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Will pulling out of the US help to recover Avon’s performance?

By Michelle Yeomans+

23-Jun-2014
Last updated on 23-Jun-2014 at 15:36 GMT2014-06-23T15:36:00Z

Will pulling out of the US help to recover Avon’s performance?

Following a dismal couple of years for cosmetic giant Avon, could a move like withdrawing from the US market help to recover declining sales?

According to Forbes, North America and Asia have been the weakest links for the global beauty brand when it comes to product and channel presence.

The analysts report that in 2013, Avon’s revenue share from North America declined 17% to $1.46 billion, which also included the divestiture of its Silpada business in July of that year. 

Reasons offered for this include the brand's reorganization of its' independent sales force during the second quarter which resulted in severe disruption in customer-representative relationships.

"There was [also] the fallout of the global hiring system in Q3FY13 and the rollout of the new order management system, as well as a troubled Service Model Transformation (SMT) module in Canada during FY13," the publication reports.

It's been a tough road for Avon..

Sales figures began to noticeably hit back in January 2013 as Avon announced its’ vice chairman Charles Cramb had been fired following on-going investigations into bribery centred on its China operations.

The internal investigations go back as far as June 2008, with efforts to establish whether or not officials at the company have violated the Foreign Corrupt Practices Act  remaining ongoing.

By April '13, Andrea Jung had announced she was stepping down as executive chairman and board member, who was then replaced by Sherilyn S. McCoy , formerly of Johnson & Johnson. The move had some in the industry concerned regarding McCoy's lack of experience in running a public corporation.

Between March and May, Coty made two unsolicited bids for the troubled giant, firstly at $10bn before upping the offer to $10.7bn, to which Avon rejected the first time claiming that its rival had ‘substantially undervalued’ it and was reported to have ‘ignored’ the second time.

Coty pulled the offer from the table two weeks later to the dismay of a number of financial analysts who felt Avon should have taken an offer that "may be as good as it gets".

By December the company had announced it was pulling out of the South Korea and Vietnam's markets whilst planning to cut 1500 jobs worldwide as it continued to look for ways to stabilize the business at a 'turbulent time'.

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