Avon may be wishing it had answered the door last year.
The blemish-ridden cosmetics company — which last spring ignored a $10 billion takeover bid in order to pursue a turnaround — saw its shares slammed 22 percent Thursday as it warned of bigger-than-expected penalties from a multiyear foreign bribery probe.
CEO Sheri McCoy, a former Johnson & Johnson exec who took the helm in April 2012, has been scrambling to clean up a mess left by former CEO Andrea Jung, whose 13-year tenure at the top unraveled last year in a slew of embarrassing scandals.
“There is no shortage of challenges for us,” McCoy said on a Thursday conference call, admitting to slumping US sales and shrinking business in key markets overseas. “There is always tension around the pace of change in a turnaround.”
Perhaps more troubling, Avon revealed that the Securities and Exchange Commission recently spurned its proposal to settle charges that the company paid off Chinese government officials in an aggressive expansion several years ago.
The door-to-door makeup marketer had offered in June to pay a $12 million fine, McCoy told analysts on the call. But the SEC has countered with “monetary penalties of a magnitude significantly greater than our earlier offer,” she said.
Avon didn’t disclose the size of the SEC’s demand, but the company signaled it could be crippling as it likewise faces bribery allegations from the US Department of Justice.
“If the DOJ’s offer is comparable to the SEC’s offer and if the company were to enter into settlements … [Avon’s] financial condition and ongoing business would be materially adversely impacted,” the company revealed in a regulatory filing.
McCoy, a Princeton-educated manager who ranks at No. 20 on Fortune’s “Most Powerful Women” list, had warned last year that Avon faced a tough slog.
Nevertheless, pressures from the bribery investigations aren’t letting up. Since 2008, Avon has spent about $340 million in legal fees and other costs related to the federal probes.
Meanwhile, results have been worse than already-downsized forecasts.
Avon swung to a third-quarter loss of $5.5 million, surprising Wall Street, which had been expecting a profit of $47.8 million.
Quarterly revenue slid 7 percent, to $2.3 billion, fueled by continued declines in North America, where the ranks of its “Avon lady” sales reps plunged by 16 percent.
Avon shares on Thursday got hammered, losing $4.90 to close at $17.50, leaving the company with a market capitalization of $7.6 billion.
In April 2012, the company turned down an offer by New York fragrance maker Coty to buy Avon for $23.25 a share.