Fitch Ratings has assigned a negative outlook to Avon Products Inc.’s long-term issuer default rating.

Fitch affirmed the business’ IDR at B+, but shined a spotlight on the company’s declining earnings, citing those figures as the reason for the negative outlook.

“We look upon Avon as being a work in progress,” said Fitch senior director Ellen Itskovitz. “They had put together a three-point transformation, with the first being improve their balance sheet, the second being implement cost savings and the third being invest in the company for growth.”

Avon’s “done a very good job” shoring up its balance sheet, Itskovitz said, and is now in the reinvestment phase. “The third point is the hardest to do and they’re beginning that,” she said. “There have been some green shoots at this stage, but obviously you need to see much more, that’s one reason we’re keeping it negative.”

According to the report: “Avon’s IDR reflects its sizable scale as a leading direct-selling beauty company with $5.7 billion revenue in 2016 and it’s well-recognized brand in the beauty industry. However, its operating results have been on a declining trajectory in recent years as the company faces challenges from its direct-selling model, emerging market exposure and FX headwinds. The negative outlook continues to reflect the company’s declining EBITDA trend, due to its challenged business model and exposure to weak markets such as Brazil and Russia.”

Some of Avon’s moves, including the 2015 divestiture of Liz Earle, sale of preferred stock and exit of most of the North America business have helped the company to pay down debt and extend its maturity profile (it reduced debt by $260 million in 2016). No long-term debt matures until 2019, Fitch noted.

Earlier in June, Avon stock jumped on reports that chief executive officer Sheri McCoy was preparing to step down or retire, something that activist investors have been pushing for. Barrington Capital Group called for Avon’s board to “immediately begin a search” for a new ceo in early May.

Itskovitz said Avon’s ratings outlook would likely be unaffected if McCoy left her post. “At this stage, she’s been there for a certain period of time, you expect to see turnover in senior management when there’s been some volatility in the business,” Itskovitz said.

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