Sherilyn McCoy became Avon Products Inc.’s (NYSE: AVP) new CEO on April 23. Her job was to turn around the company that had been nearly wrecked by her predecessor, Andrea Jung. Since then Avon’s shares have dropped by almost 35%. In the past month, the stock has fallen 16% to a 52-week low. Wall St. has lost confidence in the transformation of Avon, though it is well short of a year old.

The problem at Avon could be one of two things. The first is that the company never could be turned around because it was too badly damaged. If so, Jung gets all the blame. She let Avon run amok overseas and alienated the company’s important army of “Avon Ladies,” the bedrock of Avon’s long-term success.

Or McCoy may have made a series of bad decisions on her own, or decided not to make good decisions fast enough. This is the more likely the case, as Avon’s latest earnings comments show.

Revenue dropped 6% in the September quarter to $2.55 billion. Net income was down 81% to $32 million. McCoy’s reaction to disaster:

Management has the team fully aligned around actions that will accelerate top-line growth, reduce costs and improve working capital. Management is also targeting cost savings of at least $400 million by the end of the three years to be largely driven by a reduction in Selling, General and Administrative expenses (SG&A).

The members of the “team” facing termination probably are not “aligned.” The plan to “accelerate top-line growth” was vague, or really less than that. The size of expense cuts was not. Management that cannot fix companies due to lack of skill or lack of opportunity always highlight cost cuts as the primary route to better earnings.

McCoy should have at least publicly taken a run at a plan for increased sales to give shareholders some hope that she knows what she is doing. The description would not have to be laid out in great detail. A simple articulation of strategy would have been enough for many people or institutions who hold the stock.

For those who were waiting for a ray of hope, there was nothing.

Douglas A. McIntyre

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