Avon ( AVP) beat third-quarter targets and reaffirmed full-year guidance, but the company warned of weakening trends and said it would discuss its problems with investors next month.

The New York cosmetics giant made $164 million, or 35 cents a share, down from the year-ago $177 million, or 37 cents a share. Revenue rose 4% from a year ago to $1.89 billion, though it was flat in local currencies.

Operating profit decreased 6%, mainly due to gross margin declines caused by unfavorable pricing and product mix and higher consumer and strategic spending. Operating margin was 13.1%.

U.S. third-quarter revenue decreased 6%, with continued lower customer purchase frequency and ongoing competitive intensity. The company also believes that its U.S. business was affected by the impact of higher fuel costs on Avon's Representatives and their customers. Units and active Representatives in the quarter were down 2% and 4%, respectively.

Sales of Beauty products in the U.S. decreased 6%. Beauty Plus sales increased 14%, primarily due to the launch of a foundations business, and Beyond Beauty sales declined 29%, in part reflecting ongoing, planned category repositioning. U.S. operating profit was 11% lower year-over-year due to unfavorable product mix and the revenue decline.

For the full-year 2005, Avon continues to project an earnings-per-share increase of low-to-mid single digits compared with 2004 earnings of $1.77 per share. 2005's expectation includes 20 cents a share of tax benefits primarily from settlements of prior-year audits, partially offset by an impact of 2 cents a share from a revised higher effective rate, both of which were disclosed in the second quarter 2005. 2004's earnings per share included non-recurring tax benefits of 11 cents per share. Full-year revenues are expected to increase mid-single digits (up slightly in local currencies), and full-year operating profit is anticipated to be flat to down somewhat. Full-year cash flow from operations is projected to be in the range of $800 million. The company noted that its guidance does not include the cost of any steps that it might take during the balance of the year to reduce its enterprise expense base.

The company expects consolidated fourth-quarter local-currency revenue growth to be flattish compared with the prior-year quarter. U.S. revenue trends show a weakening from the third quarter's growth rate, primarily driven by further deterioration of consumer activity that reflects the effect of higher fuel costs and the impact of Hurricane Katrina.

The company said it will discuss action plans to address the underlying causes of the continuing broad-based weakness in its business at an investor meeting Nov. 15.

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