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Avon (NYSE:AVP) announced increased sales. But when you wipe the face cream off they actually had a Q3 operating profit decrease of 32%. The profit margin dropped from 13.1% to 8.1%. The culprit has been fingered as a $40 million dollar write down of inventories. They also claim to be doubling advertising from last years levels. Now lets think. Avon is sold by rep’s so as to avoid the need for big advertising. Also where can you spend big advertising dollars? Usually this involves western markets and Japan; both area’s are experiencing downward Q3 sales. But where is the growth? Latin America and China do not have a comparable big media spend capability. Are they really placing their advertising bets in the correct market? Do they remember or recognize their core competency in using representatives? Look for rocky results until more reality checks reach the boardroom.

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