Coverage: Avon CEO to exit amid investor pressure
Avon Products Inc., which has been under pressure from activist investor Barington Capital, said Sheri McCoy will step down as chief executive next year, and the company reported a loss.
Paul R. La Monica of CNNMoney.com had the news:
The news of McCoy’s departure comes one day after Oreo and Cadbury owner Mondelez said that longtime CEO Irene Rosenfeld will give up the top spot at the company later this year.
McCoy, like Rosenfeld, had faced criticism from activist shareholders during her tenure.
But while Mondelez ultimately fended off challenges and continued to keep growing, Avon’s stock has plunged nearly 35% this year and more than 75% over the past few years.
Sales have fallen off the cliff and Avon has racked up significant losses as well. The company warned of another quarterly loss and drop in revenue on Thursday.
Avon, founded in 1886, is now worth just $1.5 billion. To put that in perspective, Avon rival Coty had offered to buy the company for $10 billion in 2012 just before McCoy took over.
Phil Wahba of Fortune reported that McCoy failed to fix the business:
The number of sales representatives, iconically known as ‘Avon Ladies’, has shrunk in all but one of the years of her rein and the declines have continued into 2015. Avon has racked up about $1.8 billion in losses and last year sold off its North American business to private equity firm Cerberus, a huge blow for a company founded in 1886 in New York when a door-to-door bookseller found that the perfumes he mixed himself were popular with his customers.
Ultimately, McCoy was trying to fix an unimaginable mess at a company with operations all over the world, and proved slow to react to market changes such as the impact of e-commerce and changing demographics. The company seemed to be in perpetual turnaround-restructuring mode from which investors had clearly tired since McCoy’s predecessor, Andrea Jung, had herself undertaken a number of reorganizations of the once-iconic company with little to show for it.
McCoy, a 30-year veteran of Johnson & Johnson(JNJ, +0.90%) before Avon, enjoyed a few successes early on, including exiting a few markets. But ultimately the company faced unhappy shareholders, activist investors Barington Capital Group LP and partner NuOrion Partners AG, who were unrelenting for three years in criticizing Avon’s umpteenth turnaround plan. And who can blame them: with sales and the number of representatives falling, it’s clear McCoy’s efforts have never managed to stem decline let alone set Avon up for a future.
Brooke Sutherland of Bloomberg Gadfly writes that Avon needs a miracle worker:
And, absent a time machine, there are no quick fixes.
Could Avon do more on the cost-cutting front? Probably, but that won’t stabilize Avon by itself.
One big motivator for de-bloating Avon’s cost structure and taking that capital infusion from Cerberus was to give it resources to invest in a business model that’s more relevantand attuned to online shopping habits. Worryingly, Avon on Thursday said it was expecting to reduce its planned capital investments by $20 million this year. That will increase free cash flow, but won’t do much to stop the defection of representatives or help it compete with the Birchboxes, Sephoras and Amazon.coms of the world.
Avon has seven months to find a new CEO. If you know any miracle workers looking for a job, send over their names.