Spotlight on Avon’s McCoy at CAGNY conference

NEW YORK, Mon, Feb. 18, 2013 — Investors bought everything Avon Products Inc. CEO Sheri McCoy was selling last week, lifting shares 23 percent on the back of solid results and a confidence the new CEO has a turnaround plan.

That makes the spotlight even brighter on McCoy when she takes center stage on Thursday at an important industry analyst conference and details that turnaround. Among her biggest challenges: fix the company’s technology problems, and help the sales representatives generate more cash.

“She has to start speaking with specificity,” said Kathy Gersch, a co-founder of Kotter International, which helps companies implement strategies and whose clients include Coty Inc., a smaller rival that tried to buy Avon last year.

“It’s not just about fixing the company anymore. It’s about moving the company into the future.”

So far, McCoy and finance chief Kimberly Ross, have taken early steps to cut costs, stanch an exodus of representatives in top markets like Brazil and Russia, and start talks with U.S. officials to settle a costly overseas bribery probe.

Wall Street gives McCoy and Ross kudos for being frank about the depth of Avon’s problems and for taking tough steps like cutting 1,500 jobs in December as part of plan to save $400 million in costs a year by 2015; and exiting Vietnam and South Korea where it is too far behind rivals.

The quarterly performance turned in on Tuesday showed some of that progress, cheering investors who had become disappointed by the broken promises in the later years of the tenure of Andrea Jung, McCoy’s predecessor.

Avon shares slide after Coty withdraws takeover offer

NEW YORK, Tue May 15, 2012 – Shares of Avon Products Inc. fell 14 percent in premarket trading on Tuesday, after Coty Inc. withdrew its $10.7 billion takeover bid for the world’s largest cosmetics direct seller, saying Avon had missed its deadline to begin discussions.

Fragrance company Coty last week raised its unsolicited bid, which had the financial backing of Warren Buffett’s Berkshire Hathaway and others, to $24.75 per share from an earlier $23.25 per share offer, and gave Avon a Monday deadline to respond.

Avon’s stock fell to $17.95 before the bell on Tuesday, below where it was trading before Coty’s initial $10 billion bid was made public in April.

“While Coty’s bid provided a floor under Avon’s stock, the withdrawal of this bid will push it to its fundamental level,” BMO Capital Markets analyst Connie Maneaty wrote in a note.

Avon, which had rejected all of Coty’s earlier bids without entering into discussions, said on Sunday that it would respond to Coty’s latest offer within a week. However, Coty withdrew its proposal on May 14, five days after raising its bid.

“Shareholders may be disappointed to see Coty walk away, rather than pushing for a transaction,” Victoria Collin of Atlantic Equities LLP wrote in a client report.

The news leaves Avon shareholders hoping new CEO Sheri McCoy can spark a turnaround at the company that has been struggling with plummeting profits on falling sales both at home and in some international markets.

“Ultimately the value at Avon that can be unlocked, if correctly executed, should be worth over $25/share,” Collin said.

Avon calling: company’s profit sinks as sales continue to slide

NEW YORK, Tue May 1, 2012 – Avon Products Inc. reported a 2 percent drop in quarterly sales after seeing the number of active sales representatives fall and the company dealt with higher costs.

Avon, the world’s largest direct seller of cosmetics, also said net income fell 81.5 percent in the first quarter, hurt by more “reps” leaving, with the exodus in North America the most pronounced.

The company, which last month rebuffed a $10 billion takeover bid from smaller rival Coty Inc., last year shelved a top-to-bottom business review until its new CEO started.

Sheri McCoy, previously a senior executive with Johnson & Johnson, took the reins of the company on April 23, replacing Andrea Jung after a 12-year stint.

But in a statement on Tuesday, the company’s finance chief Kimberly Ross said only that the Avon would discuss its growth strategy “at the appropriate time.”

