Door-to-door beauty giant Avon Products may be forced to stump up in excess of US$132m – around £80m – to settle a US Securities and Exchange Commission (SEC) on Chinese bribery allegations.
So far the ongoing SEC probe has cost the company around $300m in its own internal investigations. The latest figures are well in excess of what Avon originally offered to settle the SEC concerns – and it could still be some time before Avon reaches a deal with the SEC.
Though Avon execs, more broadly, are hopeful of a return to growth by 2016 – Avon has been battling unprofitable markets like South Korea as well as attempting to slash costs – Avon’s share price has halved since 2009 ($14.55 before going to press). Its Far East push was originally designed to help shield it from falling sales on home turf. Yet in its latest numbers, Asia Pacific sales fell 16%. Meanwhile US sales also slipped further.
There are glimmers of light: 2013 operating profits as a whole climbed more than 30% to $427m and Latin American sales are improving. But while the SEC investigation continues, it leaves management and boss Sheri McCoy, who’s headed the $11bn a year company since 2012, considerably distracted.
It has not been an easy time for the company. In its financial report for Q4 and full year 2013 revenue, it reported a 10% drop in Q4 revenue to $2.7bn. Total units also declined by 10%, while the number of active representatives was down 5% on the same period in 2012. Avon's total revenue for 2013 was $10bn, down 6% on 2012. Total units were down 5% on the prior year and representatives were down by 2%. For the full year, total beauty sales declined 7%. However, McCoy commented: “While much work remains to be done, we continue to make progress toward building a better, simpler and more stable business."
