Shares of Avon Products Inc. (NYSE: AVP) have closed lower each of the last three days following the company’s extremely weak first quarter results. The door-to-door cosmetics firm took another couple of shots today as two credit ratings agencies lowered the company’s debt to ‘BBB-’, just barely high enough to retain Avon’s investment grade rating.
S&P said this:
Today’s rating action reflects the company’s continued weak operating results, with the March quarter results weaker than expected and margins considerably declining, and further deterioration of credit measures.
Fitch Ratings said this:
The downgrade reflects the continued trends in Avon’s generation of negative free cash flow … during the past two years and through the first quarter of 2012 and increase in leverage … to 2.7X for the last 12 months ended March 31, 2012.
Avon has already rejected a takeover offer of $10 billion from privately held Coty Inc., although there are reports that Richmont Holdings, another closely held firm, is lining up financing to make its own offer.
Paul Ausick
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