Avon reported a net profit of $26.5 million, or 6 cents per share, on revenue of $2.58 billion in the quarter that ended March 31, compared with net income of $143.6 million, or 33 cents, on revenue of $2.63 billion a year earlier.

Avon names Johnson & Johnson’s Sherilyn McCoy as CEO

NEW YORK, Mon Apr 9, 2012 – Avon Products Inc. said it named Johnson & Johnson executive Sherilyn McCoy as its chief executive officer, effective April 23.

The world’s largest direct seller of cosmetics, which rejected a takeover bid from fragrance company Coty Inc. last week, had announced in December that it would look outside for a new CEO and that current Chairman and CEO Andrea Jung would become executive chairman.

McCoy, 53, was with the pharmaceutical company for three decades, and most recently served as vice chairman of Johnson & Johnson’s pharmaceutical, consumer, corporate office of science and technology, and information technology divisions.

McCoy was promoted to the post of vice chairman at J&J in December 2010, setting her up as a possible successor to CEO William Weldon. But in February, J&J announced that Alex Gorsky, who was named vice chairman at the same time as McCoy, would be the company’s CEO, effective April 26.

McCoy joined J&J in 1982 as a scientist in the company’s personal products unit. She had been in charge of J&J’s pharmaceutical division since 2009 and has held senior management roles in the company’s medical device business.

Since January 2011, McCoy also ran J&J’s consumer products business, which had been besieged by a series of recalls of an array of brands, including Tylenol.

In a statement, Weldon said McCoy “was instrumental in helping to bring stronger strategic focus to our pharmaceutical business as it builds a robust pipeline and launches important new medicines; and to our consumer business as it leverages the success of its iconic brands and worked to resolve some recent challenges.”

Avon rejects $10 billion takeover bid from beauty company Coty

NEW YORK, Mon Apr 2, 2012 – Beauty company Coty Inc. said on Monday it offered to buy Avon Products Inc. for $10 billion, but the bid was rejected by the cosmetics direct seller, which is grappling with sliding sales in key markets and a bribery probe.

Coty, whose products include fragrances for celebrities including Beyonce and Lady Gaga, said it had no plans to make a hostile bid but had been “unsuccessful” in getting Avon to talk about a deal.

Coty, a fast growing privately held company majority-owned by John A. Benckiser, is offering $23.25 per share, a 20 percent premium over Avon’s Friday closing price of $19.36 on the New York Stock Exchange.

Shares of Avon rose 19.3 percent to $23.10 in premarket trading.

Avon, in a statement on Monday, rejected the offer, saying it “substantially undervalues” the company.

Avon is searching for a new CEO to replace Andrea Jung, who has held the reins since 1999. Avon has said the new CEO will undertake a top-to-bottom review of the struggling company, which is also dealing with a probe into whether it broke U.S. anti-bribery laws in China.

Avon said that having a new CEO will create a “greater opportunity” to increase the company’s value beyond what Coty is offering.

The company is facing a long decline in sales and the number of sales representatives in the United States. During the holiday period, sales in key emerging markets like Brazil and Russia fell.

Coty said it originally offered $22.25 per share in early March but failed to entice Avon into talks. It said it went public with its latest offer after sending three letters to Jung but failing to draw Avon into discussions.

“We do not understand how your Board’s unwillingness to discuss our proposal can serve the best interests of Avon’s shareholders,” Coty Chairman Bart Becht said in letter to be delivered to Jung on Monday.

Avon Ladies see need for complete company makeover

NEW YORK, Fri Mar 16, 2012 – Avon Products Inc’s. next chief executive officer will face a litany of challenges. One of the biggest will be to re-energize the iconic “Avon Ladies,” the company’s diminished and often demoralized army of U.S. sales representatives.

The world’s largest direct-selling cosmetics company, famous for the “Ding Dong, Avon Calling” advertisements in the 1950s and 1960s, is more in need of a complete makeover than just a touch-up, according to more than a dozen sales “reps.”

