Bloomberg News

Avon CEO McCoy Embraces Technology to Reverse Profit Slump

February 22, 2013

Shortly after becoming Avon Products Inc.’s (AVP:US) chief executive officer last year, Sheri McCoy hit the road, meeting with thousands of representatives, and even some former sellers, to hear what the door-to-door cosmetics seller could do better.

Many of the sales representatives had been through numerous overhauls already as the New York-based company worked to reverse years of declining profits (AVP:US).

“They’d gone through a lot of change, and the question to me was, ‘Sheri, how is this going to be different?’” McCoy, who took over as CEO in April, said in an interview yesterday at the Consumer Analyst Group of New York meeting in Boca Raton, Florida.

McCoy laid out how this time could be different. Her strategy includes embracing technology with mobile applications and putting brochures online, while adding more profitable home and fashion products to boost earnings (AVP:US) using the company’s more than 6 million sales representatives.

“There is clearly an opportunity to improve Avon given how much of a mess things are, but it will be a long, costly, bumpy road to reach sustainability,” Ali Dibadj, an analyst at Sanford C. Bernstein & Co. in New York, said in an e-mail.

Avon fell (AVP:US) 1.9 percent to $19.96 at the close in New York. The shares have gained 39 percent this year, compared with an 9.4 percent increase in the Standard & Poor’s 500 Consumer Staples Index.

Cutting Jobs

Last week, the shares surged the most in almost 40 years after Avon’s fourth-quarter adjusted profit topped analysts’ estimates.

McCoy replaced Andrea Jung, whose tenure as CEO since 1999 encompassed slumping earnings, a foreign bribery investigation and a takeover attempt from Coty Inc.

McCoy is cutting about 1,500 jobs and leaving the South Korea and Vietnam markets as part of a plan to save $400 million by the end of 2015. The company is also seeking alternatives for its Silpada jewelry unit.

“It just didn’t make sense, given all the other priorities,” McCoy said of Silpada.

Those new priorities include an investment of as much as $200 million in information technology systems by 2016 and updating and repositioning brands such as its Anew anti-aging line.

Brand Promoting

One thing she heard consistently during her travels was that sellers wanted Avon to spend more on promoting and building the brand. Much of that task had fallen to her predecessor, Jung, who served as the face of Avon as she touted it as “the company for women.”

McCoy said she doesn’t plan to follow suit.

“I don’t need to be out in front,” McCoy said. “In fact, because it’s a socially connected brand, it should be everyone connecting” with customers.

Still, marketing will be a big focus, including an emphasis on digital, McCoy said. She has hired a new marketing chief, Patricia Perez-Ayala, who joined the company in December after more than 20 years at Procter & Gamble Co. (PG:US), the world’s largest consumer-products company and world’s biggest advertiser.

“We have to continue to look at how we make direct selling more modern in some ways,” including using technology to amplify the social connections forged by the reps, she said. “You see this blurring of the channels, and that’s why the brand is so important because in the end, the consumer is going to buy on the brand.”

McCoy came to lead the world’s largest direct seller from Johnson & Johnson (JNJ:US), where she was considered a top contender for the CEO job.

“I was brought in with a clear focus to turn around the company,” she said. “And I’m confident we’re going to do it.”

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • AVP
    (Avon Products Inc)
    • $11.7 USD
    • 0.17
    • 1.45%
  • PG
    (Procter & Gamble Co/The)
    • $84.33 USD
    • 0.15
    • 0.18%
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