Economical Management

Planting season 2010

Task: Financial Analysis for Avon Products Incorporation

Student: Ninoska Trejos

04 17, 2010

1 . History

1 . 1 Company Information

Avon Products Inc (AVP), founded by David L. McConnell, is known as a leading global beauty organization, with $12 billion in annual income; it started operations in 1886 and incorporated inside the State of recent York in January twenty seven, 1916. The company's stocks are traded inside the New York Stock Exchange (NYSE). Its products get into three merchandise categories: Beauty, Fashion and Home. Magnificence consists of color cosmetics, perfumes, skin care and private care. Style consists of style jewelry, wristwatches, apparel, shoes or boots and equipment. Avon conducts its organization in the remarkably competitive beauty industry and competes against other client packaged items (" CPG”) and direct-selling companies to develop manufacture and market beauty and non-beauty-related products.

The company's reportable portions are based on geographic operations in six areas: Latin America; North America; Central & Asian Europe; American Europe, Middle section East & Africa; Asia Pacific; and China. They presently include sales functions in 66 countries and territories, including the U. H., and distribute its products in 40 even more. Unlike most of its rivals, which promote their products through third party full establishments (i. e. medication stores, office stores), Avon primarily sells its products to the ultimate buyer through the direct-selling channel. In this instance, sales are created to the ultimate buyer principally through direct offering by around 6. a couple of million effective independent Representatives. Representatives happen to be independent contractors and not Avon's employees. Avon products happen to be traded inside the U. T. and selected other market segments; they also market their products through consumer websites ( inside the U. S i9000. ). These websites provide a purchasing opportunity to buyers who choose not to purchase through a rep.

Avon encounters competition from various products and product lines both equally domestically and internationally. The sweetness and beauty related products industry is extremely competitive plus the number of competitors and level of competition that they face through this industry differs widely by country to country. Around the world, they contend against items sold to consumers by various other direct selling and direct-sales companies (Mary Kay Inc, L'OREAL CO, REVLON INC) and through the Internet, and against goods sold throughout the mass industry and prestige retail programs. In March 2010, the organization acquired Liz Earle Splendor Co. Limited

Avon has already established three the latest two-for-one inventory splits: in-may 1996, September 1998 and May 2004. Just before that, Avon had not divide its inventory in 21 years. In October 2007, Avon's Board of Administrators authorized the repurchase of $2 billion dollars of the business common share over a five-year period upon the completion of the then-current share repurchase programs. Avon has had a share repurchase program since 19941.

1 . 2 Risk Factors

Buyers have to consider each of the next risks associated with an investment in Avon's public securities and all sorts of the other information in its 2009 Annual Statement:

5. Avon's capacity to conduct organization, particularly in international marketplaces, may be impacted by political, legal, tax and regulatory risks. The company is usually subject to economical risks associated with its international operations, including exposure to foreign currency fluctuations. Avon operates throughout the world, through businesses in various locations around the world, and derives about 80% of your consolidated income from its operations outside of the U. S i9000. Because of this, motions in exchange costs may have got a significant influence on its profits, cash flow and financial position. There may be no confidence that foreign exchange fluctuations will not have a material adverse influence on its business, results of operations and financial condition.

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