Shop Talk

Retailers, consumers and prices

Check Out Line: What’s significant?

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Check out Avon’s dose of disclosure.

Andrea Jung 2010The world’s top direct seller of cosmetics (led by Chairman and CEO Andrea Jung, shown here) topped analysts’ expectations with its quarterly profit.

It also gave a little more insight into its ongoing investigation about possible bribery in China — which is by far its smallest market, but one with great potential.  The company said fees paid to professionals working on the probe were “significant” in the latest quarter.

The ongoing probe has been expanded to additional countries in Avon’s other international regions — Latin America; Central & Eastern Europe; Western Europe, Middle East & Africa; and Asia Pacific.

Avon also had some trouble recruiting sales representatives in China as it moves to more of a direct sales model from the boutiques it runs there.  The number of active representatives in China fell 25 percent during the quarter.  In 2009, the number of active representatives in China rose 32 percent.  In 2008, that figure popped 79 percent.

Check Out Line: Estee Lauder had a beautiful holiday season

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Fabrizio FredaCheck out Estee Lauder’s much better-than-expected end to 2009.

The cosmetics maker said fiscal second-quarter results, due next week, will fly past its forecast and Wall Street’s predictions.  Sound familiar?  That’s because the company did the same thing back in October, before it released results for the first quarter of its fiscal year.

Analysts noticed the similarity.  JP Morgan’s John Faucher entitled his research note “Deja Vu” and many said with the stock’s nice run already (up about 56 percent in 2009), big gains from here are likely limited.

Fancy a Fergalicious fragrance?

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fergieDo you want to smell like a Pea?  Avon hopes so.

The cosmetics maker will launch a new scent with Fergie from the Black Eyed Peas next year.

Avon called Fergie “a bold choice” for its brand.

“I’m always seeking out new ways to express myself, and fragrance is the perfect opportunity to share my originality and confidence with my fans, and the Avon consumer.  I couldn’t be happier to be working with a brand with such a strong reputation for supporting women,” Fergie said in a statement.

Check Out Line: Direct selling in difficult times

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Check Out one analyst’s view of direct sellers.USA/

Jefferies analyst Douglas Lane said quarterly results from direct selling companies — like cosmetics maker Avon and storage and serving containers maker Tupperware — bolsters his positive view on the model, which uses sales representatives to promote its products.

Referring to Avon, Tupperware, Nu Skin, Herbalife and Usana Health Sciences, Lane said in a research note that “these five companies beat Street expectations by an average of over 20% in the June quarter, as well as the upper end of each mgt’s range in the cases one was articulated.”

Netflix tops customer satisfaction survey

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NETFLIX-OUTAGE/Online retail may be outperforming brick-and-mortar rivals amid the U.S. recession, but that’s no reason to get complacent.

In a wake-up call to the industry, a new survey shows that customer satisfaction with online retailers declined 3 percent from last year.

Check Out Line: Stronger dollar = weaker results

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Check out the latest earnings reports, which give a hint of hope that things could be looking up, if it weren’t for that pesky stronger U.S. dollar.
 
Avon‘s revenue fell 13 percent to $2.18 billion as the stronger U.S. dollar decreased the value of overseas sales by 16 percentage points. On a local currency basis, sales rose 3 percent. 
 
WITHERSPOON/“Foreign exchange significantly pressured first-quarter profit, as expected,” Avon Chief Executive Andrea Jung said in a statement. “We are taking aggressive action to lessen the foreign-exchange impact … the benefits of which should be stronger in the second half of 2009.”
 
Kraft Foods posted a higher-than-expected first-quarter profit helped by price increases and cost-cutting.  While profit rose, the maker of Oreo cookies said sales fell 6.5 percent to $9.4 billion, hurt in part by — you guessed it — the stronger dollar, which lessens the dollar-value of sales made overseas. Organic revenue, or sales excluding currency fluctuations, acquisitions and divestitures, rose 2.3 percent. 
    
Over at MillerCoors, the combined U.S. operations of SABMiller Plc and Molson Coors Brewing Co, net sales rose 3.8 percent to $1.72 billion. Sales from wholesalers to retailers, a good gauge of consumer demand, rose 0.4 percent.  Molson Coors said its overall profit rose, as increased prices and cost cuts helped offset steeper commodity costs, lower sales volume and, of course — the stronger U.S. dollar. 

One company that couldn’t put any blame on forex is CVS Caremark, which operates solely in the United States.  Even if people are cutting back, net revenue still jumped 9.7 percent, to $23.4 billion. CVS profit was better than expected. 

Check Out Line: Ding, dong, Avon falling!

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Check out Avon’s declining sales.
 
The world’s largest direct seller of cosmetics just spent however much money you have to spend to get an ad on NBC right before the Super Bowl, trying to recruit people to sell for Avon.
 
The pitch was that in these tough economic times, being  an Avon rep was a good idea. It’s a good way to earn extra money, and, since it was essentially your own business you couldn’t be fired, the commercial said.  

 
One question: who are all these new Avon Ladies going to be selling to?
 
The global economy is in tatters. Avon posted fourth-quarter profit below analysts expectations and sees more difficulty in 2009.
 
Sales fell 9 percent, though that was due to the stronger dollar. But even a 2 percent sales increase in local currencies was somewhat anemic.
 
So, who is Avon calling on?
 
Also in the basket:
 
Walgreen January sales up 0.4 percent
 
Liz Claiborne to cut 725 U.S. jobs
 
A CEO gets a rare second act (WSJ)

Check Out Line: International strength pretties up Avon profit

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lips1.jpgCheck out how international sales and the weak dollar continue to lift quarterly results at U.S. companies.

Second-quarter profit at cosmetics firm Avon Products Inc more than doubled, as demand in Latin America and other overseas markets more than made up for sagging U. S. results.

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