Avon says SEC won't recommend action related to analyst contact, but bribery probe continues

NEW YORK, N.Y. – Avon Products Inc.’s legal woes may finally be on the wane.

The direct-beauty product seller said in a regulatory filing late Thursday that the Securities and Exchange Commission has decided it won’t recommend any action against the company over whether Avon contacted analysts inappropriately during a separate bribery investigation.

The news sent its shares up almost 2 per cent in morning trading Friday. The end of the investigation into analyst contacts is a plus for the company which is trying to turn around its financial performance as new CEO Sheri McCoy settles into the job.

But Avon, whose products include Skin So Soft lotion and mark makeup, is still dealing with wider probes into whether Avon paid bribes in China and other countries. The problems began in 2008, when it started to investigate possible bribery in China related to travel, entertainment and other expenses, and soon widened the probe to other countries.

The internal probe led to the New York company firing vice chairman and former chief financial officer Charles Cramb in January along with four other executives.

The SEC and the Justice Department are also investigating the matter. In August, Avon said it was working toward possibly settling those investigations, which are separate from the investigation into contact with analysts.

Avon declined to comment on Friday.

The long-running legal woes, along with three years of lacklustre financial performance, are one reason longtime CEO Andrea Jung was replaced in April. She was replaced by McCoy, a former Johnson & Johnson executive. Jung remains executive chairman.

In August, the company said its second-quarter net income fell 70 per cent, hurt by the stronger dollar and lower demand globally for its makeup and skin care products.

To improve results, Avon Products plans to focus more on its independent sellers and buyers of Avon’s products, McCoy said during the most recent quarterly earnings report. She laid out plans to improve Avon’s product lineup, market products more effectively, pay top sellers more, cut costs and invest in technology.

Despite the company’s problems, McCoy has defended the direct-selling model. Some analysts have questioned if it is still as relevant as it was 50 years ago, pre computers. Founded in 1886, Avon became a fixture in households across the United States as its legions of “Avon ladies” went door to door selling makeup to family, friends and acquaintances.

Today, the company markets to women in more than 100 countries via 6 million independent sellers.

Shares rose 31 cents, or 1.9 per cent, to $16.59 in morning trading Friday. Its shares are still 31 per cent below their 52-week high of $23.94 set late last October.