Caught Without Makeup? Investors Figure Avon, Looking Ugly Just Now, Will Get Back to Pretty
Sheri McCoy, a former Johnson & Johnson (JNJ) exec now running Avon Products (AVP), was blunt when Avon reported earnings last week. She called the results “not good” and said “they reflect the complex challenges that Avon faces.”
Indeed, net income plunged 70% to $62 million. Foreign exchange rates hurt it, but so did the fact that fewer women bought its makeup from its army of discontented door-to-door saleswomen. Besides that, there’s that matter of whether Avon bribed officials overseas. The company’s talking with the feds about settling that.
Avon reported lower revenue growth in every category:
Avon shares have held up better than earnings, so the PE ratio is higher:
Why? Investors may be seeing signs –- like blunt talk from McCoy -– that the chief with big pharma background may be able to address the company’s troubles.
But it also could be that resolving the bribery probe would clear the way for a takeover. As YCharts’ Dee Gill explained, Avon is far bigger in sales than Estee Lauder Companies (EL), Elizabeth Arden (RDEN) and Revlon (REV), but its foothold in international markets is enticing to potential suitors.