Avon 2008 Annual Report Download - page 37

ing on RVP and advertising, and the impact of unfavorable
foreign exchange on product cost.
Central & Eastern Europe – 2007
Compared to 2006
%/Point Change
2007 2006 US$
Local
Currency
Total revenue $1,577.8 $1,320.2 20% 10%
Operating profit 296.1 296.7 –% (12)%
Operating margin 18.8% 22.5% (3.7) (4.3)
Units sold 6%
Active Representatives 13%
Total revenue increased for 2007, reflecting growth in Active
Representatives, as well as favorable foreign exchange, partially
offset by a lower average order as our Representatives transi-
tioned to a shorter selling cycle. Active Representative growth for
2007 benefited from additional selling opportunities that we
provided to our Representatives through more frequent brochure
distribution beginning at the end of June 2007, which encour-
ages more frequent customer contact.
The region’s revenue growth in 2007 was primarily driven by
Russia, as well as growth in all markets in the region. Revenue in
Russia increased over 20% for 2007 due to strong Active Repre-
sentative growth, which benefited from the additional selling
opportunities, as well as favorable foreign exchange. Revenue in
Russia for 2007 also benefited from increased advertising, con-
tinued merchandising improvements, and the launch of “Hello
Tomorrow.”
The decrease in operating margin for 2007 was primarily driven
by higher inventory obsolescence expense, higher spending on
advertising and RVP, partially offset by lower product costs due
to favorable foreign exchange movements and the impact of
higher revenue.
Western Europe, Middle East & Africa –
2008 Compared to 2007
%/Point Change
2008 2007 US$
Local
Currency
Total revenue $1,351.7 $1,308.6 3% 6%
Operating profit 121.0 33.9 * *
Operating margin 8.9% 2.6% 6.3 6.8
Units sold (3)%
Active Representatives 4%
* Calculation not meaningful
Total revenue increased for 2008 due to growth in Active
Representatives and a higher average order, partially offset by
unfavorable foreign exchange. Revenue growth for 2008 was
driven by Italy and Turkey.
Revenue in the United Kingdom in 2008 declined 3% due to
unfavorable foreign exchange. Revenue in the United Kingdom
in local currency increased, driven by an increase in Active
Representatives, benefiting from investments in representative
recruiting. Revenue in the United Kingdom also benefited from
the continued roll-out of PLS and strong merchandising. Revenue
growth in Turkey of 8% for 2008 was due to a larger average
order. Revenue in Turkey also benefited from continued high
levels of investments in advertising and RVP. Revenue in Italy in
2008 increased due to growth in Active Representatives.
The increase in operating margin for 2008 was primarily driven
by lower costs to implement restructuring initiatives, the impact
of higher revenue, lower inventory obsolescence expense, lower
overhead expenses and increased pricing. These benefits to
operating margin were partially offset by the impact of unfavor-
able foreign exchange on product cost and higher spending on
RVP and advertising.
Western Europe, Middle East & Africa –
2007 Compared to 2006
%/Point Change
2007 2006 US$
Local
Currency
Total revenue $1,308.6 $1,123.7 16% 7%
Operating profit 33.9 (17.8) * *
Operating margin 2.6% (1.6)% 4.2 3.1
Units sold 6%
Active Representatives 7%
* Calculation not meaningful
Total revenue increased for 2007 reflecting growth in Active
Representatives, as well as favorable foreign exchange. The
revenue increase for 2007 was primarily driven by growth in
Turkey and the U.K. Revenue growth in Turkey of over 35% for
2007 was primarily due to growth in Active Representatives, as
well as favorable foreign exchange. Revenue growth in the U.K.
of over 10% in 2007 benefited from growth in Active Repre-
sentatives, mainly due to the strength of the Sales Leadership
program, and favorable foreign exchange. Revenue in Turkey
and the U.K. also benefited from new product launches and
significant investments in advertising and RVP.
Operating margin for 2006 was suppressed by 1.9 points due to
$21.0 of expense associated with the resolution of a value-
A V O N 2008 31