Avon and Estee Lauder both lower 2005 expectations

The HBA Expo floor was abuzz that both Avon and Estee Lauder have reduced their earnings expectations for financial year citing the continued rise in oil price that is hitting manufacturing costs, as well as other factors.

Avon announced that and unexpected shortfall in all of its four sales regions will be effecting its original projection by as much as 16%. Avon is still expecting revenue increases though in spike of the current situation.

On the other hand, Estee Lauder expects an approximately 1% hit due to currency translation negatively impacting sales and a 10% hit to their bottom line caused by factors such as expenses relating to closures and over-stocking.

Cosmetic and personal care manufactures all expressed concern yesterday because of economic uncertainty and the fact that raw material costs especially in packaging, and transportation are expected to skyrocket.

Distributors of packaging complained that increases on inbound freight on packaging such as glass bottles have been affected by as much 25% this year, which does not even factor in the latest fuel increases.

Manufacturers of packaging and packaging distributors have no choice but to pass these increases on to their customer, which has everyone up in arms. Since packaging accounts for about 10% of most products cost, this is going to effect bottom lines if even the most profitable companies.

The announcements are early signs that cosmetics manufacturers are in for a rough storm, as economic conditions continue to look doubtful.

Both the Packaging and Industrial Films Association (PIFA) and Flexible Packaging Association (FPA) warned its customers of significant price increases.

On a brighter note, two suppliers of printed labels I interviewed both claim that the do not expect any price increases that they will have to pass onto their customers and that they are both doing so well they are willing to absorb the increases of their raw material costs.