Avon's Andrea Jung loses CEO title
Avon's Andrea Jung loses CEO title
By Msnbc.com staff and wire
The list of women CEOs in the U.S., never very long, is losing one of its most prominent names.
Avon Products Inc., the global beauty company, said it has begun a search to replace chief executive Andrea Jung, who will remain as chairman. Jung has attracted the ire of investors because of slumping sales and a federal probe about whether the company broke bribery laws overseas.
Jung will be named executive chairman beginning in the new year, Avon said Tuesday, adding that Jung will work with the board to find a replacement.
"The stock has been cut in half this year," Ali Dibadj, analyst at Sanford C. Bernstein, said. "The trust between investors and management has been severed. There have been a few times where expectations have been laid out there and have not been met."
Avon in October said that the Securities and Exchange Commission was investigating the company's contact during 2010 and 2011 with certain analysts and other representatives of the financial community. The company also reported third-quarter profit that fell below analyst expectations, with Brazil weighing on earnings as the result of implementation of a new computer system, while tough economic conditions also hurt sales in other markets.
Jung has been Avon's CEO since 1999 and is credited with helping to grow the company in the late 1990s and early 2000s, as it continued to expand, bringing the prospect of a career or even just some extra pocket money to women from South Africa to South Korea.
But in the past several years, Avon has turned in poor performances in key markets such as Brazil and Russia, poured tens of millions of dollars into its international bribery investigation and struggled to stem declines in a sluggish U.S. market.
Aside from saying in October that the SEC was conducting its own bribery probe, the company also said the commission was looking into whether the company violated disclosure laws in contacts with analysts and others.
Avon shares have fallen 44 percent this year, while the Standard & Poor's 500 Index is down only 2.5 percent.
Though the stock rallied on the announcement of a CEO change on Tuesday, analysts were skeptical about the impact of the move.
"What you can say is the company is going to look for a CEO who hopefully will be able to right-size the fundamentals. But it's too soon to say anything about the turnaround itself," BMO Capital Markets analyst Connie Maneaty said.
Jung is popular with the representatives who sell the company's products, and at one time were known as "Avon Ladies."
That popularity might be one reason Jung is staying on as chairman, Dibadj said.
"Andrea is extraordinarily good at working with the representatives, and letting them down in some sense, very hard, might not be the best business decision," he said.
Jung's successor will need to be somebody who can also inspire the representatives, but at the same time improve operations and set out a vision beyond the "boom and bust" cycle Avon has endured, he said.
Bottom Line - Avon's Andrea Jung loses CEO title
Re: Avon's Andrea Jung loses CEO title
Even getting big name celebrities like Reese Witherspoon can't turn this clunker around. Avon has been around for years and is one of the less egregious MLMs out there, but the fact remains that is uses the flawed MLM marketing method that is not sustainable and has a turnover of 56% a year according to figures from the DSA. So, no matter how good intentioned many on the sales force may be, with hundreds of thousands of reps running around, tremendous competition in the beauty products industry and a finite number of customers available, I don't see it getting much better. With the internet folks can research before getting involved in deals like this and who knowing that the vast majority are going to waste loads of time with no chance to profit will want to???
Soapboxmom
Re: Avon's Andrea Jung loses CEO title
Quote:
Avon (
AVP) said Wednesday it will cut 1,500 jobs globally over the next year and exit South Korea and Vietnam as it looks to shed the excess fat from its operations and hone in on faster growing "high priority" markets.
The worldwide streamlining will help the New York-based beauty products retailer achieve annual cost savings of $400 million by the end of 2015.
“In order to turn around the business, we are focused on driving top-line growth and aggressively managing our cost base,"
Avon CEO Sheri McCoy said in a statement. “The decisions outlined today are necessary to stabilize the company and begin the process of returning
Avon to sustainable growth."
Avon anticipates total charges related to the cutbacks of $80 million to $90 million before taxes, of which about $50 million to $60 million will be recorded in the fourth quarter with the remainder in the first half of 2013. A majority of the costs will be severance related, followed to a lesser extent by accelerated depreciation.
The
direct seller of beauty products posted an 81% decline in third-quarter profit last month amid weaker sales performance as it continued to bleed active representatives. At the time, it had unveiled a three-year growth plan aimed at lowering costs by at least $400 million.
MLM is a fatally flawed business model. The reps are leaving in droves as the legions trapped at the bottom of this pyramid can't make money. Needless to say much of the company's revenue probably is generated by the purchases of these desperate reps who are jumping ship. MLM is a math game and will never be sustainable!
Re: Avon's Andrea Jung loses CEO title
Quote:
Originally Posted by
Soapboxmom
MLM is a fatally flawed business model. The reps are leaving in droves as the legions trapped at the bottom of this pyramid can't make money. Needless to say much of the company's revenue probably is generated by the purchases of these desperate reps who are jumping ship. MLM is a math game and will never be sustainable!
Yep. Just like Herbalife.
This is what happens when you have an organization built on nothing but internally consuming distributors (shops with no products on the shelf).
When they don't make money recruiting others who would like to have their very own shops with no products on the shelves who are their own best and only customer, they tend to leave.......and join some other nonsense that's got a little bit more glam.
MOST MLM's have this same problem. Very few exceptions.
