(Dollars in millions, except per share data)

OVERVIEW

We are a global manufacturer and marketer of beauty and related products. Our business is conducted worldwide, primarily in the direct selling channel. We presently have sales operations in 66 countries and territories, including the United States, and distribute products in 44 more. Our reportable segments are based on geographic operations in six regions: Latin America; North America; Central & Eastern Europe; Western Europe, Middle East & Africa; Asia Pacific; and China. We centrally manage global Brand Marketing, Supply Chain and Sales organizations. Product categories include: Beauty, which consists of cosmetics, fragrances, skin care and toiletries ("CFT"); Fashion, which consists of fashion jewelry, watches, apparel, footwear and accessories; and Home, which consists of gift and decorative products, housewares, entertainment and leisure products and children's and nutritional products. Sales from Health and Wellness products and mark., a global cosmetics brand that focuses on the market for young women, are included among these three categories based on product type. Sales are made to the ultimate consumer principally through direct selling by approximately 5.8 million independent Representatives, who are independent contractors and not employees of Avon. The success of our business is highly dependent on recruiting, retaining and servicing our Representatives.

We view the geographic diversity of our businesses as a strategic advantage in part because it allows us to participate in higher growth beauty markets internationally. In developed markets, such as the United States, we seek to achieve growth in line with that of the overall beauty market, while in developing and emerging markets we seek to achieve higher growth targets. During 2008, approximately 80% of our consolidated revenue was derived from operations outside the U.S. When we first penetrate a market, we typically experience high growth rates and, as we reach scale in that market, growth rates generally decline.

During the first quarter of 2009, revenues decreased 13%, impacted by unfavorable foreign exchange and the depressed economy. Local currency revenue increased 3%, with increases in Latin America, Central & Eastern Europe, Asia Pacific and China. Sales from products in the Beauty category decreased 12%, due to unfavorable foreign exchange. On a local currency basis, sales of products in the Beauty category increased 5% due to a 2% increase in units and 3% increase in net per unit. Active Representatives increased 7%. Unfavorable foreign exchange lowered operating margin by an estimated 4 points year over year, approximately 3 points from foreign-exchange transaction and approximately 1 point from foreign-exchange translation. See the "Segment Review" section of Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information related to changes in revenue by segment.

We expect that the global economic pressures and negative impact of foreign currency will continue or could worsen in the foreseeable future and 2009 will be a challenging year. Given the current macro-economic environment, we expect that revenue growth in 2009 will be somewhat lower than our long-term revenue growth, which is expected to average mid-single digits, excluding the impact of foreign exchange. We also expect that operating margin in 2009 will continue to be pressured by the unfavorable impacts of foreign exchange, both foreign currency translation and the impact of transaction losses caused by changes in foreign exchange. Operating margin will also be negatively impacted by additional restructuring charges during 2009. We believe benefits from our strategic sourcing initiative ("SSI") program, focusing on manufacturing productivity, changing sourcing of raw materials and finished goods to help mitigate foreign exchange impacts, and some softening in commodity costs will help to partially offset the negative impact of foreign exchange. We will continue to look for ways to transform our cost structure and intend to reduce non-strategic spending during 2009, while continuing our strategies of investing in advertising and our Representatives, which we continue to expect will remain constant as a percent of revenue for the full year on a combined basis. We will also continue to offer an increased assortment of "smart value" products, which are quality products at affordable price points, and promoting our Representative earnings opportunity to a wider audience.

We believe that our operating cash flow and global cash balances of $1.6 billion, coupled with the continuing execution of our turnaround strategies and the competitive advantages of our direct selling business model, will allow us to look beyond the anticipated 2009 challenges and continue our focus on long-term sustainable, profitable growth.

Our strategic initiatives include advertising and representative value proposition ("RVP") investments, the product line simplification initiative ("PLS"), SSI, enterprise resource planning system, zero-overheard-growth philosophy and sales and operation planning process. We are also implementing restructuring initiatives under the 2005 and 2009 Restructuring

AVON PRODUCTS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Programs. For a description of these initiatives, please refer to Item 7 of our 2008 Annual Report on Form 10-K ("2008 Form 10-K"). With regards to our four major initiatives, SSI, PLS and the two restructuring programs, we remain on track with our expectations included in the 2008 Form 10-K. During the first quarter of 2009:

• we invested approximately $11 incrementally in our Representatives through RVP by continued implementation of our Sales Leadership program, enhanced incentives, increased sales campaign frequency, improved commissions and new e-business tools. This incremental investment was ahead of revenue growth;

• we realized benefits of approximately $45 from SSI; and

• actions implemented under the 2005 Restructuring Program resulted in savings of approximately $75, as compared to savings of approximately $63 in the first quarter of 2008. See Note 9, Restructuring Initiatives, of the Notes to the Consolidated Financial Statements, for more information on our restructuring programs.

