Shares of door to door cosmetics and beauty products giant, Avon Products Inc. (AVP: Charts, News) closed down -1.73 or 8.0 percent to $19.87 per share on Tuesday, after the company reported an 82 percent drop in first quarter earnings. Avon reported a net profit of $26.5 million or $0.06 per share, versus net income of $143.6 million or $0.33 per share for the same period one year ago.
With the exclusion of certain items, the company earned $0.10 per share, versus $0.37 in last year’s first quarter compared to an analyst poll by Thomson Reuters (TRI: Charts, News) which forecast the company would make $0.28 per share. Revenue fell by 2 percent, from $2.63 billion to $2.58 billion; the analyst consensus was for revenue of $2.52 billion.
New York City based Avon Products Inc. is the fifth largest beauty products company in the world and the world’s largest company dedicated to direct sales to the public. The company operates in more than 140 countries around the world and has an army of over six million sales representatives.
The company began laying off corporate employees in an attempt to improve margins, which have contracted significantly due to increased labor costs in Brazil and other international markets. In addition, heated competition from stores and cheaper products in the United States put pressure on the firm.
Avon recently hired Sherilyn S. McCoy, former Vice Chairman of the Executive Committee for pharmaceutical giant Johnson and Johnson (JNJ: Charts, News), as new Chief Executive Officer on April 10th. Ms. McCoy replaced Andrea Jung who went on to the Executive Chairman position after 12 years as CEO.
In an interview after the earnings release, Ms. McCoy answered when asked on her view of a larger-scale, broader based restructuring of the company, “I think what we need to be focused on is, how do we stabilize, making sure that people are clear around their accountabilities. I’m not sure that an overall restructuring makes sense. It may be just a better alignment of how we are going about driving the business.”
On April 2nd, privately held Coty Inc. offered $23.25 per share in an unsolicited bid for the company’s 430.77 million shares outstanding, totaling more than $10 billion. Avon responded to the bid rejecting the offer, saying it “substantially undervalues” the company despite the offer being 20 percent higher than where the stock was priced at the time.
After Coty’s bid announcement, Standard and Poor’s Rating Service put Avon’s corporate credit rating of “BBB” and its short term rating of “A2″ on CreditWatch with negative implications. S&P said that if a deal went through between Coty and Avon, it would include “meaningful additional debt” for Avon.
Avon Products stock is back where it was trading before the Coty bid was announced on April 2nd, which might make shareholders put pressure on Avon’s board to accept the Coty offer. Nevertheless, if the stock price declines further, it could give Coty additional leverage to buy Avon.
Other News About AVP
Avon Investors Vote for CEO in Pushing Coty to Raise Bid
Avon shareholders want more from Coty for their shares.
Avon Profit Trails Analysts’ Estimates As Costs Increase
Avon earnings weaken as costs in Asia Rise.
Other Stocks in the News
Facebook Said to Begin IPO Road Show as Soon as Next Week
Facebook will begin marketing its shares in a “dog and pony” show.
Phillips 66 shares debuting on NYSE
New company shares begin trading of ConocoPhillips spinoff.
Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc.
No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions.
We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.