Avon needs bold change as Jung's CEO tenure ends

Avon needs bold change as Jung's CEO tenure ends

(Reuters) - Avon Products Inc's new arch executive will need to figure out how to urge operations from Russia to Brazil, demeanour during possibly approach offered works in a United States and be someone who can attract a millions of member who sell a cosmetics to consumers.

After years of gain misses and restructurings and pouring tens of millions of dollars into a unfamiliar temptation probe, Avon will be handing a new CEO a prolonged to-do list that will need to be finished to revive financier confidence.

"The new CEO should be operationally focused and fiscally disciplined. we don't cruise approach offered knowledge is a necessity, though emerging-market and turnaround imagination would be nice," Sanford C. Bernstein researcher Ali Dibadj said.

On Tuesday, Avon announced that it would demeanour outward for a new CEO and that stream authority and CEO Andrea Jung would spin executive chairman.

Shares of Avon surged as most as 11 percent and finished adult 5 percent on a awaiting that a association will bear a full renovate underneath a new CEO after several years of gain disappointments and restructurings.

"We wish to trust a house will inspire any new CEO to cruise Avon's whole business indication with a vacant square of paper," Barclays researcher Lauren Lieberman said.

But that renovate could be lengthy.

"Even in candid situations, outmost CEO searches can take several months," Barclays researcher Lauren Lieberman pronounced in a investigate note. "Avon is anything though a elementary situation," she added, observant a complexity of a company's business indication and an ongoing SEC review into possibly abroad employees disregarded U.S. temptation laws.

Among stairs that Lieberman is looking for is for a association to redesign a tellurian supply sequence to improved conduct flighty unfamiliar sell rates in a many markets, understanding with changes in consumer approach and cut a time it takes to put out new sales brochures.

The new CEO will also need to understanding with overhauling Avon's mechanism systems, a routine that has led to snafus like not carrying a products that member had systematic in markets like Brazil.

Avon is also still traffic with a fallout from a temptation review that began in China in 2008, and a new CEO will need to pull along a delayed routine of relocating to a approach sales indication there.

The new CEO in some ways might initial be a arch handling officer, a post that Avon has not had given 2006, analysts said.

RESTING ON LAURELS

Avon, famed for a "Ding Dong, Avon Calling" debate of a 1950s and 1960s, saw stellar expansion by to a early 2000s as it stretched internationally, bringing a awaiting of a career - or additional slot income - to women in locales as different as South Africa and South Korea.

However, Avon took a eye off direct-sales competition, such as Brazil's Natura and Sweden's Oriflame , as good as normal beauty businesses like L'Oreal SA and Procter & Gamble Co streamer into new markets.

The miss of an inner claimant is not a surprise, as Jung had run operations though a boss or arch handling officer for years, while former arch financial officer, Chuck Cramb, has already been changed into a into a new post overseeing grown markets such as a indolent United States.

The apparent miss of period formulation is "an unusual complaint of a board," pronounced Mark Cohen, highbrow during Columbia Business School and former CEO of Sears Canada.

Now, as Avon wraps adult celebrations around a creation for a 125th anniversary, investors who have watched a batch tumble by scarcely 45 percent in 2011 alone might also have something to celebrate.

Avon shares had usually appreciated about 1.7 percent given Jung was named CEO until a proclamation of a CEO search. The shares shot adult as most as 11 percent to $17.91 on a New York Stock Exchange on Wednesday.

Graphic on Avon shares during Jung's tenure: http://link.reuters.com/kyx55s

THE SEARCH

As a company with roughly 6.5 million representatives, Avon needs someone who can motivate a sales force. Jung, 53, has been CEO given 1999 and a Princeton graduate's persona was mostly a vast partial of a allure for member who favourite to see a successful lady during a tip of a company.

"This is a movement business and they need to revive morale

in a field," pronounced Consumer Edge Research researcher Javier Escalante, who kept his "neutral" rating on a shares.

He suggested that someone with sales knowledge and glamour should run a show, maybe Leslie Blodgett, a creator and executive authority of Bare Escentuals.

"You need somebody who can sell a square of ice to an Eskimo, and she is one of those," Escalante said.

Last year, Japan's Shiseido bought Bare Escentuals for $1.7 billion.

Another clever contender could be Herbalife Ltd Chairman and CEO Michael Johnson, who has a clever following among a member who sell that company's nourishment products, Escalante said. Under Johnson, who formerly worked during Disney, Herbalife posted 5 years of double-digit sales growth.

Avon has seen waste of member in North America, where many women find other things such as food and valuables some-more appealing - and essential - to sell. Some analysts have even suggested it leave a U.S. market, or get into stores to hawk a products some-more effectively.

THE AMWAY WAY

While Avon continues to try to repair a obstruction of mechanism systems around a creation other approach sellers have been updating their systems and expanding into uninformed categories to keep adult with what consumers want.

Sales are sepulchral during Amway, that while formed in Ada, Michigan, now creates about 90 percent of a income outward of a United States with a sales force of some-more than 3 million.

Amway, that is secretly held, saw sales stand 9.5 percent to some-more than $9.2 billion in 2010 and they should arise "substantially" in 2011, Steve Lieberman, clamp boss and handling executive of Amway North America, pronounced in a new interview.

Avon had $10.73 billion in sales in 2010, though with roughly twice as many sales representatives.

"We have advantages given we are private," pronounced Lieberman. "Being private allows us to demeanour prolonged term. Some of a competitors are carrying problems now, and they're really public."

Avon has already done some vital government changes, bringing in Chief Financial Officer Kimberly Ross in late Nov and Fernando Acosta, boss of a vast Latin America business, during a commencement of December.

A cabinet of 3 long-serving house members, along with Jung, will demeanour outward a association for a new CEO. Once Avon finds someone, Jung will have a new two-year agreement for a executive chairman role, with a probability of an extension.

The CEO hunt is being led by Fred Hassan, handling executive and partner during Warburg Pincus LLC, along with Maria Elena Lagomasino, CEO of GenSpring Family Offices, and Lawrence Weinbach, handling executive of Yankee Hill Capital Management. Hassan and Weinbach have served on Avon's house given 1999, and Lagomasino assimilated in 2000.

Jung has a full support of a board, according to a matter Hassan done on Tuesday.

"This betterment to executive chair is hopefully only a face-saving ploy given it's not convincing for her to attend possibly in a preference of her inheritor or to co-exist with someone who has to be brought in to significantly spin a association around," pronounced Cohen.

(Reporting by Jessica Wohl in Chicago; Additional stating by Phil Wahba and Jilian Mincer in New York and Doris Frankel in Chicago; Editing by Gunna Dickson, Bernard Orr, Gary Hill)

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