Avon Shares Tumble After Cosmetics Company Posts Unexpected Lossby
Avon Products Inc. shares fell to the lowest price in seven weeks after the cosmetics company reported an unexpected first-quarter loss, hurt by the strong U.S. dollar, restructuring costs and a writedown of its Venezuela business.
The loss amounted to 7 cents in the period, the New York-based company said in a statement Thursday. Analysts had projected profit of 3 cents on average.
The results signal that Avon faces an uphill battle in turning around the business. The makeup seller is working on a cost-cutting plan that includes eliminating about 2,500 jobs and moving its head office to the U.K.
The shares dropped as much as 8.1 percent to $3.95 on Thursday in New York, the lowest intraday price since March 16. The stock had already lost almost half its value over the past 12 months.
In March, Avon offloaded its domestic operations in a deal with private equity firm Cerberus Capital Management LP. Cerberus acquired majority control of the North American business, letting Avon shift its focus overseas, where door-to-door cosmetics sales have bigger growth potential.
The advance of the dollar against other currencies has eroded the value of Avon’s sales overseas. The company also faces headaches in Venezuela, where the inability to exchange the local currency forced the company to split off that business and write down its assets.