* Avon Q3 adj EPS $0.42 tops Street view of $0.40
* Avon North American rev down 8 pct; below some estimates
* Arden sales $265.2 mln tops Street view for $262.9 mln
* Avon shares down 1.6 pct; Arden up slightly
* Revlon shares soar 34 pct after reporting profit
(Adds Avon comments, analysts, details on Revlon, Allergan)
By Martinne Geller
NEW YORK, Oct 29 Cosmetic maker Avon Products
Inc (AVP.N) warned investors that demand remains weak in North
America while Elizabeth Arden Inc RDEN.O benefited from
consumers picking up perfumes at duty-free shops.
Avon, the world's largest direct seller of cosmetics,
reported third-quarter revenue that fell short of analysts'
estimates, hurt by worse-than-expected revenue in North
America, and its shares fell as much as 8.7 percent.
Elizabeth Arden posted an unexpected quarterly profit and
sales that beat estimates, aided by improving trends in its
travel retail business, which includes duty-free shops. Its
shares rose as much as 10 percent. [ID:nN29260659]
"There are signs that economic conditions are beginning to
improve, and, while early, we are expecting good performance
from our new launches for the holiday season," said E. Scott
Beattie, Arden's chief executive.
The company's retail customers have not yet returned to a
normal pattern of ordering replenishment stock, he said, which
suggests consumers are still spending cautiously.
Avon, which operates through a network of representatives,
said revenue fell 8 percent in North America, worse than BMO
Capital Markets analyst Connie Maneaty's expectation for a 2
"North American weakness was a surprise," Maneaty said. "We
note, however, that the region does not determine overall EPS
growth and we expect it to firm up over time."
Arden also sells Prevage anti-aging cream, which it created
in alliance with Botox-maker Allergan Inc (AGN.N). Allergan
posted higher quarterly profit on Thursday, as sales of the
anti-wrinkle drug rose. [nN28494607]
Cosmetics maker maker Revlon Inc (REV.N) also reported
financial results on Thursday, posting a profit on sales that
declined less than expected, and its shares soared 34 percent
ARDEN'S LEVERAGE, AVON'S STRATEGY
Arden's sales fell to $265.2 million, but topped analysts'
estimates for revenue of $262.9 million. Elizabeth Arden saw
revenue fall 5.3 percent in its North American fragrance
business and nearly 10 percent in its international business.
The company also raised the lower end of its full-year
sales and earnings outlooks. It expects earnings for the full
fiscal year of 55 to 65 cents per share on net sales expected
to rise 2.5 percent to 3.5 percent. It previously forecast
earnings of 50 to 65 cents per share and a 2 percent to 3.5
percent increase in sales.
Oppenheimer analyst Joseph Altobello said he remains
bullish on Arden's shares.
"Arden's earnings power remains understated, in our view,
with operating leverage likely to magnify even a modest
improvement in reorders," Altobello said in a research note.
Avon's third-quarter profit excluding restructuring costs
was 42 cents per share. Analysts on average were expecting 40
cents, according to Thomson Reuters I/B/E/S. [ID:nN29260358]
Revenue fell to $2.55 billion, short of analysts' estimates
of $2.57 billion. It also increased its cosmetics sales
representatives count by 10 percent in the quarter as more
people sought jobs.
Avon met with investors on Thursday to discuss its results
and strategies, including steps to sustain growth in Latin
America, where revenue rose 5 percent, and improve results in
Sanford Bernstein analyst Ali Dibadj said the North
American results were disappointing, given the much easier
comparisons with the weak year-ago quarter.
"North America did not get better. Latin America is still
staying strong and that's supporting the company, but it
doesn't look like it's a lot to write home about at this
point," Dibadj said.
Part of Avon's plan to improve revenue and profit margins
calls for expanding its portfolio of higher-margin beauty
products such as skin creams, and to phase out some fashion or
When Avon completes its restructuring in 2013, it expects
to have mid-single-digit revenue growth and operating margins
improving to mid-teen levels.
Avon's shares were down 52 cents, or 1.6 percent, at $32.48
on the New York Stock Exchange in afternoon trading, off an
earlier low of $30.13, while Revlon was up $1.97 at $7.72.
Elizabeth Arden shares gained a penny to $11.57 on the Nasdaq
after trading as high as $12.71.
(Additional reporting by Jessica Wohl in Chicago, editing by
Matthew Lewis and Maureen Bavdek)