07.01.16
New York, NY
212.282.5000
www.avoncompany.com
Sales: $4.5 billion for skin care, fragrances and color. Corporate sales: $6.0 billion.
Key Personnel: Sheri McCoy, chief executive officer; James S. Scully, executive vice president, COO and CFO; Fernando J. Acosta, executive vice president, chief marketing and social selling officer; Jeff Benjamin, SVP, general counsel and chief ethics and compliance officer; John Higson, executive vice president, commercial business operations; Susan Ormiston, senior vice president, human resources and chief human resources officer; Nilesh Patel, senior vice president and president, Asia Pacific.
Major Products: Color—Avon Makeup Collection; Avon Naturals and Foot Works; Skin Care—Anew, Anew Clinical, Anew Genics, Clearskin Professional and Avon Solutions; Fragrances—Outspoken and Outspoken Intense by Fergie, Derek Jeter Driven and Derek Jeter Black, Hervé Léger Homme, Step into Sexy, Scentini Fragrance Collection, Rare Diamonds, Eternal Magic, Far Away.
New Products: Mark—Hawaii Five Oh! eyeshadow, Sunset Glow face bronzer, Nailed It Maui Bliss mini gel nail lacquers, Gel Finish 7-in-1 nail enamel Gel Finish topcoat, Maui Bliss body mist and body wash. Anew—Skinvicible Day lotion, Anew Clean Illuminating Rich cleansing foam, Anew Clean Comforting Cream Cleanser & Mask, Anew Clean Purifying Gel Cleanser, Anew Clean Cleansing Brush. Avon—Senses Ocean Refreshing Blue shower gel, body lotion and body spray, Senses Lily and Honeysuckle Blossom bubble bath. Fragrance—Avon Luck La Vie EDP and Night Magic cologne spray.
Comments: Do not adjust your television, nor your magazine nor website. Yes, you are seeing two Avons in The Top 50. After years of declining sales, lawsuits and other woes, Avon’s board of directors had to do something—now the question is, should the board have done something else?
In December, Avon’s board formed a strategic partnership with Cerberus Capital Management, L.P., whereby Avon’s North America business morphed into a privately held company that is majority-owned and managed by Cerberus. Cerberus has invested $170 million for an approximate 80% ownership interest of the North America business, which now operates as New Avon LLC (for more on the New Avon, see p. 94 in this issue). Avon maintains an approximate 20% interest in the North America business.
Cerberus also invested $435 million in Avon Products, Inc. in exchange for an ownership interest of approximately 16.6%. Avon Products, Inc., comprised of the remaining international markets, continues to trade on the New York Stock Exchange under the ticker symbol AVP.
In her note to investors, Avon CEO Sheri McCoy said the board conducted an exhaustive review of strategic options, and the path taken was the best available. Observers weren’t so sure. Analysts’ reactions ranged from “Avon could have done more to extract greater value from this asset” to Avon’s board sold its assets at “fire sale” prices.
What’s done is done and really, something had to be done. Just look at fiscal 2015 results. Corporate sales fell 19% to $6.1 billion and net losses nearly tripled to $1.1 billion. Of course, when you exclude quite a few items—North America sales, the Liz Earle divestiture and “significant tax items in Brazil”— sales grew 5% in constant dollars and the adjusted operating margin for the year was 5.7%.
Avon said its beauty sales rose 3%, driven by 7% growth in fragrance and a 1% gain in color.
In another move, management has embarked on a three-year transformation plan that includes three elements: invest in growth, drive out cost and improve financial resilience.
To that, management could have added—Get the Hell Out of New York! Earlier this year, Avon announced it will transfer its headquarters to the UK. The move is part of the restructuring plan that also involves cutting 2,500 jobs out of its worldwide workforce of 28,300. The company aims to save $350 million during the next three years.
Still, all this moving and maneuvering hasn’t moved the needle yet. For the first quarter ended March 31, sales fell 16% to $1.3 billion. Net losses increased 13% to $165.4 million.