NEW ACCOUNTING STANDARDS

Information relating to new accounting standards is included in Note 1, Accounting Policies, of the Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS-THREE MONTHS ENDED MARCH 31, 2009 AS COMPARED TO MARCH 31,
2008

Consolidated



                                                                                     Favorable
                                                                                   (Unfavorable)
                                                                                      %/Point
                                                     2009            2008             Change
Total revenue                                      $ 2,179.8       $ 2,501.7                 (13 )%

Cost of sales                                          811.2           923.7                  12 %
Selling, general and administrative expenses         1,200.2         1,281.8                   6 %

Operating profit                                       168.4           296.2                 (43 )%

Interest expense                                        24.8            26.1                   5 %
Interest income                                          7.3             9.2                 (20 )%
Other expense, net                                       4.2              .7                (500 )%

Net income attributable to Avon                        117.3           184.7                 (36 )%

Diluted earnings per share                               .27             .43                 (37 )%

Advertising expenses (1)                                78.2            81.6                   4 %

Gross margin                                            62.8 %          63.1 %               (.3 )
Selling, general and administrative expenses
as a % of total revenue                                 55.1 %          51.2 %              (3.9 )
Operating margin                                         7.7 %          11.8 %              (4.1 )
Effective tax rate                                      19.9 %          33.2 %              13.3

Units sold                                                                                    -
Active Representatives                                                                         7 %

(1) Advertising expenses are included within selling, general and administrative expenses.

AVON PRODUCTS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Revenue

Total revenue decreased 13% in the first quarter of 2009 with unfavorable foreign exchange contributing 16 percentage points to the revenue decline. Local currency revenue increased 3%, with increases in Latin America, Central & Eastern Europe, Asia Pacific and China and decreases in local currency revenues in North America and Western Europe, Middle East & Africa. Active Representatives increased 7%.

On a category basis, the 2009 decrease in revenue was primarily driven by a decrease of 12% in Beauty sales, with decreases in all sub-categories of Beauty. Within the Beauty category, skincare declined 17%, fragrance declined 10% and color and personal care declined 9% each. Fashion sales decreased 12% and Home sales decreased 19%. Local currency sales of our product categories increased 3%, with the Beauty category increasing 5%. Within the Beauty category, local currency sales of color increased 10%, fragrance increased 9%, personal care increased 8% and skincare decreased 4%. Local currency sales of Fashion and Home decreased 1% and 6%, respectively.

Gross Margin

Gross margin decreased 0.3 points in the first quarter of 2009. We estimate that the unfavorable impact of transaction foreign exchange lowered gross margin by over 2 points. We were able to offset most of this negative impact from foreign exchange through improved pricing, manufacturing productivity gains, benefits from SSI and product mix. Since currencies continued to move negatively during the first quarter of 2009 impacting our cost of inventory, we may not be able to offset the negative impact on gross margin as well as we did during the first quarter.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $81.6 in the first quarter of 2009, primarily due to lower advertising costs which decreased by 4%, lower variable expenses such as freight and commissions from decreased revenue and lower costs incurred to implement our restructuring initiatives. During the first quarter of 2009 we recorded $4.5 and $10.0 relating to our 2005 and 2009 Restructuring Programs, respectively. As a percentage of revenue, selling, general and administrative expenses increased by 3.9 points due to:

• the decline in revenues caused by the impact of unfavorable foreign exchange, while selling, general and administrative expenses are disproportionately U.S. dollar based;

• higher brochure costs due to higher cost of paper and additional flyers and brochure pages to offer "smart value" products;

• higher investment in RVP and advertising, as well as increased commissions for sales leadership primarily due to the continued roll-out of this program in Russia;

• higher bad debt expense as a percent of revenues caused by an influx of new Representatives, who normally have a higher rate of default than established Representatives; and

• higher distribution costs as a percent of sales due to the impact of processing more, smaller orders.

See the "Segment Review" section of Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information related to changes in operating margin by segment.

Other Expense

Interest expense decreased slightly for the first quarter of 2009, primarily due to lower interest rates. At March 31, 2009, we held interest-rate swap agreements that effectively converted approximately 53% of our outstanding long-term, fixed-rate borrowings to a variable interest rate based on LIBOR.

Interest income decreased in the first quarter of 2009, primarily due to lower interest rates.

Other expense increased due to unfavorable foreign exchange.

AVON PRODUCTS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Effective Tax Rate

The effective tax rate for the first quarter of 2009 was 19.9%, compared to 33.2% for the first quarter of 2008. The 2009 tax rate includes a one-time benefit of 15.4 points resulting from a reduction in a foreign tax liability as a result of a planning strategy, which benefited the first quarter of 2009 earnings per share by $0.05. Partially offsetting this one-time benefit is a higher tax cost associated with the repatriation of anticipated current year earnings.

