The skin care brand switched hands for £140 million in an all-cash deal. Avon decided to take the direction because it had been registering regular poor performance. There is, therefore, a need to change gears so that the firm can try and salvage a reputable performance.
Avon Products, Inc. (NYSE:AVP) had acquired the skin care brand in 2010 and operated it as a standalone business. The division brought in 1% of the company’s adjusted operating proceeds and total revenues in 2014. The divestment deal took place on June 9. The company will use the proceeds from the same to redeem the 2.375% Notes worth $250 million that will expire in March 2016. The company also plans to use the sale as a means to strengthen its capital structure.
Since 2011, Avon Products, Inc. (NYSE:AVP) has been registering poor performance. Sales in 2014 dropped by 11% to $8.9 billion, mostly because of unfavorable economic conditions. The Latin American region was the worst hit sections of the business. It accounts for more than 50% of the company’s revenues. North America which accounts for more than 10% of the firm’s revenues was also affected. The year also marked major restructuring efforts for the company. There are rumors that Avon might incorporate more restructuring strategies in the future.
Avon’s first quarter results for 2015 indicated that the company dropped by a huge 18% margin to $1.8 billion. This represented a 44% decline from the figures recorded in the first quarter of 2014. An analysis from Brand Finance indicated that Avon had 39% brand erosion. The company claims that its poor performance is as a result of the changing social and economic aspects of the markets, thus resulting to low popularity. The company hopes that the sale will help to streamline the business towards more efficiency while it works to improve the overall performance.