Beleaguered beauty products company Avon Products Inc. (NYSE: AVP) has struggled for years to turn itself around. When Sheri McCoy was brought on as chief executive a little more than two years ago, she promised a turnaround, but so far has not been able to deliver. That may be about to change, as the company finally takes steps to move past the bribery probe that has been a black eye for Avon since 2008.
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The company said Thursday that it will pay $135 million in fines and fees to settle the U.S. government investigation into whether it paid bribes in China. Some $68 million will go to the U.S. Department of Justice and $67 million to the U.S. Securities and Exchange Commission. Avon’s Chinese subsidiary will plead guilty under the Foreign Corrupt Practices Act in exchange for a three-year deferment of criminal prosecution, after which the charges may be dismissed. This preliminary resolution still needs SEC authorization and court approval.
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Under McCoy, Avon has been cutting costs, leaving unprofitable markets and streamlining its operations. That the cosmetics company still has a long way to go was evident in its first-quarter earnings report released early Thursday. The company reported a net loss of $168.3 million, or $0.38 per share, on total revenue of $2.2 billion. That compared to the year-ago net loss of $13.7 million, or $0.03 per share, and sales of $2.5 billion. Revenue declined across all regions during the period, led by a 22% drop off in North America.
Avon shares were down more than 12% Thursday mid-day, after earlier setting a new 52-week low of $13.22. The share price is about 23% lower than when McCoy took up the reins, while the S&P 500 is up more than 30% in that time. Only time will tell if Avon shares have hit bottom, and it would take some courage for bargain hunters to jump in now hoping for the long-awaited turnaround to finally materialize.
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