Segment Review

Latin America



                                                               %/Point Change
                                                                        Local
                                      2009        2008       US$       Currency
            Revenue                  $ 794.0     $ 864.3       (8 )%         14 %
            Operating profit            88.2       120.6      (27 )%         -
            Operating margin            11.1 %      14.0 %   (2.9 )        (1.7 )

            Units sold                                                        7 %
            Active Representatives                                            7 %

Revenue in the first quarter of 2009 decreased as a result of unfavorable foreign exchange. Local currency revenue increased reflecting growth in Active Representatives, driven by significant investments in RVP, and a higher average order. While revenue grew 13% in Venezuela, the impact of unfavorable foreign exchange rates drove revenue declines of 18% in Brazil and 13% in Mexico. Local currency revenue in the first quarter of 2009 benefited from continued growth in most markets, particularly from growth of 12% in Brazil, 16% in Mexico and 13% in Venezuela.

Local currency revenue growth in Brazil was primarily driven by an increase in average order, as well as an increase in Active Representatives. Local currency revenue growth in Mexico was driven by a significant increase in Active Representatives, partially offset by a lower average order. Revenue growth in Venezuela reflected growth in Active Representatives, as well as increased prices due to inflation.

The decrease in operating margin in Latin America during 2009 was primarily due to the impact of unfavorable foreign exchange. Latin America also experienced improved gross margin due to improved pricing, which was offset by higher investment in RVP.

Currency restrictions enacted by the Venezuelan government in 2003 have impacted the ability of our subsidiary in Venezuela ("Avon Venezuela") to obtain foreign currency at the official rate to pay for imported products. Unless official foreign exchange is made more readily available, Avon Venezuela's operations will continue to be negatively impacted as it will need to obtain more of its foreign currency needs from non-government sources where the exchange rate is unfavorable as compared to the official rate.

At March 31, 2009, Avon Venezuela had cash balances of approximately $151, primarily denominated in bolivars. The last dividends repatriated to the U.S. were during 2007, when Avon Venezuela remitted dividends of approximately $40 at the official exchange rate. Avon Venezuela continues to receive official foreign exchange for some of its imports and other remittances. As a result, we continue to use the official rate to translate the financial statements of Avon Venezuela into U.S. dollars. In 2008, Avon Venezuela's revenue and operating profit represented approximately 4% and 8% of consolidated revenue and consolidated operating profit, respectively.

Inflation in Venezuela has continued to increase over the past few years and it is possible that Venezuela will be designated as a high inflationary economy during 2009. Gains and losses resulting from the translation of the financial statements of subsidiaries operating in high inflationary economies are recorded in earnings. If Venezuela is designated as a high inflationary economy and there is a devaluation of the official rate, earnings will be negatively impacted. For

AVON PRODUCTS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

example, based on the balance sheet of our Venezuelan subsidiary at March 31, 2009, if Venezuela is designated as a highly inflationary economy and there is a 20% devaluation, our pre-tax earnings would be negatively impacted by approximately $32. Additionally, revenue and operating profit on an ongoing basis would be impacted by the devaluation.

North America



                                                               %/Point Change
                                                                        Local
                                      2009        2008       US$       Currency
            Revenue                  $ 525.7     $ 593.6      (11 )%        (10 )%
            Operating profit            22.5        63.9      (65 )%        (63 )%
            Operating margin             4.3 %      10.8 %   (6.5 )        (6.3 )

            Units sold                                                       (9 )%
            Active Representatives                                           -

North America consists largely of the U.S. business.

Revenue in the first quarter of 2009 was impacted by the macroeconomic environment, including deteriorating consumer confidence. Total revenue decreased in the first quarter of 2009 as a lower average order was received from the Representatives. During the first quarter of 2009, sales of Beauty, Fashion and Home declined 8%, 13% and 24% respectively. Given the economic environment, we expect these trends to continue.

While Active Representatives were flat year-over-year our North America business experienced a significant increase in new Representative additions, particularly towards the latter portion of the first quarter of 2009. It is our goal to transform these new Representatives into Active Representatives.

The decrease in 2009 operating margin in North America was primarily driven by the impact of lower revenues and fixed overhead expenses.

