Why Avon Isn't Looking Too Pretty Today

Why Avon Isn't Looking Too Pretty Today

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 company Avon plummeted 23% today after its quarterly results easily missed Wall Street expectations.

So what: The stock has been sluggish in recent months on concerns over slowing growth, and today's wide third-quarter miss -- adjusted earnings per share of $0.14 versus consensus of $0.19 -- only reinforces that worry. In fact, revenue in North America slid 19% while Avon Ladies sales reps shrank by 16%, suggesting that the business model is steadily losing its appeal.

Now what: Management sees some light at the end of the long-termtunnel. "Our quarterly performance was negatively affected by macroeconomic headwinds and continued weakness in some parts of our business, particularly North America," said CEO Sheri McCoy. "However, overall, Avon is headed in the right direction, parts of our business are stabilizing, and we are making progress toward our three-year financial goals." When you couple Avon's worrisome operating trends with all the uncertainty surrounding its potential bribery settlement with the Department of Justice and SEC, I wouldn't be so quick to buy into that bullishness.

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The article Why Avon Isn't Looking Too Pretty Today originally appeared on Fool.com.

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