"The results of the quarter reflect a challenging ERP implementation in Brazil which caused greater disruptions than we anticipated. This significantly impacted our top and bottom line results. In addition, consumer uncertainty amidst a volatile macroeconomic environment across several of our markets further pressured revenue growth. Given the current operating environment, the company no longer expects to achieve the stated targets of mid-single digit revenue growth and 50 to 70 basis points of operating margin improvement in 2011. In light of the changing landscape, we are assessing our long-range business plan and are targeting an operational and financial update at an investor meeting in the first quarter of 2012," said Andrea Jung, Avon's chairman and CEO.
Avon's beauty sales increased 8% year-over-year, with gains in all categories; fragrance, colour, personal care, and skincare grew 12%, 9%, 6%, and 2%, respectively.
As planned, lower advertising was largely offset by a higher investment in RVP during the third quarter of 2011. Within this rebalancing, advertising was US$76 million for the quarter, down 34% or US$39 million from a year ago. Avon invested an incremental US$34 million in RVP in the third quarter of 2011 in sales leadership and higher incentives.
South Africa rose by 29%. The region's active representatives grew 3% year-over-year and units sold declined 1%. Operating profit was up 51% versus the prior-year quarter. Operating margin was 13.9%, up 380 basis points from the prior-year quarter. Third-quarter 2011 adjusted operating profit was up 55% with an adjusted operating margin of 14.2%, up 420 basis points, due to the favourable impact of the revenue associated with the VAT settlement which was only partially offset by higher commodity costs.
