inc. (COTY - Snapshot Report), registered a 4% revenue decline in its Beauty Products and Fashion categories each. However, sales at the company’s Home category business improved 13%. The decline in Beauty revenues was primarily due to weak performance in its fragrance, color, skincare and personal care products.

Adjusted gross margin of this Zacks Rank #3 (Hold) company expanded 30 basis points year over year to 63.3%, on account of lower freight costs, partially offset by unfavorable foreign currency exchange rates. Adjusted operating margin improved 50 basis points to 9.5%, attributable to higher gross margin, reduced advertisement expenses and lower professional fees.

Region-wise Performance

In the quarter, Avon’s revenues in Latin America inched up 1% year over year to $1,252.1 million on a constant-dollar basis. On a currency neutral basis, revenue at Brazil and Mexico rose 4% each, while sales in Venezuela increased 15%. Units sold were up 1% during the quarter, while Active Representatives grew 2% year over year.

In North America, sales skidded 12% year over year to $380.3 million, mainly due to a fall in Active Representatives. Units sold for the region waned 10% year over year, while Active Representatives slipped 13%.

The beauty product manufacturer’s revenue in Europe, the Middle East and Africa inched up 2% year over year to $678.4 million, primarily due to improvements in units sold and Active Representatives. Regional breakup shows that sales escalated 8% in Russia and 9% in Turkey on a constant-dollar basis, while revenues in UK and South Africa declined 5% and 11%, respectively. Avon registered a 3% increase in Active Representatives, while units sold were up by 6% during the quarter.

The Asia-Pacific division’s revenue dipped 9% to $198.1 million. The region marked an 11% decline in Active Representatives and a 12% fall in units sold. Country wise, the region recorded a 28% and 2% revenue decline in China and Philippines, respectively on a constant-dollar basis.

Other Financial Details

The leading global beauty company exited the quarter with cash and cash equivalents of $873.2 million, long-term debt (excluding current maturities) of $2,634.8 million, and shareholders’ equity of $1,116.3 million.

Moreover, prior to the earnings release, the company announced a quarterly dividend of 6 cents, payable on Sep 3, 2013 to shareholders of record as on Aug 15.

Headquartered in New York City, Avon directly sells cosmetics, fragrances, toiletries, jewelry, and accessories. The company markets globally through more than 6.2 million independent sales representatives and is the world’s largest direct seller of beauty products.

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