Avon exploring sale of North America business

Avon Products Inc, a direct seller of cosmetics, is exploring strategic alternatives, which could include a sale of its North America business, the Wall Street Journal reported on Tuesday.

Avon's shares rose as much as 18.1 percent to $9.46. Up to Monday's close, the stock had lost 44 percent of its value in the past 12 months.

No deal regarding the North American business is imminent, the WSJ said, citing people familiar with the matter.

Avon, which has a market capitalization of $4.1 billion, declined to comment.

The company's North American business, which accounted for 14 percent of the total revenue in 2014, has posted losses for the last three years.

Chief Executive Sheri McCoy has been struggling to turn around Avon as it loses representatives - the so-called "Avon Ladies" - in the United States, and grapples with weak demand in Brazil, its largest market.

An overseas bribery scandal last year also compounded the company's problems.

"We believe Avon is coming to terms with the reality that cost cuts are not the answer and it needs to recapitalize and finding funding for a massive $500M-$1B reinvestment needed to fix the business," RBC Capital Markets analysts wrote in a note on Tuesday.

"Seeking strategic alternatives is likely Avon's best option, but also a risky one for the partner involved with Avon as a fix is not guaranteed."

Avon reported a much bigger fourth-quarter loss in February but said it expected its North American business to turn profitable in 2015.

The company said late on Monday it was postponing its Analyst Day to fall 2015 from May 13 to give adequate time for new Chief Financial Officer James Scully to prepare for the meeting. 

$1 = £0.68