Why Avon Products Shares Popped
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of beauty products supplier Avon Products (NYS: AVP) are looking oh-so-pretty, as its stock shot up as much as 12% following the buzz that the takeover bid from Coty launched last month may actually come to fruition.
So what: The big news of the day is that JAB Holdings announced that it was selling a 4.9% stake in Reckitt Benckiser, which would net the company approximately $2.1 billion. This is relevant because JAB is also the majority owner of Coty, the cosmetics company that made a $10 billion bid for Avon last month. The move is largely seen as JAB garnering extra finances to help facilitate the potential takeover.
Now what: Just what Avon's stock needed: more speculation. Whether or not Coty does wind up purchasing Avon seems trite to me given that Avon's business has been struggling. In its latest quarter, sales dropped 1% while price increases provided the only boost. That's notable because beauty salons Ulta Salon (NAS: ULTA) and Sally Beauty Holdings (NYS: SBH) have both been crushing Wall Street's expectations. Avon's problems seemed to be confined to Avon (thankfully for the sector) and its ridiculously large pile of debt. I'd just as soon continue to avoid the company altogether.
Craving more input? Start by adding Avon Products to your free and personalized watchlist so you can keep up on the latest news with the company.
At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Motley Fool newsletter services have recommended buying shares of Ulta Salon. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.