Central & Eastern Europe



                                                               %/Point Change
                                                                        Local
                                      2009        2008       US$       Currency
            Revenue                  $ 321.4     $ 421.6      (24 )%          4 %
            Operating profit            48.3        93.1      (48 )%        (29 )%
            Operating margin            15.0 %      22.1 %   (7.1 )        (6.9 )

            Units sold                                                       (3 )%
            Active Representatives                                            9 %

Revenue decreased in the first quarter of 2009 as a result of unfavorable foreign exchange. Local currency revenue increased despite severe economic contraction throughout the region, reflecting growth in Active Representatives, driven by investments in RVP, offset by a lower average order. While the impact of unfavorable foreign exchange rates drove revenue declines of 25% in Russia and 18% in Ukraine, local currency revenue in the first quarter of 2009 grew 6% in Russia and 25% in Ukraine. The local currency revenue increase in Russia for the first quarter of 2009 was primarily due to strong growth in Active Representatives. In late 2008, we completed the roll-out of Sales Leadership and improved the discount structure we offer for Representatives in Russia. The local currency revenue increase in Ukraine for the first quarter of 2009 was driven by strong growth in Active Representatives and a higher average order; however, for the remainder of the year, we do not expect local currency growth rates to be as strong as the first quarter of 2009 in Ukraine given current economic conditions.

AVON PRODUCTS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

The decrease in operating margin was primarily driven by unfavorable foreign exchange, increased investment in RVP, increased brochure costs and bad debt expense, partially offset by lower inventory obsolescence.

Western Europe, Middle East & Africa



                                                               %/Point Change
                                                                        Local
                                      2009        2008       US$       Currency
            Revenue                  $ 243.2     $ 317.0      (23 )%         (2 )%
            Operating profit             6.0        19.3      (69 )%        (43 )%
            Operating margin             2.5 %       6.1 %   (3.6 )        (1.9 )

            Units sold                                                       (6 )%
            Active Representatives                                            4 %

Revenue decreased during the first quarter of 2009 primarily as a result of unfavorable foreign exchange. Local currency revenue decreased slightly as a result of lower average order offset by growth in Active Representatives reflecting further deepening of recessionary pressure on the consumer. Revenue declined 33% during the first quarter of 2009 in the United Kingdom, and the decline was 7% in local currency reflecting consumer pressure caused by the recession, partially offset by an increase in Active Representatives. Revenue in Turkey declined 19% during the first quarter of 2009 due to the negative impact of foreign currency. Turkey's local currency revenue increased 10% during the first quarter of 2009 reflecting an increase in Active Representatives, partially offset by lower average order.

The decrease in first-quarter 2009 operating margin was primarily driven by unfavorable foreign exchange and to a lesser extent, by higher brochure costs and obsolescence expense, partially offset by lower costs to implement restructuring initiatives, which negatively impacted operating margin by 4.2 points in 2008.

Asia Pacific



                                                               %/Point Change
                                                                        Local
                                      2009        2008       US$       Currency
            Revenue                  $ 199.6     $ 217.4       (8 )%          1 %
            Operating profit            15.2        23.0      (34 )%        (19 )%
            Operating margin             7.6 %      10.6 %   (3.0 )        (1.9 )

            Units sold                                                       -
            Active Representatives                                            5 %

Revenue decreased during the first quarter of 2009 due to unfavorable foreign exchange. The region's local currency revenue increase was primarily driven by growth in the Philippines, offset by a decline in Japan. Revenue in the Philippines decreased 4% during the first quarter of 2009 but local currency revenue increased by 11%, driven by growth in Active Representatives, supported by RVP initiatives. Revenue was flat in Japan, and declined low double digits in local currency due to lower sales from both direct mail and direct selling. We continue to see downward pressure in Japan going forward.

Operating margin decreased in the first quarter of 2009, primarily due to unfavorable foreign exchange, increased inventory obsolescence expense and higher investment in RVP and advertising, partially offset by cost saving initiatives.

AVON PRODUCTS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

China



                                                              %/Point Change
                                                                       Local
                                       2009       2008      US$       Currency
             Revenue                  $ 95.9     $ 87.8        9 %           4 %
             Operating profit           13.5       13.6       (1 )%         (4 )%
             Operating margin           14.0 %     15.5 %   (1.5 )        (1.2 )

             Units sold                                                      1 %
             Active Representatives                                         41 %

Revenue increased in the first quarter of 2009, due to favorable foreign exchange and an increase in Active Representatives, offset by a lower average order. The growth in Active Representatives reflects continued expansion of our direct selling efforts, which were supported with continued Representative recruiting, television advertising and field incentives. The lower average order results from the continued expansion of direct selling, as Representatives order in smaller quantities than beauty boutiques, and orders from new Representatives tend to be smaller than the average direct selling order. Revenue growth in China was negatively impacted by a decline in revenues from beauty boutiques as beauty boutiques placed smaller orders, mostly reflecting destocking given the fear of general consumer retrenchment. We believe that our first quarter performance in China is not indicative of full year results, as we expect our revenue growth rates to be higher. Our beauty boutique operators continue to engage in direct selling by servicing our Representatives.

The decrease in first-quarter 2009 operating margin was primarily driven by increased fees paid by Avon to beauty boutiques for providing services to our Active Representatives.

For information concerning an internal investigation into our China operations, see Note 5, Contingencies, of the Notes to the Consolidated Financial Statements.

. . .