Shares of Avon Products Inc. jumped 14.2 percent on a report that the struggling direct seller was considering its strategic options, including a possible sale of its North American operations.
On Monday, Avon pushed back its planned investor day next month, noting, “The decision to postpone the meeting follows the recent appointment of James S. Scully as the company’s chief financial officer, to allow the company adequate time to prepare for a more robust discussion at the meeting.”
The meeting could have put Avon executives in a bind if they were working in the background on a big strategic shift that would reshape the company.
The Wall Street Journal first reported that Avon was weighing its options. Investors liked the possibility of a sale and drove the shares of the company up $1.14 to $9.15.
An spokeswoman for the direct seller declined to comment.
Avon — which was once courted heavily by rival Coty, but fought back the advances — will update investors on its turnaround efforts and first-quarter results on April 30.
Wall Street has been pelting the company with questions about its North American business. Over a year ago, Stifel analyst Marc Astrachan noted that the company could sell off operations in its home market if its turnaround efforts failed.
Today, Astrachan said such a sale “could make sense and would improve sales growth and EBITDA margin of the remaining business.”
Looking at the 7.2-times EBITDA multiple private equity giant TPG paid for Avon-Japan in 2010, Astrachan said the North American business could be valued at $412 million, or 7 percent of the company’s current enterprise value.
There is reason for caution, though. The analyst also noted that, “a sale of North America is not without risks, including distributions relating to running the remaining business, the potential negative impact on Avon’s global grand positioning as a U.S. beauty brand, and stranded overhead.”