Avon CEO To Depart As Barington Pressure Prevails

Aug 3 2017 | 5:58pm ET

Activist hedge fund manager James Mitarotonda has notched a victory in his battle with Avon Products as the cosmetics company announced Thursday that its CEO, Sherilyn McCoy, would step down at the end of March 2018.

Avon has faced pressure from Barington and other activist investors to replace management due to poor share price performance and in order to accelerate the company’s turnaround. Barington, which owns more than 2.8 million shares of Avon’s stock, proposed a restructuring in December 2015 and agreed to hold off on launching a proxy war last year in return for the right to approve the appointment of an independent director. Notably, the March agreement did not include a standstill agreement, which left Barington open to continue agitating for change at the company.

Avon is in the midst of a three-year plan to turn around the fortunes of its more than 130-year old business, shedding assets, cutting jobs and replacing half its board when it agreed to sell a 19% stake to Cerberus Capital in 2015 as part of a spinoff of North American operations. Nonetheless, the steps have not arrested the declines in either the firm’s revenues or share price, which are down approximately 7% and 26%, respectively, in the past 12 months. 

Rumors began to circulate that McCoy’s exit was imminent in June. The company’s board may have been forced to act after Avon’s second quarter results, which showed a net loss of $45.5 million – its third consecutive quarterly loss – and a sales decline of 3%. 

Executive search firm Heidrick & Struggles has reportedly been engaged to assist in finding McCoy's successor. Avon's stock closed Thursday down more than 10% to $3.

New York-based Barington was co-founded in 1991 by Mitarotonda. The fund has invested in a wide range of retail and consumer-focused companies, including Dillard's, The Children's Place, Nautica, Avon Products, Lone Star Steakhouse, Darden Restaurants and Harry Winston, among others.

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