Avon falls off the S&P 500
Avon moves to the S&P MidCap 400 index, which measures the financial performance of mid-sized companies. By contrast the S&P 500 tracks companies with over $10bn in market capitalization value. Avon is currently valued at only $3.2bn, according to a CNNmoney report.
The change, done in the name of index maintenance, leaves only two prominent personal care companies on the S&P: Estée Lauder (EL) and Procter & Gamble (PG).
Selling the product, not the company
Possible equity investment deals, acquisitions, and mergers have been rumoured for some years. And, CNNmoney reminds us that “Avon had a chance to save its investors from these big losses back in 2012. But the company turned down a $10.7 billion takeover offer from rival Coty.”
Nonetheless, Avon is holding on to its essential business and taking steps to incrementally relaunch the iconic brand for the digital age. “The Avon Representative and her social circles have been the core of our business for over 125 years,” Mark Harker, vice president of Avon North America Marketing stated.
Late last year Avon unwrapped an email marketing platform, social media resources, and a refreshed e-commerce site that all facilitate digital engagement among representatives and their customers. “The new site and a recently relaunched social media center help to forge strong connections between the Representative and her consumers. We are giving her the tools, training and incentives to be a successful multichannel social seller,” he added.
The S&P 500 index exists as a standard by which investors and portfolio managers gauge the success of a comparable, actively managed investment portfolio. For this purpose Avon’s financial performance is no longer useful.
“Avon's last quarter was a distinct disappointment, and the company’s projections for 2015 along with its $1.6bn in debit makes the stock a nightmare for any portfolio manager, said Jim Cramer, commenting for TheStreet.
Time to regroup
Already this year Avon has made several moves to curtail its international business and economize operations here in the US.
In January, Avon Canada partnered with a logistics provider for its product distribution needs. And doing so meant that company staff was hugely reduced at Avon’s distribution center in Pointe-Claire, Quebec. Company spokesperson Lindsay Fox explained this change at the time saying it was made so Avon could “remain competitive and reduce costs.”
Also, last month Avon shuttered its business in 16 Caribbean nations. This move was made expressly to allow the company to “focus its recourses on improving its US business,” said Fox.
Avon announced a cost-cutting strategy in 2012 with the intention of cutting $400m in spending by next year. These recent adjustments to the company’s global business will likely help Avon meet that objective.