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Avon Products and Investors Agree to Avoid Proxy Contest

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Mar. 29 2016, Published 6:31 p.m. ET

Price movement of Avon Products

Avon Products (AVP) has a market cap of $2.0 billion. AVP rose by 8.4% to close at $4.64 per share on March 28, 2016. The price movements on weekly, monthly, and year-to-date (or YTD) bases were -3.1%, 24.1%, and 14.6%, respectively.

Currently, AVP is trading 11.2% above its 20-day moving average, 31.1% above its 50-day moving average, and 9.7% above its 200-day moving average.

The Oppenheimer Mid-Cap Revenue (RWK) invests 0.75% of its holdings in Avon. The ETF tracks a revenue-weighted index of the S&P Mid Cap 400 Index. The YTD price movement of RWK was 3.7% on March 24, 2016.

The iShares Morningstar Small Value ETF (JKL) invests 0.39% of its holdings in Avon. The ETF tracks a market-cap-weighted index of US small-cap value stocks. The index’s stocks range from the 90th to the 97th percentile of the market-cap spectrum, using fundamental factors.

The market caps of Avon Products’ competitors are as follows:

  • Colgate-Palmolive (CL): $62.4 billion
  • Estée Lauder (EL): $34.5 billion
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Avon Products’ agreement with its investors

Avon Products and investor group Barington Capital Group, which includes NuOrion Partners AG and other investors that own over 3% of the company’s outstanding shares, have reached an agreement in connection with its 2016 Annual Meeting of Shareholders.

As per the company filings, “Under this agreement, Barington has been granted the right to approve the appointment of an independent director to the Avon Board that will be selected by the Company and Cerberus Capital Management L.P.”

It also said, “Barington has agreed to withdraw its nominations for election to Avon’s Board of Directors at the Company’s 2016 Annual Meeting and to vote all of its shares in favor of the nominees proposed by the Avon Board.”

This agreement will help to avoid a proxy contest with the investors. Cathy D. Ross has been elected to the company’s board of directors, effective March 24, 2016.

Performance of Avon Products in recent 4Q15 and 2015

Avon Products reported fiscal 4Q15 net sales of $1,607.3 million, a fall of 20.2% compared to net sales of $2,014.1 million in fiscal 4Q14. Sales from the beauty and fashion & home categories fell by 20.9% and 14.4%, respectively, in fiscal 4Q15 compared to fiscal 4Q14.

Its net income and EPS (earnings per share) fell to -$333.4 million and -$0.76, respectively, in fiscal 4Q15 compared to -$330.7 million and -$0.75, respectively, in fiscal 4Q14.

Fiscal 2015 results

In fiscal 2015, AVP reported total revenue of $6,160.5 million, a fall of 19.4% YoY (year-over-year). It reported operating profit of $165.0 million in fiscal 2015 compared to $434.3 million in fiscal 2014.

Its net income and EPS fell to -$1,148.9 million and -$2.60, respectively, in fiscal 2015, compared to -$388.6 million and -$0.88, respectively, in fiscal 2014.

Meanwhile, its cash and cash equivalents and inventories fell by 26.6% and 11.8%, respectively, in fiscal 2015. Its current ratio fell to 1.1x in fiscal 2015 compared to 1.4x in fiscal 2014.

In the next part, we’ll look at Mead Johnson Nutrition.

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