In interviews, they called for improved commissions, a break on what they pay for brochures, less pressure on them to recruit new reps, and more exciting products to compete with popular brands like LVMH’s Sephora.

Avon is searching for a new CEO to replace Andrea Jung, 53, who is stepping down after years of U.S. sales declines and, more recently, poor performances in key markets such as Brazil and Russia. The company also faces a federal probe into whether it broke U.S. anti-bribery laws overseas.

The yet-to-be-named CEO will have the large task of overseeing a major review of Avon’s business planned for this year. He or she will have to start by winning back the confidence of sales reps like Joan Dikowitz, a 63-year-old school bus driver from Tilson, New York.

Dikowitz, who sells Avon products for extra cash, says she makes about $300 a month in commissions, barely half of what she used to earn a few years ago.

“It’s not as lucrative. Absolutely,” Dikowitz said. She sees little potential in the business and no longer bothers to hunt for new customers.

The number of active Avon reps in North America fell 8 percent in 2011, leaving an estimated 420,000 in the United States.

U.S. presents evidence to grand jury in Avon case: report

WASHINGTON – Federal prosecutors have presented evidence to a grand jury against U.S. executives of cosmetics company Avon Products, in a case that probes whether those executives broke foreign bribery laws, the Wall Street Journal said.

In 2008, Avon said that it had started an internal investigation into whether it had violated the Foreign Corrupt Practices Act, which bars U.S.-linked companies from paying bribes to officials of foreign governments.

U.S. authorities are studying a 2005 internal audit report by the company that concluded Avon employees in China may have been bribing officials in violation of the Foreign Corrupt Practices Act, the Journal said, citing three people familiar with the matter.

The federal authorities are probing whether current or former executives ignored the audit’s findings or actively took steps to conceal the problems, both potential offences, the newspaper said.

“We’re not aware that a federal grand jury is investigating this,” an Avon spokeswoman told the Journal.

She declined to confirm to the paper whether there had been an audit in 2005 and declined to discuss how executives handled any such audit.

Avon could not immediately be reached for comment by Reuters outside regular U.S. business hours.

In January, Avon’s former CFO Charles Cramb left the company amidst a probe initiated by the U.S. Securities and Exchange Commission.

Avon under SEC investigation for bribery charges; shares drop

NEW YORK ― U.S. regulators are formally investigating whether Avon broke bribery laws overseas, and the cosmetics company said it was again reassessing its strategy after quarterly profit fell far short of expectations.

Shares of Avon fell as much as 19.6 percent on Thursday, as analysts questioned whether the company can come up with a turnaround plan as quickly as it expects to.

Analysts, as they have in past quarters, again took Chairman and Chief Executive Andrea Jung to task during the company’s quarterly conference call.

“Why should investors believe management and the board have any control over the business at this point?” asked Stifel Nicolaus’ Mark Astrachan, who downgraded Avon to “hold.”

“Look, the buck stops with me,” replied Jung, who has been CEO since 1999 and chairman since 2001.

U.S. regulators also subpoenaed Avon Products Inc over its contact with analysts and others as part of an investigation related to fair disclosure under Regulation FD.

Under Jung, Avon has turned in poor performances in Brazil and Russia, poured tens of millions of dollars into its international bribery investigation and struggled to stem declines in a sluggish U.S. market.

Avon, which has been celebrating its 125th anniversary with celebrity-studded events throughout the year, now plans to assess long-range business plans and give an update at a meeting during the first quarter of 2012.

“It strikes me that you guys are so totally screwed up, in so many ways, the change has to be radical,” said Citigroup analyst Wendy Nicholson, who noted that a first-quarter meeting may not give Avon enough time for a comprehensive review.

Another potential red flag is that Avon cannot fully fund its dividend with free cash flow. The payout was raised to a quarterly rate of 23 cents per share earlier this year.