Boston, MA 07/05/2013 (wallstreetpr) – Avon Products, Inc. (NYSE:AVP), the global cosmetics giant, confirmed an agreement to sell its silver jewelry business,Silpada Designs, to the original founders, Jerry & Bonnie Kelly & Teresa Walsh for $85 million in an all-cash transaction. The company expects to re-pay outstanding debt from the proceeds of this sale and boost its balance sheet.
According to the management of Avon Products, Inc. (NYSE:AVP), this sale is an important step towards stabilizing its U.S. business and returning its focus on the core business of cosmetics. The company expects this step to provide the required timeline and investment to return its core business to historical levels of profitability.
The struggle of Avon Products, Inc. (NYSE:AVP) in recent times has not only included declining top and bottom lines and a highly leveraged balance sheet but also an issue of contributing $100,000 to the Direct Selling Association for supposedly political funding. The market did not take these issues gently into account, considering the share price dropped by over 20% from its last month highs. The sale of Silpada for $85 million, a fraction of the $650 million the company paid to acquire it just 3 years back in 2010, is also not an encouraging development. For the last two years, the company has reported lower than expected earnings for six consecutive quarters.
However,as for the last two quarters, the company’s earnings per share beat market expectations. In addition, the strategic move of Avon Products, Inc. (NYSE: AVP) to improve the health of its balance sheet through refinancing activities excited analysts. This has led to an upward movement for the earnings estimates. Some analysts are recommending buying the stock at the current price as they feel the company’s turnaround strategies to accelerate top-line growth, cut down costs and improveits working capital are acting as an ideal remedy.
