Avon may be close to settling its long-standing federal bribery probe, but it won’t come cheap.
The door-to-door cosmetics marketer said it could pay as much as $132 million to resolve criminal and civil charges that it improperly paid off foreign officials as it sought to expand overseas in countries, including in China.
Avon Chief Executive Sheri McCoy said Thursday that Avon has made “significant progress” in resolving the mess, which began five years ago when a probe was launched in China that has since racked up $300 million in bills.
“While differences remain, our team is working hard to bring these matters to a close,” McCoy told analysts on a Thursday conference call as the company reported another quarter of disappointing results.
But McCoy, who took the helm in April 2012 following the ouster of longtime CEO Andrea Jung, warned that there were no guarantees the company would reach a settlement anytime soon.
In the fourth quarter, Avon ratcheted up its reserve for probe-related legal costs by $77 million, bringing the total to $89 million.
While the $132 million estimate amounts to more than Avon had initially forecast, the updated figure “is encouraging given the relatively small size compared to worst-case fears,” Stifel Financial analyst Mark Astrachan said in a research note.
Avon execs said it has enough cash to cover the new estimate.
Fourth-quarter revenue fell 10 percent to $2.67 billion, missing Wall Street’s forecast, as Avon reps sold 10 percent fewer items. The size of its sales force shrank 5 percent.
Sales in North America fell 25 percent. In China, sales plunged 48 percent.