212.282.5000
www.avoncompany.com
Sales: $4.5 billion for skin care, fragrances and color. Corporate sales: $6.0 billion.
Key Personnel: Sheri McCoy, chief executive officer; James S. Scully, executive vice president, COO and CFO; Fernando J. Acosta, executive vice president, chief marketing and social selling officer; Jeff Benjamin, SVP, general counsel and chief ethics and compliance officer; John Higson, executive vice president, commercial business operations; Susan Ormiston, senior vice president, human resources and chief human resources officer; Nilesh Patel, senior vice president and president, Asia Pacific.
Major Products: Color—Avon Makeup Collection; Avon Naturals and Foot Works; Skin Care—Anew, Anew Clinical, Anew Genics, Clearskin Professional and Avon Solutions; Fragrances—Outspoken and Outspoken Intense by Fergie, Derek Jeter Driven and Derek Jeter Black, Hervé Léger Homme, Step into Sexy, Scentini Fragrance Collection, Rare Diamonds, Eternal Magic, Far Away.
New Products: Mark—Hawaii Five Oh! eyeshadow, Sunset Glow face bronzer, Nailed It Maui Bliss mini gel nail lacquers, Gel Finish 7-in-1 nail enamel Gel Finish topcoat, Maui Bliss body mist and body wash. Anew—Skinvicible Day lotion, Anew Clean Illuminating Rich cleansing foam, Anew Clean Comforting Cream Cleanser & Mask, Anew Clean Purifying Gel Cleanser, Anew Clean Cleansing Brush. Avon—Senses Ocean Refreshing Blue shower gel, body lotion and body spray, Senses Lily and Honeysuckle Blossom bubble bath. Fragrance—Avon Luck La Vie EDP and Night Magic cologne spray.
Comments: Do not adjust your television, nor your magazine nor website. Yes, you are seeing two Avons in The Top 50. After years of declining sales, lawsuits and other woes, Avon’s board of directors had to do something—now the question is, should the board have done something else?
In December, Avon’s board formed a strategic partnership with Cerberus Capital Management, L.P., whereby Avon’s North America business morphed into a privately held company that is majority-owned and managed by Cerberus. Cerberus has invested $170 million for an approximate 80% ownership interest of the North America business, which now operates as New Avon LLC (for more on the New Avon, see p. 94 in this issue). Avon maintains an approximate 20% interest in the North America business.
Cerberus also invested $435 million in Avon Products, Inc. in exchange for an ownership interest of approximately 16.6%. Avon Products, Inc., comprised of the remaining international markets, continues to trade on the New York Stock Exchange under the ticker symbol AVP.
In her note to investors, Avon CEO Sheri McCoy said the board conducted an exhaustive review of strategic options, and the path taken was the best available. Observers weren’t so sure. Analysts’ reactions ranged from “Avon could have done more to extract greater value from this asset” to Avon’s board sold its assets at “fire sale” prices.
What’s done is done and really, something had to be done. Just look at fiscal 2015 results. Corporate sales fell 19% to $6.1 billion and net losses nearly tripled to $1.1 billion. Of course, when you exclude quite a few items—North America sales, the Liz Earle divestiture and “significant tax items in Brazil”— sales grew 5% in constant dollars and the adjusted operating margin for the year was 5.7%.
Avon said its beauty sales rose 3%, driven by 7% growth in fragrance and a 1% gain in color.
In another move, management has embarked on a three-year transformation plan that includes three elements: invest in growth, drive out cost and improve financial resilience.
To that, management could have added—Get the Hell Out of New York! Earlier this year, Avon announced it will transfer its headquarters to the UK. The move is part of the restructuring plan that also involves cutting 2,500 jobs out of its worldwide workforce of 28,300. The company aims to save $350 million during the next three years.
Still, all this moving and maneuvering hasn’t moved the needle yet. For the first quarter ended March 31, sales fell 16% to $1.3 billion. Net losses increased 13% to $165.4 million.
